Vietnam Proposes Free Trade Zone in Hai Phong: Strategic Breakthrough in Investment Reform

Legislative Background and Strategic Rationale

On 13 May 2025, the Vietnamese Government submitted to the National Assembly a draft Resolution to replace Resolution No. 35/2021/QH15 dated 13 November 2021 on piloting special mechanisms for Hai Phong. This initiative aims to remove structural bottlenecks and unlock Hai Phong’s role as a growth engine in the Red River Delta (RRD) region, in line with Resolution No. 45-NQ/TW (January 2019) and Conclusion No. 96-KL/TW of the Politburo.

The draft Resolution includes six major policy groups with 41 specific mechanisms, 17 of which are dedicated to establishing and regulating a free trade zone (“FTZ“) in Hai Phong as detailed in Article 9. Hai Phong, Vietnam’s largest northern seaport city, lies 100 km from Hanoi and borders China’s southern economic corridor via Quang Ninh. It serves as a strategic location for cross-border trade, manufacturing, logistics, and global supply chains.

Legal Framework and FTZ Design

The FTZ will have clearly demarcated geographic boundaries and be established to pilot special and breakthrough policies for investment, trade, research and development (“R&D“), and high-skilled labor attraction. Functional subzones will include:

1. production zones;
2. port and logistics hubs;
3. commercial and service areas; and
4. other zones as permitted by law.

These subzones will meet non-tariff zone criteria, subject to customs and inter-agency oversight. 

Delegated Authority and Administrative Powers

Under the draft Resolution, the Hai Phong People’s Committee will be empowered to establish, expand, or adjust the boundaries of the FTZ, which is connected to the Dinh Vu – Cat Hai Economic Zone and southern coastal areas. The process for the establishment of the FTZ will follow the same legal procedures as those for industrial parks under current Vietnamese law. The local government of the city will also control planning adjustments within the FTZ boundaries.

Investment Incentives and Pilot Policies

The draft Resolution provides for the following incentives and pilot policies in relation to the FTZ:

1. Corporate Income Tax (“CIT”):
   • • 10% for up to 30 years
     • four-year exemption plus nine-year 50% reduction

     • 15% flat rate thereafter

2. Personal Income Tax (“PIT”):
   1. • 50% PIT reduction for foreign experts, managers, scientists, and skilled workers

3. Startup Tax Incentives:
   1. • CIT and PIT exemptions for innovation-based startups
      • Companies subject to Global Minimum Tax (“GMT“) must comply with applicable rules

4. Land and Construction:
   1. • Simplified procedures and reduced rent/fees for land and surface water use

5. Banking Access:
   1. • Foreign bank branches may open transaction offices within the FTZ, beyond their main office locations 

One-Stop, On-Site Governance Mechanism

The FTZ will implement a “one-stop, on-site” model via the Hai Phong Economic Zone Authority (HEZA), which will be authorised to:

1. issue investment registration certificates;
2. approve, adjust, and withdraw business licences;
3. grant work permits and labour confirmations; and
4. issue certificates of origin (C/Os).

Risk Management and Security Considerations

It is to be noted that Vietnam’s National Assembly Economic–Financial Committee emphasised the need to address risks beyond economic scope. It stated that “the FTZ must include controls to manage national defense, financial security, and public order. Mechanisms for supervision, accountability, and institutional responsibility are critical”. Needless to say, a balance must be achieved between openness and sovereignty protection, including fiscal stability and zone containment.

Next Steps and Legal Outlook

The draft Resolution is set for review at the 9^th session of the 15^th National Assembly. If approved, implementing regulations will be promulgated in late 2025 or early 2026.

An open clause in the draft Resolution (Article 12.5) allows the FTZ framework to remain valid in case of future municipal mergers or administrative changes.

Recommendations for Investors

The Hai Phong FTZ marks Vietnam’s most ambitious pilot of a globally aligned, high-autonomy special economic zone. Investors in manufacturing, logistics, fintech, and R&D should track legal developments closely, evaluate GMT exposure and tax planning options, and engage local advisors early to navigate relevant land, labour, and foreign exchange rules.

If you have any queries on the above or require assistance in relation to this development, please feel free to contact any of our team members.