What are the conditions for a science and technology enterprise to be eligible for corporate income tax reduction incentives in Vietnam?

What are the conditions for a science and technology enterprise to be eligible for corporate income tax reduction incentives in Vietnam?

According to Article 2 of Circular 03/2021/TT-BTC, the conditions for a science and technology enterprise to be eligible for corporate income tax reduction incentives include the following four conditions:

Firstly, the enterprise must be granted a Certificate of Science and Technology Enterprise by a competent state management agency.

Secondly, the annual revenue from production and business activities of products formed from scientific and technological results must account for at least 30% of the total annual revenue of the enterprise.

In which:

- Annual revenue from production and business activities of products formed from scientific and technological results is the revenue from all products formed from scientific and technological results as stipulated in Clause 1, Article 2 of Decree No. 13/2019/ND-CP.

- The total annual revenue of the enterprise includes all revenue from production, business, services, financial activities, and other income of the enterprise (total revenue also includes revenue from production and business activities of products formed from scientific and technological results for that year).

Thirdly, revenue generated from services applying scientific and technological results in the field of information technology should be revenue from new services, excluding existing services in the market.

The criteria and basis for determining services applying scientific and technological results in the field of information technology as new services are implemented in accordance with regulations of the Ministry of Science and Technology.

Fourthly, science and technology enterprises must separately account for income from production and business activities of products formed from scientific and technological results to avail of corporate income tax incentives.

If the enterprise cannot account separately, the income from production and business activities of products formed from scientific and technological results eligible for corporate income tax incentives is allocated according to the provisions in Clause 2, Article 18 of Law on Corporate Income Tax 2008.

Additionally, to be eligible for corporate income tax incentives, the science and technology enterprise must comply with accounting, invoicing, and document policies as prescribed by law and pay taxes based on declarations.

What are the conditions for a science and technology enterprise to be eligible for corporate income tax reduction incentives in Vietnam? (Image from Internet)

What is the duration of corporate income tax reduction incentives for science and technology enterprises in Vietnam?

According to Clause 1, Article 3 of Circular 03/2021/TT-BTC, the duration of corporate income tax reduction incentives is as follows:

- Science and technology enterprises with income from production and business activities of products formed from scientific and technological results are entitled to corporate income tax exemption and reduction as enterprises implementing new investment projects in the field of scientific research and technological development, specifically: 4 years of tax exemption and a 50% reduction in the payable tax amount for the next 9 years.

- The tax exemption and reduction period for a science and technology enterprise is calculated continuously from the date of being granted the Certificate of Science and Technology Enterprise.

If there is no taxable income in the first three years from the first year of being granted the Certificate of Science and Technology Enterprise, the first year for calculating tax exemption, reduction starts from the fourth year.

- During the tax exemption and reduction period, if in any year the science and technology enterprise does not meet the revenue condition of products formed from scientific and technological results reaching at least 30% of the total annual revenue, that year the enterprise is not entitled to incentives and the period of enjoying corporate income tax incentives is deducted accordingly.

- In the event a science and technology enterprise has taxable income but the production and business operation period exempted from taxation in the first year is less than 12 months, the enterprise can choose to enjoy tax exemption and reduction in the first year or register with the tax authority for the exemption and reduction period to begin in the following year. If the enterprise registers for exemption and reduction in the subsequent year, it must calculate the payable tax for the first year with taxable income and pay it to the State Budget as prescribed.

What are procedures for corporate income tax reduction in Vietnam?

According to Article 4 of Circular 03/2021/TT-BTC, the corporate income tax reduction procedure for science and technology enterprises is implemented as follows:

- The procedure for implementing corporate income tax incentives is carried out in accordance with tax laws on corporate income tax and tax administration.

- Science and technology enterprises shall self-determine the corporate income tax amount entitled to incentives and declare it in the Schedule of Corporate Income Tax Incentives for Science and Technology Enterprises. The Schedule of Corporate Income Tax Incentives accompanies the annual corporate income tax finalization declaration.