Vietnam unveils new criteria for high-tech companies: Decision 10

The government issued Decision n ° 10/2021 / QD-TTg which details the identification criteria for high-tech companies. The decision will take effect on April 30.

The decision lists certain conditions that apply for companies to be considered high-tech companies. While companies must meet the conditions set out in the High Tech Law as well as the Investment Law, in addition to this, Decision 10 lists the specific conditions necessary to qualify as a high technology company.

The conditions to qualify as high-tech include:

  • at least 70 percent of total annual net income from high-tech products;
  • at least 0.5 to 2 percent of the total annual net income allocated to research and development (R&D) activities, or at least 0.5 percent for companies with total capital greater than 6 trillion dong ( $ 260.87 million) and more than 3,000 employees;
  • Companies with a total capital of 100 billion VND (4.35 million USD) and more than 200 employees must allocate at least 1% to R&D activities; and
  • All other businesses should spend at least 2%.

High-tech companies are also required to hire employees with college or higher education, depending on the total number of employees. This varies from 1 to 5 percent depending on the total investment and the number of employees. However, employees with college degrees cannot exceed 30 percent of the total workforce for high-tech companies.

Companies that have currently applied for high-tech certification are likely to be subject to the new rules.

Tax incentives for high-tech companies

In Vietnam, companies carrying out activities defined as high-tech are eligible for tax incentives. A corporate income tax (CIT) rate of 10 percent for 15 years, four years exemption from corporate tax, and a 50 percent tax reduction for the next nine years are applicable to companies of high technology.

Income from the transfer of high technology under difficult socio-economic conditions is also exempt from tax. Preferential tax rates can be extended for up to an additional 15 years depending on the government’s decision. A land rent exemption is also possible up to 15 years or even the entire duration of the project.

Import duty exemptions are applied to imported goods which are used to construct fixed assets. Duty exemptions also apply to imported raw materials and supplies that have not been manufactured locally within five years.

High-tech companies are also eligible for government funding and loans depending on the industry. In addition, a 15 percent tax rate is applied to agricultural and aquaculture products projects.

Vietnam wants to attract high-tech industries

The new regulations are in line with Resolution 50 on attracting FDI in certain high-tech industries. As the Vietnamese economy grows, it is called upon to become selective in attractive FDI, as it wishes to move up the value chain from a low-cost labor destination to a hub. high-tech industry with the environment in mind.

In its socio-economic plan, the government reiterated that the digital economy and manufacturing are a priority for the government. One of the goals is for high-tech output from manufacturing and processing to reach at least 45% by 2030.

Given these goals, it makes sense for the government to tighten the criteria for high-tech companies as the government strives to attract high-tech investment. The adoption of Industry 4.0 and AI will further help accelerate this transformation.

Note: This article was published in July 2015 and has been updated to include the latest developments.

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Vietnam briefing is produced by Dezan Shira & Associates. The firm assists foreign investors across Asia from its offices worldwide, including in Hanoi, Ho Chi Minh City, and Da Nang. Readers can write to [email protected] for more help with doing business in Vietnam.

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