Vietnam’s Tax Incentives for IT Companies: Criteria and Application Process

Vietnam offers valuable tax incentives for those looking to establish or expand their IT businesses in the country. Companies engaged in software development, high-tech research, and digital innovation can benefit from tax reductions, exemptions, and government support. This guide outlines the key IT sectors eligible for incentives, the benefits available, and the steps to qualify.

What Are the Available Tax Incentives for IT Companies in Vietnam

1. Corporate Income Tax (CIT) Reductions and Benefits

Vietnam’s standard Corporate Income Tax (CIT) rate is 20%. However, the government provides significant tax incentives to attract investment in key industries, including IT.

Newly established IT startups can benefit from a four-year tax holiday at 0% CIT, followed by a 50% CIT reduction for the next nine years, helping ease financial pressure during their early growth stages. Meanwhile, high-tech and innovative startups may qualify for a preferential 10% CIT rate for up to 15 years, a substantial reduction from the standard rate, supporting long-term expansion and innovation.

Emerhub’s business experts can advise and assist you with your corporate tax filings and calculations. We will keep you updated on the latest updates on the taxes required for your industry and ensure they get filed on time.

2. Potential Value Added Tax (VAT) Exemptions

To support your business’s growth and investment, Vietnam offers various VAT exemptions and reductions, particularly in the IT and software sectors. While the country’s standard VAT rates are 0%, 5%, and 10%, certain industries benefit from preferential treatment to enhance their competitiveness.

The government has introduced key VAT incentives to boost Vietnam’s IT industry and global competitiveness. Decree 44/2023/ND-CP reduces the VAT rate on eligible goods and services from 10% to 8%. This is now extended until June 2025, to support businesses and drive growth. Additionally, software exports qualify for a 0% VAT rate, making Vietnam a prime destination for IT outsourcing and software development.

Keep in mind that proper VAT reporting and compliance are crucial to avoid penalties and ensure your business can fully benefit from available tax incentives.

3. Special Tax Incentives for Startups and SMEs

Establishing a startup comes with significant challenges. Even so, various tax incentives and financial support programs help ease the burden for SMEs and emerging businesses. These initiatives, particularly in high-tech and innovation-driven sectors, reduce operational costs and create a more supportive environment for growth.

These special tax incentives and benefits include:

• Import Duty Exemptions: Startups involved in R&D and software development can benefit from import duty exemptions on machinery, equipment, and raw materials, helping lower initial setup costs.
• Access to Government-Backed Investment Funds: Startups in high-tech fields such as AI, blockchain, and cybersecurity may qualify for government-backed investment funds and preferential loans, providing essential financial support for growth.
• Tax Incentives for Innovation Hubs: Businesses operating within startup incubators and innovation hubs located in high-tech parks enjoy preferential tax treatment, further promoting technological advancements.
• Simplified Compliance for SMEs: Newly established IT companies and SMEs benefit from streamlined business registration and tax reporting requirements. This reduces administrative burdens and facilitating ease of doing business.
• Special Support for R&D Startups: Startups focused on R&D can access grants, funding programs, and collaboration opportunities through government-backed technology initiatives, ensuring continuous innovation and industry development.

Who is Eligible for Tax Incentives in Vietnam’s IT Sector

IT Sectors That Qualify for Vietnam Tax Incentives 

To qualify for these tax incentives, your business must operate within the IT sector and engage in specific business activities. Aligning your business activities with these sectors can benefit from preferential tax rates, exemptions, and financial support designed to foster growth and competitiveness in Vietnam’s tech industry:

• Software Product Manufacturing: Development and production of software solutions.
• Digital Product Development: Creation of digital platforms, applications, and related technologies.
• Key IT Product Production: Manufacturing of essential IT hardware and software components.
• Software Services: Provision of software-related services in compliance with Vietnam’s IT laws.
• Network Security and Cybersecurity Services: Development of cybersecurity products and services under relevant regulations.
• High-Tech Activities: Research, manufacturing, and commercialization of products based on scientific and technological advancements.

Criteria for Software Production Eligibility 

Engagement in specific stages of software development is required for your IT company to qualify for tax incentives. One key stage is requirements determination, which involves gathering, analyzing, and validating software requirements to ensure they meet both functional and technical needs. It is crucial for defining the project’s scope and ensuring alignment with business objectives.

Another crucial stage is analysis and design, where companies develop algorithms, model data structures, and design software architectures to create efficient and scalable solutions. Businesses involved in these foundational processes may be eligible for preferential tax treatment under Vietnam’s IT incentive programs.

Eligible Business Locations for Tax Incentives

Location plays a crucial role in accessing tax incentives, as Vietnam encourages investment in specific regions to promote economic growth. Businesses operating in disadvantaged and extremely disadvantaged areas benefit from special tax incentives, helping to stimulate development, create jobs, and support balanced economic expansion.

Similarly, companies established in industrial parks, export-processing zones, high-tech zones, and special economic zones can receive additional tax benefits. These designated areas are designed to attract foreign investment, drive industrial growth, and foster technological innovation. Choosing a strategic location can maximize tax advantages and create long-term business opportunities.

How to Apply for Tax Incentives for Your IT Company in Vietnam

Key Requirements for Applying for Tax Reductions

In order to access tax reductions and incentives, your business must obtain specific certifications that confirm eligibility and compliance. These licenses provide tax benefits, enhance credibility, and ensure smoother operations within Vietnam’s IT sector. Depending on your business activities and investment structure, the required certifications include:

• Certificate of High-Tech Enterprise: Required for companies involved in high-tech research, development, and production.
• Certificate of Science and Technology Enterprise: Required for businesses engaging in technological innovation.
• Investment Registration Certificate (IRC): Required for foreign-invested IT companies operating in Vietnam.
• Business Registration Certificate (BRC): Required for all businesses operating in Vietnam.

Securing the right licenses is crucial for accessing tax incentives, and Emerhub simplifies the process by managing your application and liaising with authorities. We ensure your business obtains the necessary certifications smoothly and efficiently.

How to Apply for Tax Incentives in Vietnam’s IT Sector

Businesses in software production and high-tech industries can obtain beneficial tax reductions and exemptions by following a structured application process and adhering to compliance requirements. The key steps include:

1. Verify Business Eligibility: Confirm that business activities fall under the incentivized sectors, such as software production or high-tech activities, as outlined in relevant decrees like Decree 31/2021/ND-CP.
2. Prepare Documentation: Obtain the necessary certifications and gather documents related to the investment project, including business plans, feasibility studies, and financial models.
3. Submit Application to Tax Authorities: Register with the local tax authority and submit necessary documentation to claim incentives.
4. Government Review and Approval: The Ministry of Science and Technology reviews the application and will issue it within 30 days upon approval.
5. Compliance and Reporting: Comply with annual reporting requirements and meet investment commitments. Keep detailed records for potential audits by tax authorities. 

Applying for tax incentives can be challenging, but Emerhub streamlines the process by handling all the necessary requirements, coordinating with government agencies, and ensuring regulatory compliance. Our experts provide detailed support to help your IT business secure maximum tax benefits in Vietnam.

Looking to maximize tax benefits for your IT business in Vietnam? Fill out the form below, and our experts will guide you through the process.