A Complete Guide to Vietnam's Latest Industrial Park and Economic Zone Regulations - Models, Rules, and Incentives Under Decree No. 35/2022/ND-CP
NEXORA Lawfirm, Managing Attorney
Attorney admitted in Vietnam
Mediator, Insolvency Administrator, Outside Corporate Auditor
Table of Contents
01 - New industrial park models – toward diversification, specialization, and sustainable development
02 - Changes to the legal framework for industrial park development planning – unification and procedural simplification under Decree No. 35
03 - Categories of construction planning applicable to industrial parks – simplification and clarification under Decree No. 35
04 - Abolition of the industrial park establishment procedure – administrative reform to improve the investment environment
05 - Conditions for investing in and expanding industrial parks – a comprehensive set of standards under Decree No. 35
06 - Selection of industrial park infrastructure investors – clarified criteria and procedures under Decree No. 35
07 - Phased investment rules for large-scale industrial park projects and conversion of paddy rice land
08 - Development of worker housing and welfare facilities within industrial parks – a stronger legal basis under Decree No. 35 and related legislation
09 - Incentive and support policies for the new industrial park models
10 - Conditions for converting an industrial park into an urban/service area
11 - New rules on the management of export-processing enterprises and export-processing zones
A thorough explanation of Vietnam's Decree No. 35/2022/ND-CP, effective July 15, 2022. Covers the new industrial park models (supporting-industry, specialized-sector, hi-tech, eco, and mixed-use urban-service), simplified planning and investment procedures, worker housing, the new regime for export-processing enterprises, and tax incentives and support policies. Essential, up-to-date legal information for Japanese companies and foreign investors formulating their Vietnam market-entry strategy.
On May 28, 2022, the Government of Vietnam promulgated Decree No. 35/2022/ND-CP on the management of industrial parks (IPs) and economic zones (EZs), which took effect on July 15, 2022. This Decree wholly repeals and replaces the former Decree No. 82/2018/ND-CP, and is intended both to remedy institutional and policy gaps in the previous IP/EZ management regime and to establish a legal framework consistent with the latest provisions of the Investment Law, the Construction Law, the Law on Urban Planning, and the Law on Environmental Protection.
The Decree comprises 8 chapters and 76 articles in total, and provides comprehensive rules on the following matters:
development planning for the industrial park system
investment in infrastructure construction
procedures for establishing and expanding industrial parks
incentive policies and development orientation
State management of industrial parks and economic zones
With this new Decree in effect, foreign investors and Japanese companies are expected to see significantly improved legal certainty and predictability when planning and executing business operations in Vietnam's industrial parks and economic zones. The main amendments introduced by Decree No. 35/2022/ND-CP are explained below.
01 - New industrial park models – toward diversification, specialization, and sustainable development
Decree No. 35/2022/ND-CP (hereinafter, "Decree 35") adds and clarifies new models of industrial parks in Vietnam, setting out a direction aimed at promoting diversification, specialization, and sustainable development. The main models are as follows.
① Supporting-industry industrial parks (KCN hỗ trợ)
Industrial parks specialized in the production of supporting-industry products, in which at least 60% of the industrial land area is allocated to attracting projects in the supporting-industry sector. Supporting industries refer to critical sectors that underpin manufacturing, such as automotive parts, electronic components, and machining, and are also of high interest to Japanese manufacturers.
② Specialized-sector industrial parks (KCN chuyên ngành)
Industrial parks specialized in a specific industry sector, such as textiles/apparel or food, which allocate 60% or more of the industrial land area to projects in that sector. This promotes the clustering of companies in the same field, enabling more efficient supply chains and easier access to specialized talent.
③ Hi-tech industrial parks (KCN công nghệ cao)
Industrial parks that attract projects in fields eligible for special investment incentives, such as high technology, information and communication technology (ICT), research and development (R&D), innovation, and education/training. At least 30% of the industrial land is allocated to such projects, promoting hi-tech industry and R&D activity. This strengthens Vietnam's ability to attract technological innovation and high-value-added industries.
④ Eco-industrial parks (KCN sinh thái)
As defined under Article 2, Clause 5 of Decree 35, an eco-industrial park is a park in which companies that practice resource conservation and clean production cluster together and build cooperative industrial-symbiosis relationships. Companies reuse each other's by-products and waste, reducing environmental impact while also cutting costs. This model has already been piloted at Nam Cau Kien Industrial Park and Dinh Vu Industrial Park in Hai Phong City, among others, and nationwide expansion is being encouraged.
⑤ Industrial park–urban–service mixed-use models (KCN – đô thị – dịch vụ)
A model that integrates urban and service functions around an industrial park as its core. Housing, public services, and commercial facilities are provided alongside the park for its workers and specialists, offering a convenient living environment. By co-locating urban and service functions, this model also helps secure labor and specialized talent and eases the burden on surrounding urban infrastructure.
Decree 35 clearly establishes a diverse range of industrial park models — supporting-industry, specialized-sector, hi-tech, eco, and mixed-use urban-service. This allows each local government to flexibly choose the model that fits its own strengths and development goals, and to respond to emerging trends such as specialized industries, green industry, and smart-city development.
02 - Changes to the legal framework for industrial park development planning – unification and procedural simplification under Decree No. 35
Decree 35 introduces important amendments to the legal framework for industrial park development planning, in order to ensure consistency with the 2017 Planning Law and to eliminate previously duplicative procedures.
First, the system under which "industrial park development planning" was formulated and approved as a separate, sector-specific plan has been abolished. In its place, the development of the industrial park system is now incorporated into the national socio-economic development master plan and provincial-level plans under the Planning Law. Decree 35 provides for the formulation, at both the national and provincial levels, of "proposals for the development orientation and planning of the industrial park system," clarifying the direction, number, scale, and planned locations of industrial parks in each locality.
The formulation, review, approval, and adjustment of industrial park development orientation is no longer carried out through a separate approval procedure for industrial park development plans, but instead follows the general planning procedures under the Planning Law. As a result, when establishing a new industrial park, local governments no longer need to apply for a "new (or supplementary) approval of the industrial park development plan"; it is sufficient that the park conforms to an already-approved provincial-level plan. This simplifies administrative procedures, shortens the time to establishment, and creates an environment in which localities can take a more proactive role in attracting industrial park investment.
Decree 35 further sets out the conditions and principles for determining the number, scale, and location of industrial parks. This makes it possible to allocate industrial parks rationally based on investment demand, balanced land use, and infrastructure capacity, and to prevent an oversupply or shortage of industrial land. For example, the establishment of a new industrial park must take into account investment-attraction demand and the balance of land and infrastructure, and must avoid the waste of resources caused by unplanned expansion.
The same principles apply to economic zones, whose development is likewise incorporated into provincial-level plans. Changes to the boundaries of an economic zone are permitted only where specific grounds set by the Government are met, in order to preserve the consistency of planning and avoid adverse effects on surrounding areas.
Under Decree 35, the legal framework for industrial park planning has moved away from the former stand-alone "industrial park development plan" system and has been integrated with provincial-level plans and national-level industrial planning. This amendment eliminates duplicative regulation, simplifies administrative procedures for local governments and investors, and at the same time ensures nationwide consistency and coherence in industrial park planning.
03 - Categories of construction planning applicable to industrial parks – simplification and clarification under Decree No. 35
Alongside its overhaul of industrial park development planning, Decree 35 also clarifies the types of construction planning applicable to each industrial park, introducing rules to simplify procedures and avoid duplication.
3.1. Where the site is included in an urban construction master plan or economic zone construction master plan
Where a proposed industrial park site is already included in an approved urban construction master plan or economic zone construction master plan, the investor need only formulate a sub-zone construction plan (Quy hoạch phân khu xây dựng) for the industrial park, and is not required to create a new stand-alone construction master plan for the park.
3.2. Where an approved sub-zone construction plan already exists
Where an approved sub-zone construction plan already exists for the proposed industrial park site, only a detailed construction plan (Quy hoạch chi tiết xây dựng) need be prepared as necessary for implementing the industrial park project. In other words, in areas where a sub-zone plan for industrial land has already been established, investors do not need to draw up a plan from scratch, which can substantially shorten the project preparation period.
3.3. Special cases in which formulation of a sub-zone construction plan is mandatory
Decree 35 requires the formulation of a sub-zone construction plan for an industrial park in certain cases, for example:
large-scale industrial parks of 500 hectares or more;
industrial park–urban–service mixed-use models; and
industrial parks with multiple development investors, developed sub-zone by sub-zone.
Because these cases involve complex spatial layout and infrastructure arrangements, a sub-zone plan is required for unified management. However, where the matter is already specified in the urban/economic zone master plan, it is permissible to omit formulation of the "planning task" (nhiệm vụ quy hoạch) and proceed directly to preparing the sub-zone plan itself. This simplification shortens the time needed to obtain plan approval.
Decree 35 classifies the construction planning applicable to industrial parks into three stages — master plan, sub-zone plan, and detailed plan — and clarifies which level of planning must be prepared depending on the status of existing plans in the area. This avoids duplicative work and allows investors to complete only the minimum planning necessary. At the same time, for large-scale or mixed-function industrial parks, strict management through sub-zone plans is maintained, ensuring consistent and efficient development.
04 - Abolition of the industrial park establishment procedure – administrative reform to improve the investment environment
One of the major administrative reforms under Decree 35 is the abolition of the previously required procedure for issuing an industrial park establishment decision.
Under the former Decree No. 82/2018/ND-CP, even after the investment policy for an industrial park infrastructure project had been approved, the investor still had to apply to the provincial People's Committee for issuance of an "industrial park establishment decision," and the industrial park was considered formally established only once this decision was issued. This added an extra procedural step and served as a factor that extended the time before business operations could begin.
Decree 35 abolishes this procedure entirely, and clearly provides that an industrial park is deemed established at the time the investment policy approval decision or the Investment Registration Certificate is issued for the infrastructure investment project. Specifically, an industrial park is legally established as of whichever of the following dates applies:
① for an industrial park infrastructure construction project implemented with public funding, the date on which the competent authority issues the investment policy approval decision; or
② for an industrial park infrastructure construction project implemented with private funding, the date on which the competent authority issues the investment policy approval decision (including investor approval) or the Investment Registration Certificate.
This amendment removes one administrative step and shortens the project preparation period. Once the infrastructure project is approved, investors can immediately proceed to the next steps — land acquisition, site clearance, and infrastructure construction — helping to prevent the loss of investment opportunities. This is a particularly significant benefit for industrial park infrastructure investors in the current environment of intense competition to attract foreign investment.
In practice, too, this new regime removes what had previously been a procedural "bottleneck," enabling earlier project implementation. Decree 35 is regarded as providing a legal foundation that improves the investment environment through administrative reform and enables more open, faster business development.
05 - Conditions for investing in and expanding industrial parks – a comprehensive set of standards under Decree No. 35
Beyond simplifying procedures, Decree 35 systematically organizes the investment conditions for industrial park infrastructure construction and operation, so that the development of industrial parks conforms to planning and meets practical demand.
5.1. Conformity with planning and site conditions
An industrial park investment project (whether a new project or an expansion) must conform to the relevant national and provincial-level plans. It must also be consistent with land use planning, be well connected to transport infrastructure, and must not conflict with important spatial functions such as urban areas or protected zones.
5.2. Occupancy rate requirement
Before applying for a new industrial park, the average occupancy rate of existing industrial parks within the relevant province must, in principle, be at least 60% (with certain exceptions). This is intended to prevent overdevelopment where existing industrial parks still have significant vacant space, and to avoid wasting land resources.
5.3. Conditions for change of land use purpose
Industrial park development investors must satisfy the conditions for change of land use purpose (e.g., for paddy land, forest land, etc.) under the Land Law and the Forestry Law. In particular, where conversion of agricultural land is involved, the investor must be capable of lawfully and smoothly carrying out compensation, securing alternative land, and obtaining approval from the land management authority. This requirement ensures that only projects that are feasible in terms of land and environmental considerations are approved.
5.4. Appropriate sizing and requirements specific to each type of industrial park
The scale of an industrial park must be set appropriately in light of regional characteristics and management capacity, avoiding both excessively small, fragmented developments and excessively large plans that are difficult to manage. In particular, specific types of industrial park — such as supporting-industry, specialized-sector, hi-tech, and eco models — are subject to additional requirements under Decree 35 and related specialized legislation, such as the required proportion of specialized industrial land use and environmental standards.
5.5. Conditions for expansion
Expansion of an existing industrial park generally requires a certain occupancy rate (typically 60%) or completion of the prior-phase infrastructure. Where the existing infrastructure investor has sufficient capacity, it may be given priority to carry out the expansion project; otherwise, a bidding process is held to select a new investor as necessary. This rule encourages a rapid increase in occupancy rates while also ensuring transparency in expansion.
Decree 35 sets out comprehensive conditions covering conformity with planning, occupancy rate, location and scale, land use conversion, and investor capacity for the establishment and expansion of industrial parks. This ensures the feasibility and sustainable development of projects, while preventing disorderly waste of land resources.
06 - Selection of industrial park infrastructure investors – clarified criteria and procedures under Decree No. 35
Where multiple investors express interest in a new or expanded industrial park, Decree 35 clarifies the criteria and procedures for selecting the infrastructure development investor, ensuring transparency and objectivity in selecting qualified, reliable investors.
6.1. Basic conditions required of investors
An investor implementing an industrial park infrastructure construction and operation project must satisfy the conditions applicable to real estate businesses and must be eligible, under the Land Law, to receive an allocation or lease of land or a change in land use purpose from the State.
In particular, because industrial park infrastructure falls under "industrial real estate for lease," the investor must have a real estate business function. Foreign investors must establish a qualifying economic organization in Vietnam and be eligible to acquire land.
6.2. Selection procedure where multiple investors express interest
Where two or more investors express interest in the same industrial park project, the investor is, in principle, selected through a bidding process (with designation permitted as an exception in certain cases). Decree 35 classifies the bidding evaluation criteria into the following four main categories.
① Capacity assessment
Examines legal conditions and execution capacity, including satisfaction of real estate business conditions, eligibility for land allocation/lease, and the ability to mobilize resources to carry out the project.
② Experience assessment
Evaluates similar-scale or similar-nature projects previously implemented or participated in (e.g., industrial park development, large-scale real estate development). Completed or ongoing projects, as well as the track record of the parent company or founding shareholders, are also taken into account, with weight given to practical experience and successful precedent in infrastructure development.
③ Technical assessment
Examines whether the proposed infrastructure plan and design meet the requirements based on the approved industrial park construction plan and investment policy. The key criterion is whether the investor can present a modern, feasible infrastructure development proposal.
④ Financial and commercial assessment
Evaluates the profitability of the business and the investor's financial strength based on the investment policy, funding plan, and infrastructure business plan. Key indicators include the ability to raise funds through equity or borrowing and the presence of a sustainable business model.
The bidding procedure under Decree 35 is designed to enable local governments to comprehensively evaluate applicant investors and select the most qualified one. This prevents project delays and inefficiency caused by under-capable investors, and fosters a sound competitive environment. The introduction of detailed and clear criteria has the effect of enhancing both reliability and fair competition among investors in the field of industrial park development.
07 - Phased investment rules for large-scale industrial park projects and conversion of paddy rice land
One of the important new provisions of Decree 35 concerns the obligation to invest in phases for large-scale industrial park projects and projects involving the conversion of multi-crop paddy land.
7.1. Obligation to invest in phases for large-scale industrial parks
For industrial parks exceeding 500 hectares, the project must be divided into multiple investment phases, with each phase limited to a maximum of 500 hectares. This rule allows infrastructure development and investment attraction to proceed in phases according to funding capacity and market demand, preventing a situation where a large tract of land is held while occupancy rates remain low.
7.2. Obligation to invest in phases when converting multi-crop paddy land
Decree 35 also gives consideration to the conservation of paddy land in connection with industrial park development. In particular, where a large-scale conversion of paddy land capable of two or more crops per year exceeds the area threshold set for each region, the conversion must be carried out in phases. Specifically:
Red River Delta / Mekong Delta: where the area exceeds 200 hectares, conversion in a single phase is limited to 200 hectares;
North Central / South Central Coast / Southeast regions: where the area exceeds 150 hectares, conversion in a single phase is limited to 150 hectares;
Northern midland and mountainous regions / Central Highlands (Tay Nguyen): where the area exceeds 100 hectares, conversion in a single phase is limited to 100 hectares.
These regional limits reflect the volume of agricultural land resources and the importance of food security in each region — large-scale conversion is restricted in the country's principal rice-growing regions, while a lower ceiling is set in mountainous areas where farmland is limited.
7.3. Exception – large-scale cluster investment projects
However, Decree 35 recognizes an exception for particularly important industrial park projects. Specifically, where a project forms an industrial cluster with total investment of US$2 billion (approximately VND 4.5 quadrillion) or more, the phased conversion limits described above do not apply, and the land may be developed all at once and simultaneously. This rule enables the rapid development of large-scale, strategically important industrial clusters (such as hi-tech industrial complexes).
7.4. Policy effect and significance
Phased investment allows infrastructure investors to concentrate funding and personnel phase by phase, reducing the risk of unabsorbed land. It also helps ensure the efficient use of important agricultural resources, such as paddy land, and plays a role in maintaining food security. In addition, social impacts such as compensation, relocation, and resettlement can be handled in stages, easing the burden on local residents.
08 - Development of worker housing and welfare facilities within industrial parks – a stronger legal basis under Decree No. 35 and related legislation
With the aim of improving the living environment of workers and specialists employed within industrial parks, Decree 35 substantially expands the scope of persons permitted to stay and lodge within industrial parks, and establishes a legal basis for constructing worker housing.
8.1. Expansion of rules on workers' and specialists' stay within industrial parks
Under the former Decree No. 82/2018/ND-CP, only management personnel, foreign specialists, and similar persons were permitted to lodge within an industrial park, and the vast majority of Vietnamese workers were not permitted to stay overnight there.
However, following the entry into force of Decree 35 on July 15, 2022, all specialists and workers, regardless of nationality, are now permitted to stay within an industrial park where necessary for production or work purposes. This makes it possible for workers to stay in dormitories or lodging facilities even where the industrial park is located far from urban areas, or where shift work is involved.
Decree 35 also permits temporary lodging within factories or company facilities where workers are unable to leave due to force majeure events (such as an epidemic or natural disaster). Indeed, during the COVID-19 pandemic, the "three on-site model" (on-site work, on-site meals, on-site lodging) was adopted to maintain production. Decree 35 provides a clear legal basis for such arrangements.
8.2. Legal groundwork for the construction of worker housing
Under Decree 35, industrial park infrastructure investors are now able to develop part of the commercial/service land within an industrial park as worker dormitories or lodging facilities.
In addition, the 2023 Housing Law (Luật Nhà ở 2023) newly establishes the concept of "worker accommodation within industrial parks," positioning this type of housing as a priority category for project-based housing development. Article 2 of that Law defines worker accommodation as "facilities built on commercial/service land within an industrial park, pursuant to industrial park management law, for lease to workers employed at that industrial park," making clear that such facilities are treated as commercial/service land rather than industrial land. As a result, worker accommodation is designated for lease only, not for sale, and is positioned as a facility dedicated to the welfare of industrial park workers.
8.3. Preferential treatment under the land regime
The 2024 Land Law (Luật Đất đai 2024) likewise introduces provisions to promote the development of worker accommodation within industrial parks. Land planned for worker accommodation within an industrial park is managed as commercial/service land and may be eligible for preferential rent and tax treatment. Previously, the entirety of an industrial park's land was uniformly classified as "industrial park land," which made it functionally difficult to build housing; the clarification of land use categories has now eased this investment barrier.
These provisions are expected to encourage the construction of worker accommodation, contributing to an improved living environment for workers, better talent retention, and reduced strain on surrounding urban infrastructure. Over the long term, enhanced welfare provisions will help secure a high-quality workforce and contribute to the stable operation of industrial parks and their attractiveness as investment destinations.
09 - Incentive and support policies for the new industrial park models
Decree 35 and related legislation systematically set out tax incentives and various investment support measures to promote the development of the new industrial park models described above.
9.1. Incentives for specialized-sector, supporting-industry, and hi-tech industrial parks
Decree 35 makes clear that investment projects belonging to these types of industrial parks may enjoy corporate income tax (CIT), export tax, and import tax incentives, along with other forms of support.
For example, companies manufacturing supporting-industry products listed on the priority list can receive CIT reductions, while hi-tech projects can obtain import tax exemptions for machinery and equipment and priority access to the National Fund for Science and Technology Development.
In addition, an industrial park infrastructure development investor must specify the target proportion of specialized industrial land (60% or 30%, depending on the type of park) in the investment policy approval decision or Investment Registration Certificate, and its achievement of that target is monitored during operation. Where this proportion is met, the park is eligible for investment incentives corresponding to its region and industry sector.
9.2. Support for eco-industrial parks
Decree 35 grants provincial People's Committees the authority to formulate policies to promote the development of eco-industrial parks. Forms of support include the following:
support for developing and upgrading technical and social infrastructure to promote industrial symbiosis among companies;
support for attracting new investment projects; and
scientific and technological support and technology transfer assistance (improving production processes, reducing environmental impact, reusing waste, and using resources efficiently).
In addition, a certification system has been established for eco-industrial parks and the companies within them. Circular No. 05/2025/TT-BKHDT of the Ministry of Planning and Investment (effective March 15, 2025) sets out detailed evaluation criteria, procedures, and application forms, establishing specific indicators such as energy efficiency, reuse rates, adoption rates for environmental management systems, and emission reductions. For a newly established eco-industrial park, an application for certification may be filed if the park commits to meeting the criteria within 8 years of the start of operations.
9.3. Incentives for the industrial park–urban–service mixed-use model
Decree 35 establishes a principle under which incentives are applied to investors in this model based on each constituent function.
Industrial park component: ordinary industrial park incentives apply.
Urban/residential component: incentives under the Housing Law or urban development legislation apply (for example, incentives for social housing or worker housing).
9.4. Obligation to reserve land for small and medium-sized enterprises
The 2024 Land Law requires industrial park development investors to reserve a certain proportion of land (e.g., 5–10%) after infrastructure development for small and medium-sized enterprises and for industrial facilities that must relocate due to pollution. This land is leased at a discounted rent, with the corresponding rent reduction deducted from the land rent payable by the investor to the State. This achieves both a secure location for SMEs and a reduced economic burden on investors.
10 - Conditions for converting an industrial park into an urban/service area
Decree 35 establishes, for the first time, a mechanism for converting the whole or part of an industrial park into an urban/service area. This represents an important policy breakthrough for redeveloping industrial parks that are not operating efficiently, or that are located within urban areas and require a change of function.
Under Article 13 of Decree 35, conversion of an industrial park into an urban/service area requires satisfaction of the following five main conditions.
10.1. Conformity with planning
The area to be converted must be designated as urban/service land in an approved provincial or urban plan. Conversion is not permitted unless the change of use is explicitly reflected in the plan.
10.2. Location within an urban area
The subject industrial park must be located within a special-grade centrally governed city or a Class I city (whether centrally governed or provincially governed). This limits conversion to industrial parks located within major cities, and excludes industrial parks in suburban areas or small/medium-sized cities.
10.3. Minimum period of operation
The industrial park must have been in operation for at least 15 years since its establishment, or have passed at least half of its licensed operating period (where that period is less than 30 years). This prevents an industrial park from being converted too readily shortly after investment begins.
10.4. Consent of the investor and the resident companies
Conversion requires the consent of at least two-thirds of both the industrial park infrastructure investor and the companies located within the area to be converted. However, consent is not required in the following cases:
companies whose contract term has expired;
companies not permitted a lease extension under the Land Law; and
companies required to relocate due to causing serious environmental pollution.
10.5. Economic, social, and environmental effectiveness
Conversion must be expected to comprehensively yield benefits such as urban development revenue, improved landscape, better living and working conditions, and reduced environmental impact from the former industrial park.
Where these conditions are met and approval is obtained from the competent authority, the industrial park is converted into an urban/service area in accordance with the plan. The infrastructure investor, or a new investor, may then formulate an urban development project on the site of the former industrial park.
However, conversion requires strict procedures under the Land Law, including changing the land use category from industrial land to residential/commercial land and dealing with the assets of existing companies. For this reason, pilot implementation in a limited number of areas is expected in the initial stage.
11 - New rules on the management of export-processing enterprises and export-processing zones
Decree 35 introduces important amendments enabling more flexible, practice-oriented management of export-processing enterprises and export-processing zones.
11.1. Revised definition and scope of application for EPEs
Under the former Decree No. 82/2018/ND-CP, a company established within an export-processing zone was uniformly treated as an export-processing enterprise (EPE) — and enjoyed the incentives of a non-tariff zone — even if it was not actually engaged in export processing (manufacturing for export).
Decree 35 revises this, recognizing as an EPE, and eligible for the associated incentives, only a company actually engaged in export-processing activity (manufacturing for export, or providing services that support manufacturing for export). Even within an export-processing zone, a company engaged solely in production for the domestic market is no longer automatically treated as an EPE, which helps prevent abuse of incentives and ensures a level competitive environment.
11.2. Expanded scope of business activity for export-processing enterprises
Under the former regime, an EPE's activities were limited to export-related transactions and activities directly ancillary to them.
Decree 35 now permits EPEs, subject to satisfying certain conditions, to also engage in business activities outside export processing (specific manufacturing or services for the domestic market). This allows production capacity to be redirected to the domestic market when export orders decline, and makes it easier to participate in domestic supply chains.
11.3. Greater flexibility for warehousing and storage facilities
Decree 35 clearly provides that an EPE may establish a bonded warehouse satisfying the relevant conditions outside the export-processing zone or industrial park. Previously, such warehouses were confined to the export-processing zone, making it difficult to flexibly locate warehouses near ports or logistics hubs; this amendment enables reduced logistics costs and greater supply flexibility.
11.4. Permitting non-EPE companies to locate within an EPZ
Previously, an export-processing zone operated as a "closed customs area" composed entirely of export-processing enterprises.
Decree 35 now permits non-EPE companies (such as manufacturers of industrial components or logistics service providers) to locate within an export-processing zone. This strengthens the industrial ecosystem within the zone, enabling direct support for processing companies and effective use of vacant plots. However, non-EPE companies are not eligible for non-tariff zone incentives, and customs clearance procedures apply to them in the ordinary manner.
11.5. Continued customs management
An EPE is still required to establish physical separation facilities, such as fencing, from the outside world in order to satisfy the requirements of a non-tariff zone. Transactions between an EPE and domestic companies (whether inside or outside the export-processing zone) are treated as import/export transactions and require customs procedures.