CIT incentives for software manufacturing enterprises

My company is a foreign-invested company and obtains the Investment Registration Certificate (“IRC”) for the business line of the software manufacturer. I would like to ask if my company is entitled to the CIT incentives with this project. If we are entitled to many incentive policies, what should be appropriately chosen?

I am looking forward to your advice. Thank you.

FDVN’s Opinions:

Thank you for sending your question to FDVN Law Firm (“FDVN”). Please kindly be advised as follows:

 [1]. Regarding tax incentives for software manufacturing enterprises

According to Point b, Clause 1, Article 15 on the Incentive tax rate of Decree No. 218/2013/NĐ-CP,

“1. Incentive tax rate of 10% within 15 years applied to:

b) Income of enterprise from performing new investment project in the fields: … Software production investment projects; ….

Software production investment projects specified at this point are the software production investment projects in the list of software products meeting the requirement on the process of software production as prescribed by law;”.

Besides, according to Point a Clause 1, Article 16 on tax exemption and reduction of Decree No. 218/2013/NĐ-CP,

“1. Tax exemption for 4 years, reduction of 50% of tax payable for the next 9 years for:

a) Income of enterprise from performing new investment projects is specified in Clause 1, Article 15 of this Decree;”

Thus, referred to the above provisions and according to Clause 6, Article 15, and Clause 5, Article 16 of Decree No. 218/2013/ND-CP, when implementing a software production, your company's  project will be entitled to the following incentives:

• Incentive tax rate of 10% within 15 years, calculated continuously from the first year the enterprise has revenue from new investment projects;
•  Tax exemption for 4 years from the first year the enterprise has revenue from new investment projects entitled to the CIT incentives and reduction of 50% of tax payable for the next 9 years. Where there is no assessable income in the first three years, from the first year the enterprise has revenue from new investment projects, the time for tax exemption and reduction is calculated from the fourth year.

However, to be entitled to the mentioned incentives, your company shall meet the following conditions:

• To be the investment project in the business lines of software products in the list of software products in Appendix 01 promulgated together with Circular No. 09/2013/TT-BTTTT;
• The software production shall be carried out in the process, at least: Requirement determination, Analysis and design under Clause 1 and  Clause 2, Article 3 of Circular No. 13/2020/TT-BTTTT. The enterprise needs to provide documents to prove this condition under Clause 2, Article 4 of Circular No. 13/2020/TT-BTTT.

 [2]. The incentive policies should be appropriately chosen

It is stipulated in Clause 3, Article 19 of Decree No. 218/2013/NĐ-CP that“3. In the same period of time, if the enterprise is entitled to different rates of incentive tax for the same income, then the enterprise may choose the most favorable tax incentive;”

Thus, your Company is allowed by the current law provisions to chóoe the most favorable tax incentive when calculating the CIT and not compulsory to apply only one certain incentive policy.

Above is FDVN’s legal opinion on your request after studying the legal documents. We hope that this legal opinion will useful.

Nguyễn Thị Sương – FDVN Law Firm

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