TAX INCENTIVES

DETERMINING PROCESS OF SOFTWARE PRODUCTS

Tax incentives in Vietnam mean application of a lower rate of taxes for enterprises in forms of corporate income tax incentives,  exemption from import tax –  export tax, exemption from and reduction of land levy and land rents, accelerated depreciation, increasing the deductible expenses upon calculation of taxable income. Tax incentives exclusive for manufacturing of software products will be inclusive of exemption of corporate income tax, exemption and refund of value-added tax…

Since August 19, 2020, enterprises manufacturing software products shall determine procedurally compliant software manufacturing operations and submit information according to requirements from the Ministry of Information and Communications prior to benefiting from tax incentives.

07 STAGES FOR DETERMINING MANUFACTURING OF SOFTWARE PRODUCTS

Software product manufacturing operations of enterprises for preferential tax treatment shall be considered to be procedurally compliant software product manufacturing operations when the enterprise performs at least any of the 2 stages: Requirement determination, Analysis and design according to Stages in manufacturing process of software products as follow:

1. Requirement determination, which includes one or multiple following operations: producing or completing ideas regarding developing software products; describing characteristics (requirements) of products; proposing, surveying, and clarifying requirements of software products; analyzing operations; developing complete requirements for software products; consulting about procedural adjustment; consolidating requirements, approving requirement, control capacity and other factors to determine compliance of the products with the requirements.
2. Analysis and design, which include on or multiple following operations: specifically describing requirements (function and non-function requirements, and issues that need to be dealt with); establishing development equation and necessary techniques to best utilize solutions; analyzing legitimacy and examination capacity of the software, analyzing impacts of software requirements on operation environment; listing requirements to be prioritized, approved and updated when necessary; implementing data modeling, function modeling, and information channel modeling; identifying software solutions; designing solution and designing software system; designing data, software structure, designing composition units and modules of software; designing information safety and security for software; designing customer interface.
3. Programming and coding, which include one or multiple following operations: programming software; programming units and modules of software; adjusting, customizing, and modifying software; integrating software components; integrating software systems.
4. Software examination and experimentation, which include one or multiple following operations: developing testing and experimenting scenarios of units and modules of software; testing software; experimenting software; experimenting software functions; appraising software quality; assessing error possibilities; experimenting information safety and security of software; verifying satisfaction of customers’ requirements; inspecting software.
5. Software product completion and packaging, which include one or multiple following operations: developing documents on software product description, installation manuals (in case of total product transfer), software product manuals (for persons using or hiring services); packing software products; registering models; registering intellectual property rights.
6. Software product installation, transfer, instruction, and maintenance, which include one or multiple following operations: transferring (entire products or rights to use products in form of hiring); instructing installation (in case of total product transfer); installing software products (on customers’ systems in case of total product transfer or on service providing systems in case of lending software products); training and instructing (persons using or hiring services); examining software products after transferring or software products on service providing systems; correcting software products after transferring or software products on service providing systems; providing post-transfer assistance during service rental period; guaranteeing products post-transfer or during service rental period; maintaining software products (on customers’ systems or service providing systems). 
7. Publishing and distributing software products, which include one or multiple following operations: selling, lending, distributing, and publishing manufactured software products.

DOCUMENTS FOR DETERMINING PROCEDURAL COMPLIANCE  OF SOFTWARE PRODUCT

Procedurally compliant software product manufacturing operations shall be displayed by one or multiple following documents depending on operations within stages performed by the enterprise:

1. Documents proving each operation within the Requirement determination stage: Description of ideas regarding product development methods; description of characteristics (requirements) of products and context of use of products; description of propositions and results of surveys, clarification results, and requirement development results for products; detailed description and analysis regarding operations; description of complete requirements for products; description of contents of consultancy regarding procedural adjustment; records on consolidation of requirements, approval of requirements, description of control capacity and factors to verify adherence to requirements of products; or equivalent documents.
2. Documents proving each operation within the Analysis and design stage: Description of requirements; establishment of development equation and necessary techniques to best utilize solutions; analysis of legitimacy and examination capacity of software, analysis of impacts of software requirements on operation environment; lists of requirements to be prioritized, approved and updated when necessary; descriptions of data modeling, function modeling, and information channel modeling; description of software solutions; solution design and software system design; data design, structure design, designs for composition units and modules of software; designs for information safety and security for software; designs for customer interface; or equivalent documents.
3. Documents proving each operation within the Programming and coding stage: Some primary source code lines to prove that the enterprise writes the software code; description of consolidated software; or equivalent documents.
4. Documents proving each operation within the Software examination and experimentation stage: Scripts of examining and experimenting units and modules of software; description of software experimentation results, software system experimentation results, software function experimentation results, software quality appraisal results; assessment of error possibility; description of information safety and security of software; verification of software’s satisfaction for customers’ requirements; software inspection records; or equivalent documents.
5. Documents proving each operation within the Software product completion and packaging stage: Total introduction to software products; installation instructions (in case of total product transfer), product or service use instructions (for persons using or hiring the services); copies of model registration certificates (if any); copies of intellectual property right registration (if any); or equivalent documents.
6. Documents proving each operation within the Software product installation, transfer, instruction, and maintenance stage: Transfer contracts or records (entire products or rights to use products in form of hiring); installation instructions (in case of total product transfer); description of software product installation (on customers’ systems in case of total product transfer or on service providing systems in case of lending software products); training and instruction contents (persons using or hiring services); description of software product examination after transferring or software products on service providing systems; description of software product correction after transfer or software products on service providing systems; description of post-transfer assistance during service rental period; description of software product guarantee post-transfer or during service rental period; description of software product maintenance (on customers’ systems or service providing systems). 

APPLYING AND REPORTING ON  MANUFACTURING SOFTWARE PRODUCTS  

Enterprises manufacturing software products are responsible for:

1. Submitting information regarding software products and stages within software product manufacturing operations that are procedurally compliant and deducted tax to Agency of Information and Technology- Ministry of Information and Communications.
2. Being responsible for authenticity of information under applications for preferential tax treatment for software manufacturing operations and determining procedurally compliant software manufacturing operations.
3. Ensuring that software and software product manufacturing operations do not violate Intellectual property laws and other relevant law provisions.
4. Having properly registered business scopes in the Investment registration certificate and Enterprise registration certificate.
5. Being complied with all tax reports, accounting systems, financial reports, Invoices and documents related to the entire process of investment, formation and operation in accordance with local regulations, ready to provide information to determine and prove tax obligations. 

VIVA proudly is the choice of local expertise for local business by many foreign investors in the software industry from Europe, Japan, Singapore, Hongkong, India, USA… regard to market entry service and company registration, required business compliance procedures, tax management, merger and acquisition…

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