Tech profit ruling may knee-cap firms

October 01, 2012 | 09:46

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All enterprises in Vietnam may be forced to spend 10 per cent of their pre-tax profit investing in developing technology.

Panasonic Vietnam illustration photo

Minister of Science and Technology (MoST) Nguyen Quan told the National Assembly Standing Committee that the MoST and the Ministry of Finance would propose amendments to the existing Law on Science and Technology and the Corporate Income Tax Law to force enterprises to do so.

Tran Trong Binh, an attorney from Britain’s Audier & Partners law firm, told VIR if the MoST proposal was approved, many enterprises including foreign-invested ones (FIEs) would be “financially burdened”.

“Most FIEs bring technology to Vietnam from their parent companies overseas. With this new regulation, they will have to establish their own R&D funds,” he said.

Despite saying the funds would help Vietnam’s technological development, including improving the feeble supporting industries, Binh said the 10 per cent rate was “too high” for enterprises, as many were seriously hit by the economic downturn.

Furthermore, he noted with enterprises operating in services, assembling or import-and-re-export sectors, R&D funds would “almost be used for nothing”.

Before 2008, when the Corporate Income Tax Law was devised, the MoST proposed the National Assembly to force all enterprises to earmark 10 per cent of their pre-tax profit for R&D. However, the proposal was turned down.

Few FIEs in Vietnam had invested into R&D and the government’s target to attract high technology from foreign direct investment was out of reach, said Do Nhat Hoang, director of the Ministry of Planning and Investment’s Foreign Investment Agency. “For example, the national supporting development strategy has been initiated for several years, but almost nothing has been done,” Hoang said.

By Thanh Dat

vir.com.vn

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