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Vietnam high-tech tax incentives: who can claim them

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Vietnam high-tech tax incentives give qualifying companies a lower corporate income tax rate and a period of tax-free and half-rate years. Not every firm that uses technology can claim them. The law ties the benefit to a certificate, a product list and a set of numeric tests.

Sources: Law on High Technologies No. 21/2008/QH12, Articles 3 and 18 (English translation on luatvietnam.vn); Circular No. 78/2014/TT-BTC, Articles 19 and 20 (English translation on luatvietnam.vn).

What counts as a high-tech enterprise

The Law on High Technologies was passed in 2008. It defines a hi-tech enterprise as a business that makes hi-tech products, provides hi-tech services and carries out hi-tech research and development. A hi-tech product is one made with high technology that is friendly to the environment, has superior quality and adds high value.

The law says an enterprise that meets all of its conditions gets the highest level of incentive under the laws on land, enterprise income tax, value-added tax and import and export duty. So the tax benefit is not automatic. It follows from being recognized as a hi-tech enterprise.

Sources: Law on High Technologies No. 21/2008/QH12, Articles 3 and 18.

The tests a company must pass

The tests have changed over time. The 2008 law set the base rules, and the Prime Minister later set the numbers. Decision No. 10/2021/QD-TTg, which took effect on 30 April 2021, is the current set. It replaced Decision No. 19/2015/QD-TTg.

Under that decision, a company must pass three numeric tests on top of the rules in the law:

  • At least 70% of its yearly net revenue must come from hi-tech products.
  • Its spending on research and development must reach a set share of revenue. The share is 0.5%, 1% or 2%, depending on the size of the firm.
  • A set share of its staff must work directly in research and development and hold at least an associate degree. The share is 1%, 2.5% or 5%, again by firm size.

Smaller firms face the higher figures. The products must also appear on the list of hi-tech products that the state encourages. That list is in Decision No. 38/2020/QD-TTg, signed on 30 December 2020.

Sources: Decision No. 10/2021/QD-TTg, Articles 1 to 3 (English translation on luatvietnam.vn); Tilleke & Gibbins, "Decision 10 sets new criteria for high-tech enterprises in Vietnam", 15 April 2021; Decision No. 38/2020/QD-TTg (thuvienphapluat.vn and luatvietnam.vn).

The rates and the tax holiday

The standard corporate income tax rate in Vietnam is 20%. Decree No. 218/2013/ND-CP, which guides the Law on Corporate Income Tax, sets better terms for high-tech activity.

Article 15 of the decree gives a 10% rate for 15 years. It covers income from new projects in scientific research and technological development. It also covers projects that apply high technology from the priority list, and income of high-tech enterprises themselves. Article 16 adds a tax holiday: no tax for four years, then a 50% cut in tax for the next nine years.

Circular No. 78/2014/TT-BTC explains how this works for certified firms. A hi-tech enterprise can enjoy the preferential rate from the year it receives its certificate. The incentive applies to its total income, with a few listed exceptions. The tax-free and half-rate years are counted from the first year the company has taxable income from the project, with a rule for firms that have no taxable income in their first years.

Sources: Decree No. 218/2013/ND-CP, Articles 15 and 16 (English translation on thuvienphapluat.vn); Circular No. 78/2014/TT-BTC, Articles 19 and 20; Decree No. 218/2013/ND-CP, Article 10, on the 20% standard rate.

Income the incentives do not cover

Article 19 of Decree 218 lists income that cannot use these breaks. Examples are gains from transferring capital, income from transferring real estate, income earned outside Vietnam, income from oil, gas and mineral extraction, and income from services that carry excise tax.

A company must also keep separate accounts for the income that gets the incentive. Where income or costs cannot be split, the decree sets a ratio to divide them. A firm that mixes its books can lose part of the benefit.

Source: Decree No. 218/2013/ND-CP, Article 19 (English translation on thuvienphapluat.vn).

How a company applies

A company applies to the Ministry of Science and Technology for the hi-tech enterprise certificate. The file includes the business registration, a written explanation of how the firm meets each test, and financial and staffing records. The ministry reviews the file and may ask other bodies for views.

After that, the company claims the tax benefit in its annual return and keeps the proof ready for review. Firms should check the current text of each rule before filing, because the decisions and decrees above have been amended before. Advice from a licensed tax adviser is wise for any real project.

Sources: Vietnam Briefing, "CIT incentives for software production and high-tech companies in Vietnam", 10 September 2024; Law on High Technologies No. 21/2008/QH12, Article 18.

Sources

  • Law on High Technologies No. 21/2008/QH12, english.luatvietnam.vn
  • Decree No. 218/2013/ND-CP, thuvienphapluat.vn
  • Circular No. 78/2014/TT-BTC, english.luatvietnam.vn
  • Decision No. 10/2021/QD-TTg, english.luatvietnam.vn
  • Decision No. 38/2020/QD-TTg, thuvienphapluat.vn
  • Tilleke & Gibbins, tilleke.com; Vietnam Briefing, vietnam-briefing.com