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Knowledge Highlights 23 July 2024
Scientific and technological activities are “encouraged investment activities” in Vietnam and are granted certain investment incentives. These activities are mainly governed by the Law on Science and Technology 2013, which came into force on 1 January 2014, and Decree No. 13/2019/ND-CP, in force from 20 March 2019. On 11 January 2021, the Ministry of Finance issued Circular No. 03/2021/TT-BTC (“Circular 3”) to provide guidance on the exemption or reduction of corporate income tax (“CIT”) for science and technology enterprises (“STEs”). Circular 3 came into effect on 1 March 2021, repealing and replacing Joint Circular No. 06/2008/TTLT-BKHCN-BTC-BNV and Joint Circular 17/2012/TTLT-BKHCN-BTC-BNV.
This article discusses some of the key supporting policies and incentives for STEs in Vietnam.
What is an STE?
STEs are enterprises that produce and trade products or provide services in relation to science and technology and based on the application of achievements in scientific research and technological developments.
These achievements must be in one of the following forms:
What conditions must be fulfilled to be recognised as an STE?
To be recognised as an STE, an enterprise must obtain an STE Certificate from a relevant Department of Science and Technology or the Ministry of Science and Technology upon fulfilment of the following conditions:
What incentives are available for STEs?
Certain investment incentives, depending on the activities undertaken by STEs, will be granted including exemption or reduction of rent of land and water surface, facilitation for STEs to access preferential-interest sources of capital, and exemption or reduction of taxes.
Regarding the incentives in relation to CIT, the most notable change under Circular 3 is that STEs are no longer entitled to a prefential tax rate of 10% as provided under the previous regulations. Under Circular 3, STEs will be subject to the normal CIT rate of 20%. All STEs, including those currently enjoying the preferential tax rate of 10%, ceased to enjoy this incentive from 1 March 2021.
Circular 3 seeks to provide CIT incentives in the manner of tax exemption and tax reduction, particularly as follows: