Updated at 20/08/2023 - 05:56 pm
The software industry enjoys tax incentives for software, which is favorable for business activities, but the application and policies for each type of business are different, so the application of incentives requires a thorough understanding.
Here is a complete guide on how to determine tax incentives for the software industry.
Vietnam's tax incentives for the software industry #
1. Incentives on value-added tax
- Computer software, including software products and software services as prescribed, is not subject to value-added tax.
- Exported software products and software services are entitled to the value-added tax rate of 0%.
2. Corporate income tax incentives
The production of software products that meet the requirements is entitled to very high incentives, tax exemptions and reductions, and the application of lower-than-normal tax rates as follows:
- Tax exemption for four years, 50% reduction of tax payable for the next nine years.
- Apply the preferential corporate income tax rate of 10% for a period of fifteen (15 years).
Specific incentives for software production activities #
Enterprises producing software products that satisfy the conditions prescribed by law are entitled to incentives in terms of VAT and CIT.
To qualify for the offer, the following detailed application guidelines should be reviewed:
Step 1: Must determine the right software product production activities #
Read the full software production definition guide here. Note: The method of determination is divided into 2 stages, due to changes in legal regulations.
Step 1: Understanding the Software Product Manufacturing Process
According to the provisions of Article 5, Circular 16/2014/TT-BTTT, the software product manufacturing process includes the following 07 stages:
1. Determine requirements, including one of the activities such as: survey of customer requirements, business analysis; collect and build requirements; process adjustment consulting; request approval, request approval.
2. Analysis and design, including one of the operations such as: specification requirements; setting up development problems; data modeling; functional modeling; modeling information flow; identify software solutions; software system design; Designing software modules and units.
3. Programming, code writing, including one of the operations such as: writing software programs; programming software modules and units; software editing, customization and tweaking; integration of software units; software system integration.
4. Testing and testing software, including one of the operations such as: building test scripts, unit test, software modules; software testing; software system testing; software functionality testing; software quality assessment; error assessment; determine customer satisfaction requirements; software acceptance.
5. Finishing and packaging software, including one of the operations such as: developing software description documents, software installation manuals; software packaging; registration of models; registration of intellectual property rights.
6. Installation, transfer, user manual, maintenance, software warranty, including one of the operations such as: instructions to install software; implementing software installation; train and guide users; software testing after handover; software fixes after handover; support after handing over, software warranty; software maintenance.
7. Release and distribution of software products, including one of the operations such as: marketing, promoting, selling, distributing software products; software product release.
Step 2: Determine software product production activities on a case-by-case basis
According to Article 6, Circular 16/2014/TT-BTTT then cases that meet the following conditions are accepted as software product production:
1. General requirements for organizations, enterprises and individuals producing software products:
a) For organizations and enterprises: having business registration certificates, investment certificates, or documents regulating functions and tasks granted by competent persons. For individuals: have personal tax code; have a tax declaration which clearly states the income from software production;
b) Software products manufactured by individuals, organizations or enterprises belong to one of the types of software products specified in the list of software products issued under Circular No. 09/2013 / TT-BTTTT dated April 08, 4 by Minister of Information and Communications.
2. Activities of organizations, businesses and individuals are defined as activities of producing software products and meeting the process when organizations, businesses and individuals meet the requirements in this section, and operate. that action is one or more of the following:
a) Operating in one or more stages in stages from 2 to 4 of the process of producing software products specified in Clauses 2, 3, 4 Article 20 of this Circular for the above-mentioned software products. Point b, Item 5 This.
b) Activities mentioned at the stage of production and sale, the production process of the software production process specified in Clause 1 and Item 5 Article 1 of this Circular, when such organizations, enterprises and individuals conduct activities. satisfy the provisions of Point a of this Clause for the same software product.
c) Operate in stage 6 of the software product manufacturing process as prescribed in Clause 6 Article 5 of this Circular, when such organization, enterprise or individual operates in all 5 stages from 1 to 5 of the software product manufacturing process is specified in Clauses 1 thru 5 Article 5 of this Circular for the same software product.
Step 1: Understanding the Software Product Manufacturing Process
According to the provisions of Article 3, Circular 13/2020/TT-BTTT, the stages in the software product manufacturing process include the following:
1. Determine requirementsThis includes one or more actions such as: presenting or completing an idea for software product development; describe product characteristics (requirements), product use contexts; propose, survey and clarify requirements for software products; professional analysis; build complete requirements for software products; consulting process adjustment; requirements uniformity, requirements review, control capabilities, and the facilities to confirm product compliance with requirements.
2. Analysis and design, including one or more operations such as: specification of the requirement (functional and non-functional requirements, problems to be solved); setting up development problems; Appropriate techniques are performed to optimize the solution, analyze the correctness and testability of the software, analyze the effect of software requirements on the operating environment, prioritize, approve and be updated as needed; data modeling; functional modeling; modeling information flow; identify software solutions; solution design, software system design; data design, software architecture design, design of software components, modules; designing confidentiality and information safety for the software; customer experience interface design.
3. Programming, writing codeThis includes one or more operations such as: writing software programs; programming software modules and units; software editing, customization and tweaking; integration of software units; software system integration.
4. Testing and testing software, including one or more operations such as: building test scripts, unit testing, software modules; software testing; software system testing; software functionality testing; software quality assessment; error assessment; testing information security and safety for software; determine customer satisfaction requirements; software acceptance.
5. Finishing and packaging software products This includes one or more operations such as: developing software product description documents, installation manual (in case of package product delivery), software product manual (for service user or tenant); packaging of software products; registration of models; registration of intellectual property rights.
6. Installation, transfer, user manual, maintenance, software product warranty includes one or more operations such as: transfer (package of product or right to use product on rental form); instructions for installing software products (in case of package delivery); install software products (on customers' systems in case of package transfer or on service delivery systems in case of software product leasing); training, guidance (users or service hires); check software products after handing over or software products on the system of service provision; fix errors of software products after handover or software products on the system of service providers; support after handover in the process of leasing services; product warranty after handover or during rental service; software product maintenance (either on the customer's system or on the service delivery system).
7. Release and distribution of software productsThis includes one or more operations such as the sale, lease, distribution, or distribution of self-produced software products.
Step 2: Identify the software product manufacturing activity that meets the process
Apply Article 4, Circular 13/2020/TT-BTTT:
Article 4. Determining the production of software products that satisfy the process
1. The production of a software product by an organization or enterprise specified in Article 3 of this Circular is defined as the production of a software product that meets the process when, for such product, the organization, enterprises perform at least one of two stages: Requirement definition, analysis and design the respective regulations in Clause 1 and Clause 2 Article 3 of this Circular.
2. The production of software products satisfying the process specified in Clause 1 of this Article is indicated by one or more of the following documents, corresponding to each operation of the stages carried out by the organization or enterprise. show:
a) Documents proving each operation of the Requirement Determination stage: Describe the idea of the product development method; describe product characteristics (requirements), product use contexts; description of proposals, survey results, results of clarification, completion of requirements for products; detailed professional analysis description; a complete description of product requirements; describe the content of process adjustment consultant; requirement agreement, requirement review, description of product's control capabilities and the bases for verifying compliance with requirements; or documents with similar content.
b) Documents proving each operation of the Analysis and design stage: Description of requirements; describe development problems; describe the appropriate techniques performed to optimize the solution, analyze the correctness and testability of the software, analyze the effect of software requirements on the operating environment, list requirements are prioritized, approved and updated as needed; describe data model, functional model, information flow model; software solution description; solution design, software system design, data design, architectural design, software unit design, component modules; designing confidentiality and information safety for the software; customer experience interface design; or documents with similar content.
c) Documents proving the operations of the programming and coding stages: Some main source code segments show that the enterprise has written software code; description of the integrated software system; or documents with similar content.
d) Documents proving each operation of the stage of software testing and testing: Test scripts, software unit testing, software modules; description of software testing results, software system testing results, software function testing results, software quality testing results; error description evaluation; describing information security and safety testing results for software; confirm the software meets customer requirements; software acceptance report; or documents with similar content.
dd) Documents proving each operation of the product finishing and packaging stage: A full introduction to the software product; instructions for installation (in case of package delivery), instructions on how to use the product or using the service (for the user or service tenant); copy of model registration certificate (if any); a copy of registration certificate of intellectual property rights (if any); or documents with similar content.
e) Documents evidencing each operation of the stage of product installation, transfer, manual, warranty, maintenance: Transfer record or contract (product package or right to use the product below rental form); instructions for installing software products (in case of package delivery); describe the result of software product installation (on the customer's system in case of package delivery or on the service delivery system in the case of software product leasing); training content, instructions (users or service tenants); describe the software product testing after handover or software product on the service delivery system; describe the post-handover software product error correction activity or software product on the service delivery system; describe the post-handover support in the service lease process; describe product warranty after handover or service lease; describe the software product maintenance (on a customer's system or on a service delivery system).
Step 2: Determine the right conditions for enjoying tax incentives #
Not all types of income from software production are eligible for incentives, but tax-exempt income is the following income: implementing new investment projects in the field of: software product manufacturing.
Thus, it is necessary to clarify "What is a new investment project?"
a) New investment projects eligible for corporate income tax incentives specified in Articles 15 and 16 of Decree No. 218/2013/ND-CP are:
– The project is granted the first investment certificate from January 01, 01 and generates revenue from that project from the date of issuance of the investment certificate.
– Domestic investment projects associated with the establishment of new enterprises with investment capital of less than 15 billion Vietnam dong and not on the list of conditional investment fields shall be granted business registration certificates from January 01. 01/2014.
– An investment project that has been granted an investment license or an investment certificate before January 01, 01 but is in the investment process, has not been put into operation, has not generated revenue and is granted a certificate Adjustment of Investment License or Investment Certificate adjusted from January 2014, 01 of that project.
- Investment projects that are independent from the projects of enterprises in operation (even if the project has an investment capital of less than 15 billion Vietnam dong and is not on the list of conditional investment fields) with an Investment Certificate. from January 01, 01 to implement this independent investment project.
b) In case the enterprise has adjusted or supplemented the investment license or investment certificate of the project that has been put into operation without changing the conditions for enjoying the incentives, the income from the adjusted operation, Additional incentives continue to enjoy the project's incentives before adjusting or supplementing for the remaining time or incentives under the expanded investment category if they meet the incentive conditions as prescribed.
c) New investment projects eligible for CIT incentives under the new investment category do not include the following cases:
- Investment projects formed from: division, separation, merger, consolidation, transformation of enterprise form according to the provisions of law;
– Investment project formed from the change of owner (including the case of implementing a new investment project but still inheriting the assets, business location, and business lines of the old enterprise to continue. production and business activities, acquisition of active investment projects).
Enterprises established or enterprises having investment projects from transformation of enterprise type, ownership transformation, division, separation, merger or consolidation shall inherit the enterprise's corporate income tax incentives. or investment projects before conversion, division, separation, merger or consolidation for the remaining time if they continue to satisfy the conditions for corporate income tax incentives.
d) For enterprises currently enjoying corporate income tax incentives under the category of newly established enterprises from investment projects, this applies only to incomes from production and business activities that satisfy the conditions for investment incentives. recorded in the enterprise's first business registration certificate. For enterprises currently operating in production and business, if there is a change in the business registration certificate but such change does not change the satisfaction of tax incentives as prescribed, the enterprise will continue to be entitled to receive tax incentives. enjoy tax incentives for the remaining time.
FAQ - Frequently Asked Questions - Special Cases #
My company was established in October 10, the main industry is computer programming. The main activities include modeling data and creating entity-relationship diagrams that describe data structures and relationships in graphical form; provide key examples in the program; provide test scripts. Pursuant to Circular No. 2020/13/TT-BTTTT dated July 2020, 3 of the Ministry of Information and Communications regulating the determination of software production activities that meet the process, I understand that the above activities of the company The company is in the process of analyzing and designing, programming, coding and testing software. Therefore, this activity is considered as the production of software products that meet the process. So, is my understanding correct? In order to demonstrate these activities, does my company have to provide all relevant documents for each stage, or just one of the documents mentioned?
The Ministry of Information and Communications responded to this issue as follows: Clause 1, Article 4 of Circular No. 13/2020/TT-BTTTT dated July 3, 7 of the Ministry of Information and Communications providing for the determination of production activities. software products meeting the prescribed process: “The production of a software product by an organization or enterprise specified in Article 2020 of this Circular is defined as the production of a software product that meets the prescribed standards. process when for that product, the organization or enterprise performs at least one of two stages: Determination of requirements, analysis and design specified in Clauses 3 and 1, Article 2 of this Circular, respectively.
Based on this regulation, enterprises must perform at least one of two stages: Requirements determination, analysis and design.
Article 2 of Circular No. 13/2020/TT-BTTTT stipulates: “This Circular applies to management agencies, organizations and enterprises involved in the production of software products on the List of products. software products according to regulations of the Ministry of Information and Communications”.
Pursuant to this regulation, software products of enterprises must be on the list specified in Circular No. 09/2013/TT-BTTTT dated April 8, 4 of the Ministry of Information and Communications promulgating the list of software products. software and hardware, electronics.
Regarding the proof that the software product production activities meet the process, the enterprise needs to prepare documents corresponding to each operation of the stages that the enterprise has performed to demonstrate the production activities. export enterprise software.
Documents to be developed are specified at Points a, b, c, d, dd, e, Clause 2, Article 4 of Circular No. 13/2020/TT-BTTTT.
For example: For the Analysis and Design stage, if the enterprise performs the "data modeling" operation, the enterprise needs to develop a document describing the "data modeling" operation.
In the document/file, the enterprise clearly states/classifies its software products according to the list of software products as prescribed in Circular No. 09/2013/TT-BTTTT.
For example: If an enterprise manufactures accounting software products, it should clearly state that its software product is Accounting software with ordinal number 1.2.2.03 in Appendix 01 of Circular No. 09/ 2013/TT-BTTTT.
Thus, the Government Portal's reply is consistent with the provisions of Circular 13/2020/TT-BTTTT, "enterprises must perform at least one of two stages: Determine requirements, analyze and design next"
Do software manufacturing enterprises need to obtain certification from the Department of Information and Communications to prove software production?
Circular No. 16/2014/TT-BTTTT, Circular 13/2020/TT-BTTTT have set out criteria and ways to determine software production activities. The Circular does not stipulate that information and communication agencies must issue certifications on software production activities.
The higher-level document as the basis for promulgating the above Circulars of the Ministry of Information and Communications, Decree No. 218/2013/ND-CP, also does not stipulate that information and communication agencies must issue this certification.
2 The above Circular of the Ministry of Information and Communications stipulates that organizations, enterprises and individuals engaged in software production activities are "self-responsible for the accuracy of the information in the relevant declaration dossiers as well as the determination of production of its software products”.
Thus, the accountability for software production activities belongs to the enterprise. Tax authorities shall base themselves on the Circulars of the Ministry of Information and Communications to verify the dossiers of enterprises.
To explain to tax authorities about their software production activities, enterprises shall base themselves on the above 2 Circulars.
Depends on the case!
Still applying the same regulations as the above guidance, if website programming activities satisfy 3 conditions on software production, it is considered as software production.
The Circular of the Ministry of Information and Communications stipulates: Enterprises are solely responsible for the accuracy of the information in the application for tax incentives for software production activities and self-determination of software production activities that meet the requirements of regulations. submit.
Does an enterprise only need to sign a contract to produce software, that activity is automatically considered as software production?
Are not !
Even if the contract signed with the customer is "Software Production Contract", but the actual work does not meet the above 3 conditions, it is still not considered as software production.
Complying with regulations and following the right process not only helps you avoid legal risks, but also contributes to the transparency and financial health of your business.
Doing the above is not easy for businesses, the effective solution is to use a professional service: Cooperate with a financial, accounting and tax expert to ensure you follow the correct process and comply with the regulations. legislation.
See detailed information about our services in the article