We have realized that recently Vietnamese Government and competent agencies have issued many regulations on corporate income tax (“CIT”) incentives to support and promote the business investment environment in Vietnam. MACT Vietnam Co., Ltd (“MACTVN”) would like to highlight some outstanding content for your better understanding:
Criteria for identifying high-tech enterprises
The Prime Minister issued Decision No. 10/2021/QD-TTg on criteria for identifying high-tech enterprises on March 16, 2021 (“Decision 10”). We found out Decision 10 very interesting because high-tech enterprises are entitled to CIT incentives according to regulations (tax rate of 10% for 15 years, tax exemption for 4 years and reduction of 50% of tax payable in the 9 years from the year the enterprise is granted the Certificate of high-tech enterprise). Decision 10 takes effect from April 30, 2021.
MACTVN would like to summarize the criteria for identifying high-tech enterprises of Decision 10 as follows:
- Revenue criteria: Sales of high-tech products reach at least 70% of total annual net revenue;
- Criteria for research and development costs: Ratio of research and development expenses to total net revenue minus input value (value of raw materials and components for imported production and domestic purchase) ) every year:
- Enterprises with a total capital of VND 6,000 billion and a total number of employees of 3,000 or more must be at least 0.5%;
- Enterprises that do not fall into the above cases, with a total capital of 100 billion VND and a total number of employees from 200 people or more must reach at least 1%;
- Enterprises not in the above cases must achieve at least 2%.
- Criteria for the proportion of employees directly conducting research and development: Having a college degree or higher (signing a contract with a term of 1 year or more or an indefinite contract in which employees with college degree does not exceed 30%) of the total number of employees:
- Enterprises with a total capital of VND 6,000 billion and a total number of employees of 3,000 or more must be at least 1%;
- Enterprises not in the above cases with a total capital of 100 billion VND and the total number of employees from 200 people or more must reach at least 2.5%;
- Enterprises not in the above cases must achieve at least 5%.
Enterprises that have submitted an application for the Certificate of high-tech enterprises before the effective date of Decision 10 (April 30, 2021) but have not yet been granted, shall comply with the criteria specified in Decision 10.
CIT incentives for science and technology enterprises
On January 11, 2021, the Ministry of Finance issued Circular No. 03/2021/TT-BTC (“TT 03”) on exemption and reduction of CIT for science and technology enterprises (“Science and technology enterprises”). prescribed in Decree No. 13/2019/ND-CP dated February 1, 2019 (“Decree 13”). The details of TT 03 are summarized as follows:
- Subjects of application of Circular 03:
- Science and technology enterprises in accordance with the Law on Science and Technology;
- Independent accounting branch that meets the conditions of Circular 03 on the Certificate of Science and Technology Enterprise and revenue.
- CIT incentives for science and technology enterprises:
- Exemption for 04 years and reduction of 50% of payable CIT for the next 9 years;
- The tax exemption and reduction period is counted continuously from the date of issuance of the Certificate of Science and Technology Enterprise. If the Enterprise has no taxable income in the first three years, from the first year it is granted the Certificate of Science and Technology Enterprise, the first year for calculating the tax exemption or reduction period is the fourth year;
- During the tax exemption and reduction incentives, if the enterprise does not meet the conditions on revenue of products formed from scientific and technological results reaching at least 30% of the total annual revenue, it won’t be entitled to CIT incentives in that year. The year of not enjoying CIT incentives shall be deducted from the time of enjoying CIT incentives of a science and technology enterprise;
- In case a science and technology enterprise have a taxable income but the period for enjoying CIT incentives of the first year is less than 12 (twelve) months, it can choose to benefit CIT incentives in that first year or register with tax authorities will start enjoying CIT incentives in the following year.
- Conditions for benefiting CIT incentives:
- Conditions on License: To be granted the Certificate of Science and Technology Enterprise by a competent state management agency;
- Revenue conditions: Annual revenue from production and trading of products formed from scientific and technological results reaches at least 30% of the total annual revenue of the Enterprise;
Revenue generated from services with application of science and technology results in the field of information technology is the revenue from new services, excluding services already on the market;
- Conditions on accounting, invoice and voucher regimes: Science and technology enterprises must separately account income from production and trading activities of products formed from scientific and technological results in the period. If the enterprise cannot do separate accounting, the income from this activity shall be distributed according to the provisions of the Law on CIT.
- Science and technology enterprises must comply with the accounting regime, invoices and documents according to the provisions of law and pay tax according to the declaration;
- Procedures for implementing CIT incentives:
- Enterprises self-determine CIT incentives and declare them in the List of CIT incentives;
- A list of CIT incentives is submitted together with the annual CIT finalization declaration.
MACT Vietnam Co., Ltd is pleased to provide the following services:
- Consulting on the feasibility of benefiting CIT incentives under the categories of Hi-tech Enterprises, Science and Technology Enterprises and Enterprises operating in the field of supporting industries;
- Advising on CIT incentive procedures for hi-tech enterprises, science and technology enterprises and enterprises operating in the field of supporting industries.
Please contact us for more detail advices: MACT Vietnam Co., Ltd
Pham Quoc Viet, Chủ tịch, Email: Vietpq@mactvn.com, Mobile: 0984.998.265.