200% R&D Cost Deduction Incentive: An Attractive Policy Yet Still “Out Of Reach” For Many Businesses

In the context of Vietnam’s push for innovation and enhanced competitiveness, the policy allowing enterprises to deduct up to 200% of research and development (R&D) expenses for corporate income tax (CIT) purposes is considered a notable support mechanism.

However, as reported by VnEconomy, practical implementation still faces various challenges, making it difficult for many businesses to access and effectively apply this incentive.

1. The Incentive Policy: Significant Potential but Limited Practical Effectiveness

Under current regulations, R&D expenses may be treated as deductible expenses at up to 200% when determining taxable income. This mechanism is expected to:

• Encourage investment in research and technological innovation
• Optimize tax costs
• Increase resources for reinvestment

Nevertheless, in practice, the level of policy uptake remains limited compared to initial expectations.

2. Challenges in Determining Eligibility

One of the key obstacles lies in determining whether a business qualifies for the incentive.

According to feedback from manufacturing enterprises:

           “Despite participating in global supply chains, companies still face difficulties in proving that their products fall within the list of prioritized supporting industries.”

In addition, requirements such as:

• Technical standards (e.g., international standards like CEN or equivalent)
• Conditions for project expansion
• Procedures for amending investment registration certificates

…have increased the compliance burden, particularly for small and medium-sized enterprises (SMEs).

3. R&D Documentation: Complex and Not Fully Aligned with Practical Realities

To qualify for the incentive, businesses must prepare comprehensive documentation evidencing their R&D activities, including:

• Research progress reports
• Experimental logs
• Testing and acceptance reports
• Supporting documents for outputs (e.g., prototypes, patents, scientific publications)

According to business feedback:

           “Current documentation requirements are highly administrative, whereas R&D activities inherently involve uncertainty and do not always produce tangible outcomes.”

As a result, many businesses with genuine R&D activities face difficulties in completing the required documentation to benefit from the incentive.

4. Regulatory Overlaps in Application

Another challenge arises from the need to comply with multiple regulatory frameworks simultaneously, including:

• Law on Corporate Income Tax
• Regulations on science, technology, and innovation
• Relevant guiding decrees (such as Decree No. 320/2025/ND-CP and Decree No. 265/2025/ND-CP,…)

Currently, the lack of clear and consistent cross-guidance among these regulations leads to:

• Difficulties in determining eligibility conditions
• Increased compliance costs
• Prolonged processing time for documentation

5. Practical Considerations for Businesses

From a practical implementation perspective, businesses may consider:

• Establishing a system to track and maintain R&D documentation from the outset
• Clearly distinguishing R&D activities from routine improvement activities
• Simultaneously reviewing tax and science & technology regulations when applying the incentive

Early and thorough preparation can help mitigate risks during explanations or audits by authorities.

6. Conclusion

The 200% R&D cost deduction policy represents a significant step forward in encouraging businesses to invest in innovation.

However, the gap between policy design and practical implementation remains, mainly due to:

• Unclear eligibility conditions
• Complex documentation and procedures
• Lack of alignment among legal frameworks

Further clarification of guidance and simplification of procedures will be essential to enhance businesses’ ability to access and benefit from this incentive in the coming period.