Charles Small has worked in Vietnam since 2012, and has managed multiple market research projects for companies considering establishing high-tech projects in the country. For a free consultation, email Charles at: charles@csmall.co.uk
Tax Incentives for High-Tech Investment in Vietnam
When considering a presence on the ground, potential tax liabilities must always be considered. In Vietnam, the government promotes high-tech activities by granting foreign investors tax incentives to operate in the country.
Instead of paying the 20% corporate income tax (CIT) rate, those investing in high-tech operations in Vietnam could benefit from reduced CIT rates of 10% for 15 years, and 17% for a further 10 years. Incomes of certain high-tech enterprises may be exempt from taxation for up to four years, and benefit from a 50% tax reduction for a further nine years.
High-tech enterprises in Vietnam are defined according to several criteria. They must derive at least 70% of annual revenue from high-tech products, and allocate certain proportions of resources to research and development (R&D).
For enterprises with capital of under VND100 billion (US$4.47 million) to be classified as high-tech, a minimum of 1% of capital should be allocated to R&D, with at least 5% of the workforce involved in R&D educated to bachelor level or higher.
Related: Vietnam’s Cyber Security Framework
For those with capital of VND100 billion or higher seeking high-tech classification, at least 0.5% of capital would need to be allocated to R&D, with at least 2.5% of a minimum of 300 employees involved in R&D educated to bachelors degree or higher.
High-Tech Not All Low-Tax
Not all foreign investors have benefited from the incentives. Microsoft Mobile Vietnam, formerly Nokia Vietnam, recently paid VND191 billion (US$8.53 million) in CIT arrears and late payment fines to the Bac Ninh Department of Taxation for 2013 and 2014.
If the Ministry of Science and Technology had granted the relevant high-tech enterprises certificate, the company would have benefited from the 0% CIT rate for 2013-2016, as well as a 50% reduction in the CIT rate for a further nine years.
However, after acquiring Nokia’s operations in 2015, Microsoft Mobile Vietnam reportedly only applied for the same incentives granted to projects in industrial parks in the same year. As such, the company only benefits from a 50% CIT reduction for the four years 2015-2018, and is paying arrears for the preceding period.
The issue here appears to be related to the Bac Ninh factory not submitting reports on nine criteria arranged with the Ministry of Planning and Investment, following Microsoft’s acquisition. Criteria were reportedly related to local content in products, and sales to the domestic market.
If you are considering setting up a high-tech enterprise in Vietnam, it pays to know which incentives your business could benefit from. Tax incentives are of course only one part of the picture. Investors in Vietnam also benefit from a computer-literate and low-cost workforce, government sector development programs, and a stable political environment.
For more details on how your business could benefit from establishing or expanding a presence in Vietnam, get in touch for a free consultation by contacting us using the form below:
Alternatively, drop Charles an email at:
charles@csmall.co.uk
0 Comments