Time limit for corporate income tax incentives for software companies ?

How many years are companies producing software products entitled to corporate income tax incentives ?

Law office in Da Nang, Vietnam advises on relevant provisions of law on corporate income tax, regarding the duration of enjoying preferential corporate income tax policies of software product manufacturing companies ?

Tax rate incentives:

Newly established enterprises from investment projects in areas with extremely difficult socio-economic conditions, economic zones, high-tech zones; newly established enterprises from investment projects in the field of high technology, scientific research and technology development, investment in developing especially important state infrastructure, and production of software products are entitled to apply the tax rate of 10% for a period of fifteen years (Clause 1, Article 13 of the Law on Corporate Income Tax No. 14/2008/QH12 dated June 3, 2008).

Incentives on tax exemption and tax reduction periods:

Newly established enterprises from investment projects in areas with extremely difficult socio-economic conditions, economic zones, high-tech zones; newly established enterprises from investment projects in the field of high technology, scientific research and technology development, investment in developing particularly important state infrastructure, and software product production; Newly established enterprises operating in the fields of education - training, vocational training, health care, culture, sports and environment are entitled to tax exemption for a maximum period of no more than four years and a 50% reduction of the tax payable for a maximum period of no more than the subsequent nine years (Clause 1, Article 14 of the Law on Corporate Income Tax No. 14/2008/QH12 dated June 3, 2008).

Preferential tax rates:

The preferential tax rate of 10% for a period of fifteen years (15 years) applies to:

Enterprise income from implementing new investment projects in the fields of: scientific research and technology development; high technology applications in the list of high technologies prioritized for investment and development according to the provisions of the Law on High Technology; high-tech incubation, high-tech business incubation; venture capital for high technology development in the list of high technologies prioritized for development according to the law on high technology; investment in construction and business of high-tech incubators and high-tech business incubation facilities; investment in developing water plants, power plants, water supply and drainage systems; bridges, roads, railways; airports, seaports, river ports; airports, railway stations and other particularly important infrastructure projects decided by the Prime Minister; software product production; production of composite materials, light construction materials, and rare materials; production of renewable energy, clean energy, energy from waste destruction; biotechnology development (Point b Clause 1 Article 19 Circular No. 78/2014/TT-BTC dated June 18, 2014).

Preferences in tax exemption and tax reduction periods:

Tax exemption for four years and 50% reduction of tax payable for the subsequent nine years are applied for:

Enterprise income from implementing new investment projects specified in Clause 1, Article 19 of this Circular.

The tax exemption and tax reduction period specified in this Article is calculated continuously from the first year the enterprise has taxable income from a new investment project that enjoys tax incentives; In cases where an enterprise has no taxable income in the first three years from the first year in which it generates revenue from a new investment project, the tax exemption or tax reduction period will be calculated from the fourth year from the time the new investment project generates revenue.

Example 20: In 2014, enterprise A started a new investment project to produce software products. If in 2014 enterprise A had taxable income from the project to produce software products, then the tax exemption period will be calculated continuously since 2014. In cases where the enterprise A’s new investment project to produce software products has generated revenue since 2014, but by 2016 enterprise A's new investment project still has no taxable income, the tax exemption period will be calculated continuously from 2017 (Point a Clause 1, 4 Article 20 Circular No. 78/2014/TT-BTC dated June 18, 2014).

Therefore, based on the provisions of law on corporate income tax, a company producing software products is entitled to preferential corporate income tax policies with the preferential tax rate of 10% for a period of fifteen years (15 years) from the first year such company has taxable income from a new investment project, in addition, such company is entitled to tax exemption for four years and a 50% reduction in tax payable for the next nine years./.

Contact:

Phone: 0914 165 703

Email: dmslawfirm@gmail.com

DMS LAW LLC

Director

(Signed)

Lawyer Do Minh Son