TAX INCENTIVES FOR SOFTWARE MANUFACTURING ENTERPRISES IN LIGHT OF THE IMPACT OF THE 2026 TAX POLICY

Software manufacturing enterprises are among the sectors encouraged by the State due to their important role in the digital transformation process. Under the tax policy reform orientation from 2026 onward, the software sector continues to be identified as a priority industry associated with innovation and enhanced national competitiveness.

Current Vietnamese law provides various tax incentives for software manufacturing enterprises; however, improper or incomplete application remains common in practice. From 2026, as tax administration becomes increasingly digitalized and more stringent, tax risks during inspections and audits are expected to rise. This article summarizes key tax incentives, applicable conditions, and important legal considerations in line with the 2026 tax policy.

1. Legal basis for tax incentives for software manufacturing enterprises

Tax incentives applicable to software manufacturing enterprises are stipulated in the following regulations:

• Corporate Income Tax Law No. 14/2008/QH12, as amended and supplemented
• Decree No. 218/2013/ND-CP detailing and guiding the implementation of the Corporate Income Tax Law
• Circular No. 78/2014/TT-BTC and Circular No. 96/2015/TT-BTC guiding corporate income tax
• Value Added Tax Law No. 13/2008/QH12, as amended and supplemented
• Law on Information Technology No. 67/2006/QH11
• Decree No. 154/2013/ND-CP on the information technology industry
  

According to the orientation for completing tax legislation in the 2026–2030 period, incentives for the software sector are expected to be maintained but applied selectively, based on the substance of activities and actual value added.

2. Corporate income tax incentives for software manufacturing enterprises

2.1. Preferential tax rate

Income derived from software manufacturing activities is subject to a preferential corporate income tax rate of 10% for a period of 15 years, calculated consecutively from the first year in which revenue is generated.

In the context of tax reform from 2026, tax authorities are expected to intensify reviews of eligibility for preferential tax rates, particularly for enterprises registered as software manufacturers but whose actual activities are service-oriented.

2.2. Corporate income tax exemption and reduction

Software manufacturing enterprises may also enjoy:

• Corporate income tax exemption for the first 4 years
• A 50% reduction of payable corporate income tax for the subsequent 9 years

The total incentive period may extend up to 19 years, provided that all statutory conditions are satisfied.
From 2026 onward, correctly determining the commencement of tax exemption and reduction periods and the scope of incentivized income will be a key focus during tax audits.

2.3. Conditions for entitlement to corporate income tax incentives

To qualify for incentives, enterprises must:

• Be identified as software manufacturing enterprises in accordance with legal regulations
• Generate income from software manufacturing activities
• Separately account for revenue, expenses, and income from software manufacturing activities
  
  

Where separate accounting is not feasible, incentivized income shall be determined based on the proportion of revenue. In the context of digital tax administration from 2026, transparent and consistent accounting is a critical factor.

3. Value added tax policy applicable to software manufacturing

Under the Value Added Tax Law, software products and software services are not subject to VAT. This policy applies to:

• Software manufactured domestically
• Software supplied to organizations and individuals both domestically and overseas

The tax policy orientation from 2026 continues to promote the digital economy, in which VAT exemption for software is considered an important support tool for technology enterprises.

Note: Enterprises must correctly identify software products and clearly distinguish them from other information technology services. Misclassification may result in tax arrears and penalties from 2026 onward.

4. Import tax incentives and initial investment cost incentives

Software manufacturing enterprises may also be entitled to:

• Import duty exemption for machinery and equipment forming fixed assets for production activities
• Import duty exemption for components and equipment not yet domestically produced
• Recognition of software research and development costs as deductible expenses for corporate income tax purposes

From 2026, tax authorities are expected to more closely scrutinize the recognition of investment and R&D costs.

5. Common risks in applying tax incentives

In practice, software manufacturing enterprises often encounter the following risks:

• Not being recognized as a software manufacturing enterprise during tax audits
• Failure to separately account for incentivized income
• Incorrect determination of the starting point for tax exemption and reduction
• Confusion between software products and information technology services

Potential consequences include tax arrears, late payment interest, and administrative penalties.

6. Recommendations from a tax advisory perspective

To safely apply tax incentives for software manufacturing enterprises, companies should:

• Review registered business lines and actual operations
• Standardize technical documentation and software production processes
• Separately account for revenue and expenses related to incentivized activities
• Closely monitor tax exemption and reduction periods
• Engage specialized tax advisory services

Tax incentives for software manufacturing enterprises constitute a major and long-term State policy. However, in the context of tax reform and tightened tax administration from 2026, such incentives apply only when enterprises fully satisfy legal conditions. Proper understanding of regulations and structured implementation from the outset will help enterprises lawfully optimize tax costs and mitigate risks during tax inspections and audits.

Thao Phung