Giving Tax incentive to Information Technology projects

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Corporate Income Tax Incentive for IT projects will contribute to encouraging and promoting businesses investing and manufacturing in this trend .

According to the Ministry of Finance, before 1st January 2009, provisions of the law on investment stipulate that Corporate Income Tax incentives are only applied at a high level to both software manufacturing and service. However, due to the impact of globalization, there is strong competition for foreign investment among countries. Countries in the world and region focus on taking measures to improve investment environment, in which Corporate Income Tax Incentive is one of the main tools and solutions.

The international trend has shown that many countries have shifted from tax incentives for many industries and fields to incentives in the large-scale to encourage the overall economy by amending Corporate Income Tax (reducing tax rate), only focusing on incentives to develop some key sectors and special difficult areas. Therefore, in order to encourage the overall economy and create favorable conditions for the business community, to increase human resources for investment and to develop business production and increase the competitiveness with other countries in the region. On the other hand, the Law on Corporate Income Tax 14/2008/QH12 (taking effect since 1st January 2009) reduced the tax rate from 28% to 25% (from 1st January 2016 it was 20% under provision of the Law 32/2013/QH13).

On the other hand, in order to overcome spread incentives under industry, area and ensure Tax incentive policy as a tool to create changes in the allocation of resources and attract investment in areas with extremely difficult socio-economic conditions and some key industries and fields in accordance with the State's development policies, Tax incentives in the law on Corporate Income Tax was amended under the principle of keeping the highest tax incentives rate to not affect investment environment but for creating a difference compared to the lower incentive rate. At the same time, narrowing objects of incentives under field to attract with the high incentive in the area. Accordingly, for the IT field, Tax incentives only applied to software production (applying tax rate of 10% within 15 years, exempted from tax within 4 years and reduced 50% of Corporate Income Tax in 9 following years. In case of special investment attraction, it will be considered to extend the incentive tax rate of 10% but not exceed 15 years.

From 1st July 2015, Law on Investment No.67/2014/QH13 (Clause 1 Article 16) stipulates that “production of IT products, software products and digital contents” are subject to investment incentives. Accordingly, the provision of “production of software, digital information content products and software service” are subject to special investment incentives.

Currently, besides software manufacturing, software processing service and manufacturing of digital information products have been considered as the strength of Vietnamese businesses. Although it is considered as one of the most attractive countries in terms of software processing, the competitiveness of software outsourcing enterprises, enterprises producing digital information content products of Vietnam is still weak.

Circular outlines tax incentives The finance ministry issued Circular No. 83/2016/TT-BTC (“Circular 83”) on June 17, 2016. It guides the implementation ...

Therefore, in order to create favorable conditions for domestic businesses to develop and enhance competitiveness, on 26th May 2016 the Government issued Resolution 41/NQ-CP supplementing solutions for applying Corporate Income Tax Incentive for supplying some important software services and manufacturing digital information products equivalent to the current Tax incentive rate applicable to project for manufacturing software as previous period (applying 10% of Tax rate within 15 years, tax exemption within 4 years and reducing 50% of Corporate Income Tax in 9 following years). In the draft proposal for the development of the law amending and supplementing some articles of the Law on Value Added Tax, the Law on Special Consumption Tax, the Law on Corporate Income Tax, the Law on Personal Income Tax, Law on Severance Tax and Law on Import and export duty (draft), the Ministry of Finance proposed to supplement provisions on Income of businesses from the implementation of new investment projects for supplying some important software and manufacturing digital information content products which need to be applied a tax rate of 10% within 15 years, exempted from tax within 4 years and reduced 50% of Corporate Income Tax in 9 following years. At the same time, assigning the Government to specify a number of important software services and digital information contents which need to be prioritized for development and implementation in line with reality.

According to the Ministry of Finance, Corporate Income Tax Incentive for supplying some important software services and manufacturing digital information content will promote and encourage businesses towards investing and manufacturing in this trend.