Preferential corporate income tax for science and technology enterprises from 2021

On March 1st, 2021, Circular No. 03/2021/TT-BTC dated January 11th, 2021 guiding corporate income tax exemption and reduction for science and technology enterprises came into force. This helps science and technology enterprises to have many incentives in their business activities and hence promote the setting up of such science and technology enterprise in Vietnam.

Subjects eligible for incentives need to meet the conditions for a science and technology enterprise license, and revenue from products derived from scientific and technological results reaches the prescribed rate, the revenue generated from services using scientific and technological results in the information technology field is new services that complies with the Ministry of Science and Technology’s regulations, and is separately accounted for production activities and comply with the accounting, invoice and document regimes according to the provisions of laws and pay tax according to declaration.

For businesses that fully meet the above conditions, they will be eligible for company income tax exemption or reduction according to regulations, specifically: tax exemption for 04 years and 50% reduction of payable tax amounts for the next 9 years. The tax exemption or reduction period will be calculated continuously from the date of being issued the Certificate of Science and Technology Enterprise. In the case of the first three years without taxable income, the exemption or reduction period will be calculated from the fourth year.

However, during the period of tax exemption and reduction of corporate income tax, if any year, science and technology enterprises do not meet the conditions for sales of products formed from scientific results and if the technology reaches the minimum rate of 30% of the total annual turnover of the enterprise, that year the science and technology enterprise is not entitled to incentives and is deducted from the time of enjoying enterprise income tax incentives of science and technology company.

In case a science and technology enterprise has earned taxable income but has been eligible for tax exemption or reduction for the first year of operation for less than 12 (twelve) months, then the science and technology enterprise can choose to accept tax exemption or reduction in that first year, or register with the tax agency the starting time of tax exemption, or reduction in the following year. If the enterprise registers to tax exemption or reduction in the following year, it must determine the payable tax amount of the first year in which the taxable income is earned to remit into the State budget according to regulations.

The above regulations are provisions on tax exemption and reduction of company income tax for science and technology enterprises from the beginning of 2021 according to the provisions of Circular No. 03/2021/TT-BTC. The Science and technology enterprises need to know to apply, in order to make the best use of preferential policies of state agencies, to bring long-term business efficiency to their enterprises.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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