Conditions for tax exemption and reduction preferences for corporate income tax for science and technology enterprises in Vietnam

Conditions for tax exemption and reduction preferences for corporate income tax for science and technology enterprises in Vietnam​ (Image from the Internet)

1. Conditions for tax exemption and reduction preferences for corporate income tax for science and technology enterprises in Vietnam

According to Article 2 Circular 03/2021/TT-BTC, science and technology enterprises in Vietnam are entitled to corporate income tax exemption and reduction preferences as per the provisions of Clause 1, Article 12 of Decree 13/2019/ND-CP if they meet the following conditions:

- Granted a Certificate of Science and Technology Enterprise by a competent state management agency.

- Annual revenue from the production and business of products derived from scientific and technological results must account for at least 30% of the total annual revenue of the enterprise.

+ Annual revenue from production and business of products derived from scientific and technological results is the revenue of all products formed from scientific and technological results as stipulated in Clause 1, Article 2 of Decree 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 (the total revenue includes revenue from the production and business of products formed from scientific and technological results in that year).

- Revenue generated from services applying scientific and technological results in the field of information technology must come from new services, excluding existing services on the market.

The criteria and basis for determining services using scientific and technological results in the information technology field as new services shall comply with the regulations of the Ministry of Science and Technology.

- Science and technology enterprises must separately account for income from production and business activities of products formed from scientific and technological results during the period to enjoy the corporate income tax preferences. If the enterprise fails to account separately, the income from the production and business of products formed from scientific and technological results that qualifies for the corporate income tax preferences shall be allocated under the provisions of Clause 2, Article 18 of the Corporate Income Tax Law 2008.

To enjoy corporate income tax preferences, science and technology enterprises must comply with accounting policies, invoices, and documents in accordance with the law and pay taxes by declaration.

2. Regulations on tax exemption and reduction preferences for science and technology enterprises in Vietnam

The regulations on corporate income tax exemption and reduction preferences for science and technology enterprises according to Article 3 of Circular 03/2021/TT-BTC are as follows:

- Levels and duration of corporate income tax exemption and reduction preferences

+ Science and technology enterprises are entitled to corporate income tax exemption and reduction preferences as per the provisions of Clause 1, Article 12 of Decree 13/2019/ND-CP, specifically: exempt from tax for 4 years and a 50% reduction in the taxable amount for the next 9 years.

+ The period of tax exemption and reduction for science and technology enterprises is calculated continuously from the date of receiving the Certificate of Science and Technology Enterprise. In the case where there is no taxable income in the first three years from the first year of certificate issuance, the first year for calculating the tax exemption and reduction period shall begin from the fourth year.

+ During the period of enjoying corporate income tax exemption and reduction preferences, if any year the science and technology enterprise does not meet the revenue conditions of products formed from scientific and technological results to account for at least 30% of the total annual revenue, the enterprise will not enjoy the preferences for that year and this will be deducted from the incentive period.

+ In case the science and technology enterprise already has taxable income but the tax-exempt/reduced operation period of the first year is less than 12 months, the enterprise may choose to enjoy tax exemption/reduction in that first year or register with the tax authority to start the exemption/reduction period in the following year. If registered for the following year, the taxable amount of the first year must be determined and paid to the State Budget as prescribed.

- Specific application cases

+ In case a science and technology enterprise has been or is enjoying corporate income tax preferences under other preferential conditions (other than science and technology enterprise conditions) and receives a Certificate of Science and Technology Enterprise, the tax exemption/reduction time for a science and technology enterprise shall be determined by subtracting the exemption/reduction period already enjoyed under other conditions from the period applicable to science and technology enterprises.

+ In case a science and technology enterprise, which is already operating and enjoying tax preferences under science and technology enterprise conditions, has additional products from scientific and technological results added to its Certificate of Science and Technology Enterprise by a competent authority, such additional income will also enjoy tax exemption/reduction preferences along with the current preferences for the remaining time.

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