Vietnam has been considered the emerging star of the Asian hi-tech industry thanks to significant foreign investment from multinational businesses such as Samsung, Microsoft, Intel, Jinko Solar Technology, AT&S, LG, and others.
The Vietnamese government has developed several significant criteria to attract hi-tech businesses to enter the country, resulting in a wave of foreign investment in the hi-tech industry. This article will summarize this criterion and guide you through the process if you are a hi-tech firm interested in Vietnam.
What is the Hi-tech Industry?
“Hi-tech” is a term generally applied to economic and industrial sectors wherein technological innovation is emphasized. Hi-tech industries play an essential role in the modern economy and often experience significantly higher profits than other industries.
According to a study funded by the Workforce Information Council, the hi-tech sector can be defined as industries having high concentrations of workers in STEM (Science, Technology, Engineering, and Mathematics) occupations.
Definition of a Hi-tech Company
On March 16, 2021, the prime minister of Vietnam issued Decision No.10/2021/QD-TTg detailing the criteria for determining hi-tech enterprises, effective from April 30. This regulation applies to businesses manufacturing hi-tech products and providing hi-tech services in Vietnam.
Enterprises wanting to be recognized as hi-tech companies must be involved in hi-tech manufacturing products that meet the requirements listed below.
- The product must contribute to improving national scientific research and technological advancement.
- The product must have a high added-value ratio, meaning that the economic improvement the enterprise provides must be significant.
- The product must be highly competitive and provide outstanding socioeconomic benefits
- The product must be exportable or ready to substitute imports.
These hi-tech businesses must adhere to environmentally friendly standards and ensure that their products meet all government energy-saving and environmental protection requirements. The Vietnamese government’s technical norms and standards, or those of a specialized international body, must be followed for this to be done.
Procedures for registering a Hi-tech enterprise’s establishment
A hi-tech enterprise will be successfully established when the business owner receives the hi-tech Enterprise Certificate.
Documents required to apply for a Hi-tech Enterprise Certificate include the following:
- An application for recognition of hi-tech enterprise, submitted in the format required by the Ministry of Science and Technology
- Notarized copy of Business Registration Certificate or Investment Certificate or Certificate of Science and Technology Enterprise
- A formal declaration that the company has complied with the requirements outlined in Clause 1, Article 18 of the Law on High Technology.
The application must be sent in person or by post to the Ministry of Science and Technology for consideration.
The Ministry is responsible for notifying the business owner in writing if the application is deficient or incomplete and requesting that the inaccuracies be filled out or fixed.
The Ministry of Science and Technology is in charge of evaluating and granting the Certificate of a hi-tech firm and choosing it for the enterprise within 30 days of the application’s acceptance.
Criteria for the Hi-tech industry
At least 70% of these businesses’ total yearly net revenue must come from the sales of hi-tech products.
These businesses need to determine a particular ratio of the venture’s total amount spent on research and development (R&D) (this includes devaluation of investment in infrastructure, fixed capital, yearly recurrent expenditures on R&D, utility solutions in Vietnam, etc.). For companies with a total capital of VND6 trillion ($260.87 million) and have 3000 or more employees, this percentage must be at least 0.5 percent. Companies with a total capital of VND100 billion ($4.35 million) and 200 or more employees must reach at least 1 percent. However, all other companies not falling into these two above categories must get at least 2 percent.
|Total capital||No. of employees||%|
|VND 6 trillion ($260.87 million)||3000 or more||0.5%|
|VND 100 billion ($4.35 million)||200 or more||1%|
An organization must also meet the requirements for the number of employees with technical credentials and the ratio of employees with degrees from colleges or other higher education institutions to be classified as a hi-tech firm. These workers must have labor agreements that are one year or longer and must be directly involved in research and development operations. Furthermore, the proportion of workers with university degrees in hi-tech companies’ overall workforce must be at least 30%.
This regulation intends to support hi-tech investments in Vietnam as more companies relocate and establish operations there. Additionally, it will be simpler for domestic and international businesses to benefit from the excellent stimulus offered to hi-tech companies.
Tax Incentives in Vietnam
Hi-tech businesses can seek tax exemptions for the first four years of operation.
There are two ways to reduce your taxes:
- Incomes of enterprises from executing new public sector-related projects in a disadvantaged area (geographic area) or significantly poor geographical location specified in Appendix of Decree No. 218/2013/ND-CP.
- The tax exemption/reduction period is applied to hi-tech and agriculture enterprises using high technologies. These incentives begin from the year in which they are granted the Certificate of Hi-tech Enterprise or Certificate of Agriculture Enterprise Applying High Technologies.
CIT incentives for the first 15 years, in Detail:
- First 4 years: exempt from CIT completely.
- Following nine years: 50% tax reduction of the 10% rate
- Following two years: 10% CIT
From the 16th year of operations onward: Standard, 20% CIT, is applied.
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