Tax Incentive Conditions For Software Producing Companies

Software manufacturing companies may be eligible for corporate income tax (CIT) incentives as per the provisions of Article 20 of Circular 78/2014/TT-BTC. Specifically, the company will be exempt from CIT for the first four years and receive a 50% reduction in taxes payable for the next nine years on income from software manufacturing activities, provided the business meets all legal requirements and undertakes investment projects eligible for tax incentives.

To Qualify For These Tax Incentives, The Software Manufacturing Company Must Meet The Following Four Conditions

• Have a business registration certificate or a document issued by the competent authority specifying its functions and duties;
• New Investment Project: According to Clause 3 of Circular 96/2015/TT-BTC, the company must be a domestic investment project associated with the establishment of a new enterprise with an investment capital of less than 15 billion VND and must not fall under the list of conditional investment sectors.
• The software products manufactured must be included in the list of software products regulated by the Ministry of Information and Communications;
• The software production process must consist of 7 steps as prescribed by the Ministry of Information and Communications.  The production of a software product is considered to comply with the process when the enterprise carries out at least one of the two stages for that product: Requirements definition or Analysis and design, as specified.

The Software Production Process Is Outlined In Circular 13/2020/TT-BTTTT, Which Is Divided Into 7 Steps

1. Requirement Determination – Define, analyze, and finalize software requirements, ensuring compliance with operational needs.
2. Analysis & Design – Detail functional and non-functional requirements, design system architecture, data structures, and security features.
3. Programming & Coding – Develop software, integrate components, and customize solutions.
4. Testing & Experimentation – Conduct functional and security tests, verify quality, and ensure customer requirements are met.
5. Completion & Packaging – Prepare documentation, register intellectual property, and finalize packaging.
6. Installation, Transfer & Maintenance – Deploy software, train users, provide support, and ensure post-transfer maintenance.
7. Publishing & Distribution – Sell, distribute, or lease software products.

To qualify for tax incentives, the company must prove that its software production activities comply with the aforementioned processes. Documents such as design plans, source code, and test documentation will serve as key evidence to demonstrate eligibility for the tax incentives.

Additionally, the software manufacturing company should be aware that its software products must comply with intellectual property laws and related regulations. Violating intellectual property laws may result in the loss of tax incentives and other penalties, which could significantly impact the business operations.

Given the complex and detailed regulations, to fully take advantage of the tax incentives and avoid legal risks, software manufacturing companies should seek support from tax consultancy experts.

Contact TPM Tax Agency now to receive detailed and professional advice from our expert team. We are committed to helping you maximize tax incentives while ensuring sustainable business development in today’s challenging legal environment.