Vietnam: Regulation on deduction for setting up of enterprises scientific and technological development funds

Specifically, according to Article 17 of the Law on Enterprise Income Tax 2008 of Vietnam, deduction for setting up of enterprises scientific and technological development funds is prescribed as follows:

1. Enterprises established and operating under Vietnamese law may deduct up to 10% of taxed income for setting up their scientific and technological development funds.

2. Within five years after being set up, if a scientific and technological development fund is not used, has been used below 70% or used for improper purposes, the enterprise shall remit into the state budget the enterprise income tax amount calculated on the income already deducted for setting up the fund but not used or used for improper purposes and the interest on that enterprise income tax amount.

The enterprise income tax rate used for calculating the to-be-recovered tax amount is the tax rate applicable to the enterprise during the time of operating the fund.

The interest rate for calculating the interest on the to-be- recovered tax amount calculated on the unused fund amount is the interest rate for one-year term treasury bonds applicable at the time of recovery, and the interest payment period is two years.

The interest rate for calculating the interest on the to-be- recovered tax amount calculated on the fund amount used for improper purposes is the interest used for late payment fines under the provisions of the Tax Administration Law, and the interest payment period is counted from the time a fund is set up to the time of recovery.

3. Enterprises may not account expenses covered by their scientific and technological development funds as deductible ones upon the determination of taxable incomes in a tax period.

4. Enterprises’ scientific and technological development funds may be used only for scientific and technological investment in Vietnam.

View more details at the Law on Enterprise Income Tax 2008 of Vietnam, effective from January 01, 2009.

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