2025-04-09 · 14 min read

Investing in Solar Power Projects in Vietnam: A Complete Guide to Regulations, Procedures, Power Purchase Agreements, and Investment Incentives

This article provides a comprehensive overview of investing in solar power projects in Vietnam, covering foreign ownership restrictions, development licensing, power purchase agreements (PPAs), and tax incentives. It also discusses points to watch for depending on the investment format—self-consumption, commercial power sales, rooftop installations on factories, and so on—to support sound investment decisions. NEXORA LAW FIRM has extensive practical experience in the renewable energy sector, including solar power, and provides comprehensive support covering legal structuring, license acquisition, PPA negotiation, compliance with foreign investment restrictions, and tax optimization, offering practical advice from the perspective of Japanese-affiliated companies.

Vietnam's renewable energy sector—particularly its solar power market—is growing rapidly, opening up significant business opportunities for foreign-invested companies. To bring a project to fruition, however, investors must accurately grasp a complex and frequently amended body of laws, procedures, and investment incentives. Based on the latest regulations, this article provides a practical, systematic explanation covering foreign ownership restrictions, market-entry structures, power purchase pricing, PPA negotiation, land acquisition, environmental impact assessment, and investment incentives.

*Solar power plant projects fall into two categories: projects connected to the national grid, and rooftop solar projects. This article addresses the former—grid-connected solar power plant projects.

01 - Foreign Ownership Restrictions and Available Investment Structures

1.1. Current State of Foreign Ownership Restrictions in Vietnam's Solar Power Sector

At present, there are, in principle, no foreign ownership restrictions on solar power plant projects in Vietnam. Foreign-invested companies and foreign investors may operate a power generation business on the same footing as domestic companies, whether by establishing a wholly foreign-owned entity or by acquiring shares or capital contributions in a local company (M&A).

That said, certain segments—such as power transmission, operation of the power grid, and national-level dispatch/coordination—remain state monopolies, and foreign participation is restricted there. The table below summarizes the foreign ownership rules by segment of the power sector.

1.2. Choice of Investment Structure

Depending on the nature and objectives of the project, investors may choose from the following structures:

(i) Self-development (IPP model)
— 100% foreign-owned, or a joint venture with a Vietnamese company

(ii) M&A structure
— Acquisition of shares/capital contribution in a power project company, or acquisition of the project itself

(iii) Business Cooperation Contract (BCC) structure
— Contribution and profit-sharing under a contract, without establishing a legal entity

(iv) Project finance structure
— Financing based on assets and cash flow

(v) Public-Private Partnership (PPP) model
— A joint undertaking with the State; currently of limited use in the solar sector

Because the choice of structure has a major bearing on tax treatment, contractual arrangements, and legal risk, a legal review at the early stage is indispensable.

02 - Latest Developments in Power Purchase Prices and Power Purchase Agreements (PPAs)

2.1. Overview and Evolution of the Power Purchase Pricing Regime

Power purchase prices for solar power in Vietnam were historically set by the government under a Feed-in Tariff (FIT) regime, but the market is now shifting toward a competitive mechanism through Direct Power Purchase Agreements (DPPA).

Below are the main pricing regimes applied to date (all figures exclusive of VAT):

Power price by technology (conditional on an investment policy approved on or before November 23, 2019):

* The exchange rate applied is based on the official 2017 rate (USD 1 = VND 22,316).

Special measures for Ninh Thuan Province

The following special rules apply in Ninh Thuan Province:

Commercial operation commenced on or before January 1, 2021
Project incorporated in the power development plan, with cumulative capacity not exceeding 2,000 MW

→ Power purchase price: VND 2,086/kWh (approx. 9.35 cents)

Introduction of the DPPA Regime and Decree 80/2024/ND-CP

New applications under the FIT regime have essentially ended. Decree No. 80/2024/ND-CP, promulgated on July 3, 2024, clarified the legal framework for the Direct Power Purchase Agreement (DPPA) regime.

Key features of the DPPA regime:

Generators and large consumers (e.g. factories) may contract directly, without going through EVN
Power prices are set on a market basis (subject to negotiation)
The PPA structure is more flexible, but managing legal risk is important
Some aspects of practical implementation remain unsettled, warranting a cautious approach

2.2. Negotiating and Executing the Power Purchase Agreement (PPA)

Negotiating a PPA with EVN (Vietnam Electricity) requires attention to the following:

The process is heavily influenced by EVN's internal procedures and planning, and tends to take a long time (typically 8 to 12 months)
It is often difficult for a developer to drive the negotiation process unilaterally
Generally, negotiations can proceed in parallel with construction and land acquisition

A standard model PPA exists, but individual amendments and negotiation are needed to properly allocate commercial and legal risk.

03 - The Implementation Process for a Solar Power Plant Project (New Investment)

Key procedural notes

3.1. Investment-related procedures

(i) Preparing a Pre-Feasibility Study (Pre-FS) and obtaining approval of the project proposal

To implement a solar power plant project, a Pre-Feasibility Study (Pre-FS) must first be prepared. Based on this, a project proposal is drawn up to apply for approval of the investment policy, and is submitted to the local authorities, the National Assembly, or the Government (the submission destination varies according to the scale of the project).

[Approval of the Project Proposal]

The project proposal process is the process of presenting investment intent to, and obtaining approval of the investment policy from, the local authorities, the National Assembly, or the Government (the competent approving authority varies according to project scale). At this stage, the foreign investor or foreign-invested company (the "developer") must submit a project proposal (including a pre-feasibility report and a proposal for land use), along with documents demonstrating the financial capacity, experience, and technical capability required to carry out the project.
*Depending on the content of the proposal and local rules, the developer may also be required to present the project proposal and explain its capabilities to the local authorities and relevant agencies.

(ii) Incorporation into, or confirmation of consistency with, the power development plan

Power sector planning is divided into (1) the National Power Development Plan (the current plan in effect is the 8th Power Development Plan) and (2) provincial power development plans. Every generation project must be consistent with these plans; where a project is not already incorporated into the plan, it must go through a procedure to be added.
As a general rule, large-scale power sources (plants exceeding 50 MW in capacity) are incorporated into the National Power Development Plan, while small and medium-scale power sources (50 MW or below) are incorporated into the relevant provincial plan.
Before investing in a solar power plant project in Vietnam, developers must check the direction of the power-source mix and the national transmission grid plan set out in the 8th Power Development Plan (covering 2021-2030, with a vision to 2050), and formulate a proposal accordingly.
Incorporation into the National Power Development Plan is handled by the General Directorate of Energy, which reviews the application documents and reports to the Prime Minister for approval through the Minister of Industry and Trade. Incorporation into a provincial plan is handled through the provincial People's Committee.

*Note, however, that either route ultimately requires approval from the Ministry of Industry and Trade, so even where incorporation into a provincial plan is handled at the provincial People's Committee counter, coordination and consultation with the Ministry is still required.

Incorporation into the power development plan requires assessing various factors such as power demand, impact on the transmission grid, and connection methods, and is therefore extremely time-consuming. This procedure typically takes 6 to 8 months at the provincial level, and 10 to 12 months at the national level.

(iii) Investment policy approval procedure

Depending on the scale of the project, the authority responsible for deciding the investment policy is divided among three levels: (1) the National Assembly, (2) the Prime Minister, and (3) the provincial/municipal People's Committee. For solar-power-related projects that require the allocation or lease of land or water surface from the State, approval of the investment policy must be obtained from the provincial/municipal People's Committee.
Where an investment project is located in an industrial park, export processing zone, hi-tech zone, or special economic zone, and is consistent with an already-approved plan, the management board overseeing that zone approves the investment policy.
Obtaining approval of the investment policy is the single most important step in the overall project procedure; it is a precondition for proceeding with all subsequent procedures. The approval process typically takes 5 to 6 months, of which demonstrating financial capacity (confirmation of guarantees from banks or financial institutions) can itself take a substantial 2 to 3 months, depending on the developer's capabilities.
*Note, however, that unlike thermal or gas power projects, solar power projects do not require a government guarantee when raising financing, which makes fundraising comparatively easier.
After obtaining approval of the investment policy, the developer obtains an Investment Registration Certificate (IRC) and establishes the company that will carry out the project. This process takes about one month.

3.2. Land-related procedures

(i) To secure the land or water surface needed for the project, a developer may either receive an allocation or lease of land/water surface from the State, or take an assignment from a party that already holds land/water-use rights.

*Where a project is implemented by taking an assignment of land/water-use rights, the procedures for applying for land/water allocation or lease and for compensation/site clearance are not required; instead, the developer must change the purpose of use of the land/water surface (where necessary) and update information on the land-use-right registration certificate or the water-surface use permit.

(ii) Where land or water surface is allocated or leased by the State, the developer must first obtain the People's Committee's approval of the need for land use. After obtaining approval of the investment policy, the developer enters into a deposit agreement for land acquisition with the Department of Planning and Investment under the People's Committee. Under the 2020 Investment Law, the deposit amount is 1% to 3% of the project's investment capital. Under Decree No. 31/2021/ND-CP dated March 26, 2021, the deposit rate is applied as follows:

For the portion of capital up to VND 300 billion, the deposit rate is 3%
For the portion of capital exceeding VND 300 billion up to VND 1 trillion, the deposit rate is 2%
For the portion of capital exceeding VND 1 trillion, the deposit rate is 1%

(iii) Under Decree No. 31/2021/ND-CP dated March 26, 2021, solar power investment projects fall within a specially incentivized investment sector, and the deposit amount is therefore reduced by 50%.

(iv) After completing the deposit procedure, the developer works with the Department of Natural Resources and Environment to obtain decisions on land acquisition, compensation, and site clearance, and carries out the compensation and site-clearance process. Unit compensation and site-clearance prices follow the People's Committee's decision on land acquisition, compensation, and site clearance.

*In addition to these official unit prices, however, developers typically also need to negotiate with the residents whose land is being acquired and put in place individual support measures to maintain land values equivalent to market prices at the time of acquisition.

3.3. Construction-related procedures

(i) Construction projects are classified into national-level projects, and Grade A, B, or C projects, depending on the scale, nature of the project, and the type of structure to be built.

For example, a Grade A project must obtain approval of the basic design under the Pre-FS before applying for the investment policy approval decision. The competent authority for this approval is the Department of Construction under the provincial People's Committee.

(ii) Because a solar power project constitutes a construction investment project, it must comply with the Construction Law during implementation. In particular, developers must comply with the specialized procedures for environmental impact assessment. Under the 2020 Law on Environmental Protection, a solar power plant project may be required to prepare a preliminary environmental impact assessment and an environmental impact assessment report, depending on the scale of the project.

Preparing and reviewing the environmental impact assessment report is time-consuming, particularly the collection of observational data at the project site. Approval typically takes about 3 to 5 months after the report is completed.

3.4. Power-sale-related procedures

The PPA (power purchase agreement) negotiation process is heavily dependent on EVN's (Vietnam Electricity's) own plans and schedule, making it difficult for a developer to actively drive the negotiation. That said, negotiating and concluding the PPA can proceed in parallel with construction- and land-related procedures. The PPA negotiation and agreement process typically takes about 8 to 12 months.

For details of the PPA negotiation procedure, please refer to [Procedures Relating to the Power Purchase Agreement with Vietnam Electricity (EVN)].

04 - Investment Incentives for Solar Power Projects

Renewable energy businesses are designated as an incentivized investment sector under Article 16 of the 2020 Investment Law. Developers identify the applicable incentives themselves and apply for them; these are then recognized in the investment policy decision, the Investment Registration Certificate, or in separate documents issued by the tax, finance, or customs authorities.

Under Decree No. 31/2021/ND-CP dated March 26, 2021, renewable energy production is classified as a specially incentivized investment sector, entitling developers to the following specific incentives.

4.1. Deposit incentive
As noted above, the deposit amount is reduced by 50%.

4.2. Tax treatment
Import duty is exempted on goods imported to construct the project's fixed assets. Import duty is also exempted, for five years from the commencement of production, on imports of raw materials, supplies, and components not yet produced domestically.
For corporate income tax on new investment projects, a preferential rate of 10% applies for 15 years. In addition, the project is exempt from tax for the first four years, followed by a 50% reduction for the subsequent nine years.

4.3. Land/water-surface rental
Land/water-surface rental is exempted during the basic construction period under a project approved by the competent authority, for a maximum of three years from the date of the land/water-surface lease decision.
For projects falling within an incentivized investment sector, land rental is exempted for a further three years after the basic construction period ends.
For projects invested in economically disadvantaged areas, land rental is exempted for seven years.
For projects invested in especially economically disadvantaged areas, or falling within a specially incentivized sector, land rental is exempted for 11 years.
For projects invested in especially economically disadvantaged areas that also fall within a specially incentivized sector, land rental is exempted for 15 years.

(As a general matter, solar power investment projects benefit from a three-year land rental exemption following the basic construction period.)

Note:
Where a solar power project has an investment scale of VND 30 trillion or more, and at least VND 10 trillion is disbursed within three years of the date of the Investment Registration Certificate or the investment policy approval, special investment incentives apply under Decision No. 29/2021/QD-TTg dated October 6, 2021. Specifically:

Tax treatment:
A preferential corporate income tax rate of 9% applies for 30 years, comprising a five-year exemption followed by a 50% reduction for the next ten years.

Land/water-surface rental:
Land/water-surface rental is exempted for 18 years, with a 55% reduction for the remaining period.

Conclusion and summary

Investing in solar power projects in Vietnam takes place against a regulatory framework that continues to be refined, but the process still requires considerable time and effort in coordinating with local authorities and navigating documentary review. Choosing the wrong investment structure or contractual form can lead to project delays and increased costs.

Decree No. 80/2024/ND-CP, which took effect in July 2024, has put in place an institutional framework for DPPA that makes it an attractive option for foreign capital, but its practical operation still warrants close monitoring.

To secure legal stability and transparency for a project, we recommend strengthening cooperation with local experts and law firms, and conducting a legal review from the structuring stage onward.