New policy moves are expected to encourage more firms to embrace science and technology investment while also supporting firms through tax incentives.
|Tax reduction and exemption would help science-tech firms to enrich resources for research and development |
Four businesses under privately-held NextTech Group, a pioneer in e-commerce in Vietnam, have been recognised by the Ministry of Science and Technology as science and technology firms.
In light of Circular No.03/2021/TT-BTC of the Ministry of Finance guiding corporate income tax (CIT) reduction and exemption to science and technology (science-tech) firms, from March 1, these four companies will enjoy a CIT exemption in the first four years and 50 per cent reduction in the nine following years.
“This is quite good news for tech firms as well as the local IT industry. Circular 03 will inspire more firms to opt for sci-tech investment, strengthening research and development and Vietnam’s innovation,” said Dao Minh Phu, CEO of NextTech Group. “More firms embracing sci-tech investment would push up market development and bring benefits to other fields.”
Sharing the same views, Tran Viet Vinh, chairman of fintech firm Fiin Credit, said Circular 03 will create a breakthrough in the development of science-tech firms and the entire industry, especially in the context of COVID-19, as sci-tech firms can use these tax incentives to reinvest in research and development.
|In fact, many science-tech firms started to receive tax incentives from 2020 pursuant to regulations in Decree 13/2019/ND-CP of the government on science-tech firms’ development. |
In fact, many sci-tech firms started to receive tax incentives from 2020 pursuant to regulations in Decree No.13/2019/ND-CP of the government referring to sci-tech firms’ development.
Circular 03 is the detailed guiding document to Decree No.13/2019, with concrete regulations to help sci-tech firms to acquire tax incentives, while simultaneously inspiring more firms to join the field.
Circular 03 was released right after the introduction of government’s Resolution No.01/NQ-CP presenting major tasks and measures for the implementation of socioeconomic development plans and budget estimates in 2021, with the requirements of “strongly developing science-technology, innovation, and digital transformation to create breakthroughs in productivity, quality, efficiency, and competitiveness of the economy.”
Tax reductions and exemptions to sci-tech firms offer practical values amid growing COVID-19 complexities while answering firms' need to consolidate development.
Tran Viet Vinh, chairman of Fiin Credit, assumed that such detailed and clear regulations are necessary to avoid illegal profiteering by firms pretending to be tech firms.
State management agencies, however, need to ensure fast and clear procedures to enable qualifying firms to receive the incentives.
According to Dao Minh Phu from NextTech, these conditions are important to ensuring impartiality for legitimate sci-tech firms and avoiding losing tax revenue.
Luu Hai Minh, chairman of Nhat Hai New Technology JSC, cited several cases where tech trading firms claimed to be tech firms to enjoy the tax incentives.
“This must be prevented as it could cause losses to the state budget. For sci-tech firms to be the fundament for the country's development, it is important to streamline certificate provision for sci-tech firms,” said Minh.
Minh suggested to reduce conditions to enable sci-tech firms to borrow from the fund set up to support the development of small- and medium-sized enterprises without collateral, as most such firms in Vietnam have limited financial capacity.
Conditions for eligibility for sci-tech tax incentives:
* A document certifying they are a sci-tech firm from a competent state agency;
* Having 30 per cent of their total annual revenue contributed by the production and trading of products derived from science and technology results;
* The revenue derived from services using sci-tech results in the IT field must be revenue from new services. The criteria to define new services using sci-tech results are based on regulations of the Ministry of Science and Technology;
* Sci-tech firms need to separate the income from the production and trading of items formed from science-tech results during the CIT incentive period.