1. Potential Risks:

Incorrect determination of eligibility or timeline for CIT incentives may result in:

• Tax arrears.
• Penalties for late payment and inaccurate tax declarations.

2. Solutions:

Conditions for CIT Incentives

The following legal documents form the basis for applying CIT incentives to Enterprise A:

• Decree No. 218/2013/ND-CP, Point b Clause 1 Article 15 (Preferential tax rates).

• Circular No. 78/2014/TT-BTC, Article 18 (Conditions for applying CIT incentives).

• Circular No. 09/2013/TT-BTTTT issued by the Ministry of Information and Communications (dated April 8, 2013), which lists software, hardware, and electronic products.

• Circular No. 13/2020/TT-BTTTT issued by the Ministry of Information and Communications (dated July 7, 2020), which stipulates the criteria for determining software production activities that meet process requirements.

Enterprise A satisfies the following requirements to be eligible for CIT incentives on income derived from new investment projects in software manufacturing:

a) New Investment Project:

• The investment is domestic, linked to the establishment of a new enterprise with total investment capital under VND 15 billion.
• The project does not fall under any conditional investment sectors, and the business registration certificate was issued after January 1, 2014 (as per Clause 3, Circular 96/2015/TT-BTC).

b) Operating in Software Manufacturing:

• Enterprise A must have registered business activities such as computer programming and software publishing in its business registration documents.

c) Compliant Software Products:

• Products must belong to categories regulated by the Ministry of Information and Communications (Circular No. 09/2013/TT-BTTTT).

d) Compliance with Software Production Processes:

• Enterprise A must meet the software production standards outlined in Circular No. 13/2020/TT-BTTTT, including adherence to all required production steps.

e) Compliance with Financial and Administrative Regulations:

• Enterprise A must maintain proper accounting records, invoices, and documentation and fulfill its tax obligations based on self-declared filings.

Applicable CIT Incentives

Based on Point b, Clause 1, Article 15 of Decree No. 218/2013/ND-CP dated December 26, 2013, issued by the Government, detailing and guiding the implementation of the Corporate Income Tax Law:

“Article 15. Incentive tax rate
1. Incentive tax rate of 10% within 15 years applied to:
…
b) Income of enterprise from performing new investment project in the fields: ….., production of software products; … 

Software production investment projects specified at this Point is the software production investment projects in the list of software products meeting the requirement on process of software production as prescribed by law.”

Based on Clause 1, Article 12 of Circular No. 96/2015/TT-BTC, effective from August 6, 2015:

“1. Tax exemption for 4 years and 50% tax reduction for the next 9 years are applied to:
…
b) Income of enterprises derived from new investment projects in fields such as …; software product manufacturing; …”
(Clause 1, Article 11 of Circular 96/2015/TT-BTC)

Based on above regulations, the following tax incentives apply to Enterprise A: 

• Preferential Tax Rate:
• • A reduced CIT rate of 10% for 15 years.
• Tax Exemption and Reduction:
• • A 4-year CIT exemption.
  • A 50% reduction in payable CIT for the following 9 years.

Incentive Timeline

Pursuant to Clause 2, Article 12 of Circular 96/2015/TT-BTC effective from August 6, 2015:

2. Amend and supplement Clause 4, Article 20 of Circular 78/2014/TT-BTC as follows:

…

4. The continuous period of tax exemption/reduction prescribed in this Article begins from the first year in which the enterprise earns taxable income from the new project of investment which is given tax incentives. In case the enterprise does not have taxable income in the first 03 years, the period of tax exemption/reduction begins in the 4th year from the first year revenue is generated by the new project.

Pursuant to Clause 6, Article 19 of Circular 78/2014/TT-BTC:

6. The duration of application of preferential tax rates specified in this Article shall be counted consecutively from the first year when enterprises generate turnover from new investment projects eligible for tax incentives. …

Thus, for the above case, the timeline for Enterprise A to enjoy tax exemptions, reductions, and the application of preferential tax rates is as follows:

• Tax exemption (4 years): From 2024 to 2027.

• 50% tax reduction at a 10% tax rate (9 years): From 2028 to 2036 (only 5% corporate income tax is payable).

• End of the preferential period (from 2037 onwards): The standard tax rate of 20% applies.

Conclusion:

By understanding the eligibility criteria and application timelines for CIT incentives, businesses can not only optimize operational costs but also mitigate legal risks. Enterprise A should ensure strict compliance with software manufacturing regulations to maintain its CIT incentives throughout the applicable period.

If you have any further questions or inquiries, please contact TPM via the Website: tpm.com.vn or Hotline 028 3505 1800 for the quickest support.

Van Le