Nguyen Thi Thu Thuy

Type of the article: Research Article

Abstract
The transition to a circular economy is a strategic priority in Vietnam’s sustainable development agenda, necessitating robust fiscal instruments to mitigate high capital cost barriers. This study aims to evaluate the legal and financial efficacy of accelerated depreciation mechanisms for sustainable investments in Vietnam by benchmarking them against ASEAN Taxonomy standards. Using a doctrinal legal analysis and a quantitative simulation of the Depreciation Tax Shield (DTS) via a Net Present Value (NPV) approach, the study quantifies the financial impact of various depreciation scenarios on a hypothetical capital expenditure.
The simulation-based evidence indicates that the current maximum depreciation coefficient of 2.0 provides a marginal tax shield benefit of only 2.86 billion VND per 100 billion VND of investment, which is approximately 20% lower than the tax shield values in neighboring countries that utilize initial investment allowances. Furthermore, the doctrinal analysis confirms a systemic misalignment between Vietnam’s project-based regulatory management and the asset-based classification logic of the ASEAN Taxonomy, creating significant barriers to rapid capital recovery amid risks of technological obsolescence. The study concludes that Vietnam should establish a synchronized national green asset catalogue and increase the depreciation coefficient to 3.0 for strategic equipment. Such reforms would not only optimize financial benefits but also directly enhance Vietnam’s competitiveness in attracting green foreign direct investment within the region.