Foreign-Invested Enterprises Accelerate Investment In The Software Sector In Vietnam: Tax Incentives, 2026 Policy Orientation, And Key Considerations

Amid the strong global digital transformation trend, Vietnam is increasingly becoming an attractive destination for foreign enterprises in the software sector. In addition to its young technology workforce and competitive operating costs, Vietnam is orienting toward improving its tax policy framework in a stable, transparent manner that aligns with international practices from 2026 onward, thereby creating a solid foundation for sustainable and long-term technology projects.

This article analyzes the trend of foreign enterprises investing in Vietnam’s software industry, highlights notable tax incentives under current regulations and the 2026 tax policy orientation, and provides assessments and recommendations to help investors manage risks and optimize financial efficiency.

1. Trend of foreign enterprises focusing on the software sector in Vietnam

Rather than engaging solely in standalone outsourcing activities, an increasing number of foreign enterprises are choosing to:

• Establish foreign-invested enterprises operating in the software sector
• Set up research and development (R&D) centers for technology products
• Develop software engineering teams serving global markets
• Shift higher value-added technology activities to Vietnam
  

This trend is driven by:

• An abundant technology workforce with steadily improving quality
• Competitive operating costs compared to many countries in the region
• The 2026–2030 tax policy orientation that continues to prioritize technology, innovation, and the digital economy, with software identified as a key sector
  

The software industry is gradually becoming a field that attracts selective foreign investment flows, associated with green growth, digital transformation, and sustainable development.

2. Notable tax incentives for foreign-invested software enterprises

2.1. Corporate income tax incentives

Enterprises operating in the following areas:

• Software production
• Software services
• Technology research and development
  

May be entitled to:

• A preferential corporate income tax rate of 10% for an extended period
• Corporate income tax exemption during the initial years of operation
• A 50% reduction of payable corporate income tax in subsequent years
  

The level of incentives depends on:

• The registered investment sector
• The location of project implementation
• The scale and technological nature of production and business activities
  

According to the tax reform orientation from 2026, authorities will focus on:

• Narrowing widespread incentives and prioritizing software projects with substantive R&D activities
• Linking tax incentives to investment effectiveness, technology transfer, and human resource development
• Enhancing policy stability to build long-term investor confidence
  

2.2. Value-added tax on software

Under current regulations, software products and software services are subject to VAT exemption (not subject to value-added tax).

This policy is expected to continue during the 2026 period, aiming to:

• Encourage the development of the digital economy
• Enhance the competitiveness of Vietnamese software enterprises
• Attract global technology value chains
  

However, enterprises should note the following:

• Clearly distinguish between software and other information technology services
• Standardize contracts, technical documentation, and service descriptions
• In the context of digital tax administration from 2026 onward, accurately determining the substance of transactions is critical to avoiding reassessment and tax arrears
  

2.3. Other incentives related to initial investment

Foreign enterprises investing in the software sector may also benefit from:

• Import duty exemption for machinery and equipment forming fixed assets
• Recognition of eligible research and development expenses for tax purposes
• Application of appropriate depreciation methods for technology assets
  

These incentives help reduce initial investment costs and improve long-term financial efficiency.

3. Assessments and key considerations for foreign investors

👉 Note 1: Tax incentives are not automatically applied

In practice, many enterprises that meet the conditions still fail to enjoy incentives due to:

• Inaccurate registration of business lines
• Investment dossiers that do not clearly reflect software-related activities
  
  
• Failure to properly monitor the commencement and expiration of tax incentive periods
  
  

Developing an investment dossier and tax plan from the outset is therefore a critical factor.

👉 Note 2: Increasing transfer pricing risks after 2026

Foreign-invested software enterprises often incur:

• Software royalty expenses
• Management and technical support fees paid to overseas parent companies
• Internal transactions among related parties
  

From 2026 onward, tax authorities are expected to:

• Intensify data analysis and profit benchmarking
• Tighten control over cost allocation and transfer pricing
• Require transparent documentation consistent with the actual business model
  

👉 Note 3: Increasingly stringent tax administration

The technology and software sector remains among those:

• Subject to increased tax audits and inspections
• Closely monitored for prolonged losses while enjoying significant incentives
• Strongly affected by the application of information technology and data analytics in tax administration
  

Enterprises should adopt a long-term compliance-oriented approach rather than focusing solely on short-term tax optimization.

4. The role of tax advisory firms in the context of the 2026 tax policy framework

As foreign enterprises show growing interest in Vietnam’s software sector and tax policy enters a phase of standardization, digitalization, and stricter control, professional tax advisory firms play a crucial role in:

• Assessing a project’s eligibility for tax incentives
• Supporting the design of operating models in compliance with legal regulations
• Accompanying enterprises in tax filing, finalization, and dealings with tax authorities
• Mitigating risks and optimizing financial efficiency for investors
  

Vietnam is affirming its position as an attractive destination for foreign enterprises in the software sector, thanks to the combination of human resources, tax incentives, and an increasingly transparent investment environment. However, to effectively capitalize on these opportunities, investors need a structured approach, strict regulatory compliance, and the support of specialized advisory firms.

Thao Phung