Tax Incentives for companies developing software and active in the software industry

Software Production and Software Service

Notes on Value Added Tax and Corporate Income Tax

[HAS BEEN UPDATED ON 01/06/2023 – CONTACT US FOR THE NEWEST VERSION]

In case the Company operates in many industries, tax incentives rate for software production activities, software service is only applicable to the revenue from these activities, other revenues from remaining activities will be inapplicable.

  • Law on Information Technology No. 67/2006/QH11

  • Decree 71/2007/NĐ-CP

  • Circular No. 219/2013/TT-BTC, Circular No. 78/2014/TT-BTC, Circular No. 96/2015/TT-BTC, Circular No. 13/2020/TT-BTTTT, Circular No. 09/2013/TT-BTTTT

    • Tổng quan / Overview

    • Sản phẩm phần mềm / Software Production

    • Định nghĩa / Definition

Software product means software, and accompanying assets which are produced and displayed or stored in objects of any form and can be purchased, sold or transferred to other subjects for exploitation for use.

    • Các loại sản phẩm phần mềm / Types of software products 

Including: System software, Application software, Utility software, Tool software, Other software.

Please refer to the list of software products enclosed with Circular No. 09/2013/TT-BTTTT for more information.

    • Điều kiện để được xác định là doanh nghiệp sản xuất sản phẩm phần mềm được hưởng ưu đãi / Conditions to determine a Software Production Company to inherit tax incentives

  1. Company must perform at least one of the two stages: Requirement determination, Analysis and design in a chain of Software Product Manufacturing Process (7 stages).

Therein, documentation for performing 2 aforementioned stages is:

Requirement determination: Description of ideas regarding  product development methods; description of characteristics (requirements) of products and context of use of products; description of propositions and results of surveys, clarification results, and requirement development results for products; detailed description and analysis regarding operations; description of complete requirements for products; description of contents of consultancy regarding procedural adjustment; records on consolidation of requirements, approval of requirements, description of control capacity and factors to verify adherence to requirements of products; or equivalent documents.

Analysis and design, Description of requirements; establishment of development equation and necessary techniques to best utilize solutions; analysis of legitimacy and examination capacity of software, analysis of impacts of software requirements on operation environment; lists of requirements to be prioritized, approved and updated when necessary; descriptions of data modeling, function modeling, and information channel modeling; description of software solutions; solution design and software system design; data design, structure design, designs for composition units and modules of software; designs for information safety and security for software; designs for customer interface; or equivalent documents.

  1. Having new investment project in software production industry

New investment project is:

  • Projects that are granted First investment certificates from January 01, 2014 and earn revenues after the grant of certificates of investment.

  • Any domestic project of investment that is associated with establishment of a new enterprise whose capital is below VND 15 billion, not on the list of fields subject to conditions, and granted the Certificate of Enterprise registration from January 01, 2014.

  • Any project of investment that is independent from the project of an operating enterprise (including those whose capital is below VND 15 billion and not on the list of fields subject to conditions) and granted the Certificate of Enterprise registration from January 01, 2014 to execute such independent project, and granted the Certificate of Enterprise registration from January 01, 2014.

New projects of investment must be granted investment licenses or certificates of investment as prescribed by regulations of law on investment in order to be given CIT incentives.

  1. Implement regulations on accounting, invoices, vouchers and corporate income tax payment as declared according to Article 18 of Circular No. 78/2014/TT-BTC.

    • Dịch vụ phần mềm / Software Service

    • Định nghĩa / Definition

Software service means activities in direct support or service of the manufacture, installation, exploitation, use, upgrading, warranty and maintenance of software and other similar activities related to software.

    • Các loại dịch vụ phần mềm / Types of software services

Including:

  • Administration, warranty and maintenance of operations of software and information systems

  • Software quality counseling, assessment and evaluation

  • Software project counseling and formulation

  • Software valuation counseling

  • Software technology transfer

  • System integration

  • Assurance of safety and security for software products and information systems

  • Distribution and supply of software products

Other software services

    • Ưu đãi về Thuế / Tax incentives

    • Về thuế GTGT / Regarding VAT

Company provides software products and software services (regardless of outsourcing software, software produced by the company itself or purchased for sale), even in the case of selling software with installation services), if listed in section 1.2 and 2.2, they are not subject to VAT according to Clause 21, Article 4 Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance.

Clause 21, Article 4 Circular No. 219/2013/TT-BTC stipulates:

“Article 4. Goods and services that are not subject to VAT

    1. Computer software including software products and software services as prescribed by law.”

    • Về thuế Thu nhập Doanh nghiệp / Regarding Corporate Income Tax

  • Software services: Not subject to tax incentives

  • Sell-purchase software company: Not subject tax incentives

  • Software production: Tax incentives route as follows:

For companies that have investment projects on software production, revenue from software service contracts such as warranty, maintenance and software upgrades of the production unit is considered other directly related income so they also inhirit corporate income tax incentives.

STT / No. Thời gianTime frame Mức thuế suấtTax rate
(1) Bốn năm đầuThe first 04 years Miễn thuếTax exemption
(2) Từ năm thứ 05 đến năm thứ 13From the 5th year to the 13th year Thuế suất ưu đãi 5%Preferential tax rate of 5%
(3) Từ năm thứ 14 đến năm thứ 15From the 14th year to the 15th year Thuế suất ưu đãi 10%Preferential tax rate of 10%
(4) Từ năm thứ 16 trở điFrom the 16th year onwards Thuế suất bình thường (hiện nay Thuế suất là 20%)Normal tax rate (currently the Tax rate is 20%)

Lưu ý / Notes:

    • 7 công đoạn sản xuất phần mềm / 7 stages of software product manufacturing process

  1. Requirement determination

  1. Analysis and design

  1. Programming and coding

  1. Software examination and experimentation

  • Software product completion and packaging

  1. Software product installation, transfer, instruction, maintenance and guarantee

  1. Publishing and distributing software products

    • Báo cáo hoạt động / Operation report

Submitting, updating information regarding software products and stages within software product manufacturing operations that are procedurally compliant and deducted tax to Ministry of Information and Communications (via Agency of Information and Technology) for consolidation.

There is no specific time limit for company to send reports to the Ministry of Information and Communications. Accordingly, company will need to send and update information regularly if there are new or updated products in the production process.

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