In the context of the strong Industry 4.0 revolution and digital transformation, businesses operating in the IoT (Internet of Things) sector are rapidly developing in Vietnam. However, with the complex nature of high-tech products and services, IoT businesses need to pay special attention to accounting and tax issues to ensure legal compliance and optimize financial efficiency.
Here are the key points that IoT businesses in Vietnam need to consider:
1. Correctly Identify the Type of Products and Services for Tax Declaration
IoT businesses typically offer one or more of the following types:
- Hardware (sensors, gateways, data collection devices)
- Software (management applications, control platforms)
- Data storage and analysis services (cloud-based platform)
Correctly classifying the nature of goods and services is a prerequisite for determining the appropriate VAT rate and calculating reasonable expenses for Corporate Income Tax.
2. Value Added Tax (VAT)
Depending on the type of product and service, the applicable VAT will vary:
- IoT Hardware (devices, sensors, gateways): usually subject to VAT of 10%.
- IoT Software:
- If recognized as computer software under the provisions of Circular 219/2013/TT-BTC (still effective in 2025), it may be exempt from VAT. Businesses need to prepare documentation to prove that the software meets these criteria.
- If it is a software service on a cloud platform (SaaS), it is subject to VAT of 10%.
- Remote monitoring services or foreign platforms (SaaS): if purchased from a foreign supplier, Vietnamese enterprises must declare and pay Foreign Contractor Tax (FCT) on behalf of the supplier.
3. Corporate Income Tax (CIT)
IoT businesses need to note some issues:
- R&D Expenses (research and development): clear documentation is required to be recognized as a reasonable deductible expense.
- Corporate Income Tax Incentives: If the enterprise operates in a high-tech park (CNC), export processing zone (KCX), or has a certificate of high-tech enterprise, it may be entitled to:
- Preferential tax rate of 10% for 15 years.
- Tax exemption for the first 4 years and a 50% tax reduction for the next 9 years (depending on specific conditions). The tax policy in 2025 continues to favor high-tech industries.
- Corporate Income Tax Rate in 2025: The standard tax rate is still 20%. However, carefully consider the conditions for enjoying preferential tax rates if your business meets them.
4. Foreign Contractor Tax (FCT)
Many IoT businesses use services from international platforms such as:
- Amazon Web Services (AWS)
- Microsoft Azure
- Google Cloud
- Foreign IoT platforms
In these cases, when a Vietnamese enterprise pays a supplier abroad, it is responsible for withholding and paying contractor tax (usually 5% VAT and 5% CIT on the total payment value). This needs to be declared correctly to avoid tax arrears or administrative penalties for tax violations. Note the latest regulations on e-invoices related to transactions with foreign contractors under Circular 32/2025/TT-BTC.
5. Related Party Transactions and Transfer Pricing
If the enterprise is a subsidiary or has transactions with foreign related parties, it needs to comply with the regulations at:
- Decree 132/2020/ND-CP and related guiding documents.
Businesses need to prepare and submit a related party transaction dossier, declare profit, expense indicators, and the method of determining transaction prices in accordance with regulations. With the specifics of intellectual property and data in the IoT field, determining related party transaction prices can be complex and needs to be emphasized.
6. Accounting for Equipment and Software Costs
IoT businesses often invest heavily in internally developed equipment and software:
- IoT Equipment (sensors, gateways, telecommunications equipment):
- If of great value, with a usage period of over 1 year: account for as fixed assets and depreciate according to regulations.
- Small, low-value equipment: account for as tools and supplies, reasonably allocating costs.
- Self-developed software (in-house or outsourced):
- Research phase: Costs can be recorded as expenses.
- Development phase: Can be capitalized if the conditions for recognizing intangible assets are met.
7. Accurate Invoicing and Tax Declaration
Many IoT businesses offer integrated packages including hardware + software + services. It is necessary to:
- Clearly separate each item on the invoice to determine the correct VAT rate.
- Avoid the risk of under-declaring tax or incorrectly identifying taxable subjects, which can lead to tax arrears and penalties.
8. IoT Startups: Ensure Timely Tax Filing Even Without Revenue
Many IoT startups focus on early-stage product development and may not yet have revenue. However, according to regulations:
- VAT and CIT returns (quarterly or monthly) must still be submitted even if no revenue is generated.
- Capital contributions in the form of technology and intangible assets need to be clearly valued and recorded.
Conclusion
IoT businesses in Vietnam need to build a specialized accounting and tax system suitable for the technology business model. Understanding and complying with regulations on VAT, CIT, FCT, and tax incentives will help businesses:
- Avoid legal risks, tax arrears, and penalties for violations.
- Optimize costs and long-term financial efficiency.
- Create a transparent foundation for fundraising and international expansion.
In case detailed advice is needed, please contact TPM via the website or hotline (+84) 28 3505 1800 for the fastest support.
Quyen Nguyen
