VAT On Technology Transfer And Intellectual Property: Latest Detailed Regulation Proposal From The Ministry Of Finance

Urgent Need For Detailed Vat Regulations For Technology Transfer And Intellectual Property

In the current context, the promulgation of detailed regulations on Value Added Tax (VAT) for technology transfer activities and the transfer of intellectual property rights is becoming an urgent requirement. This is to ensure consistency and transparency in the implementation of VAT policy, while avoiding unnecessary disruptions to the current legal system.

Current Regulations On VAT For Technology Transfer And Intellectual Property

According to information from the Ministry of Finance, Clause 21, Article 5 of the current VAT Law clearly states that: “Technology transfer as prescribed by the Law on Technology Transfer; transfer of intellectual property rights as prescribed by the Law on Intellectual Property; software products and software services as prescribed by law” are objects not subject to VAT.

Practical Difficulties In Determining VAT

However, in practical implementation, some complex cases have arisen, especially when technology transfer and intellectual property rights transfer activities are carried out simultaneously with the transfer of machinery and equipment. This leads to difficulties in determining which portion of the value is not subject to VAT and which portion is subject to VAT.

Guidance From Decree No. 209/2013/ND-CP And Circular No. 219/2013/TT-BTC

To address this issue, Decree No. 209/2013/ND-CP and Circular No. 219/2013/TT-BTC have provided specific guidance. Accordingly, in cases where the contract includes the transfer of machinery and equipment, the value of the transferred technology and intellectual property rights – if separable – will not be subject to VAT. Conversely, if it cannot be separated, the entire contract value will be subject to VAT.

Latest Proposal From The Ministry Of Finance On Detailed VAT Regulations

In order to inherit the current regulations and ensure stability and transparency in policy implementation, the Ministry of Finance has proposed detailed regulations in Clause 21, Article 3 of the draft Decree detailing the implementation of several articles of the VAT Law as follows:

“Technology transfer as prescribed by the Law on Technology Transfer; transfer of intellectual property rights as prescribed by the Law on Intellectual Property; software products and software services as prescribed by the law on information technology, the law on the digital technology industry, and relevant laws. In case the technology transfer or intellectual property rights transfer is accompanied by the transfer of machinery and equipment, the business establishment must separately determine the value of the transferred technology and the value of the transferred intellectual property rights to identify the objects not subject to VAT; if it cannot be separated, the entire contract value shall be subject to VAT.”

Impact Assessment Of The New Regulations

The Ministry of Finance affirms that these regulations are fully consistent with the VAT Law and do not violate any international commitments to which Vietnam is a member. At the same time, these regulations are not expected to create new compliance costs for taxpayers, do not hinder the production and business activities of organizations and individuals, and do not create additional administrative procedures.

Significance Of Adding Detailed Regulations

The addition of these detailed regulations in the draft Decree not only aligns with the authority granted by the National Assembly but also contributes to completing the legal framework, ensuring feasibility and consistency in implementation. This is considered an appropriate solution to improve the efficiency of tax administration, create more favorable conditions for businesses and taxpayers, especially in the context where technology transfer and intellectual property activities are playing an increasingly important role in the development of the digital economy and innovation.