CIRCULAR

GUIDELINES ON TAX OBLIGATIONS INCURRED UPON CONTRIBUTION AND USE OF FUNDS FOR SCIENCE AND TECHNOLOGY DEVELOPMENT IN ENTERPRISES

Pursuant to the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019;

Pursuant to the Law on Corporate Income Tax No. 14/2008/QH12; the Law No. 32/2013/QH13 providing amendments to the Law on Corporate Income Tax; the Law No. 71/2014/QH13 providing amendments to tax laws;

Pursuant to the Resolution No. 43/2022/QH15 dated January 11, 2022 of the National Assembly on fiscal and monetary policies for supporting Socio-economic recovery and development program;

Pursuant to the Government’s Decree No. 126/2020/ND-CP dated October 19, 2020 on elaboration of the Law on Tax Administration;

Pursuant to the Government’s Decree No. 218/2013/ND-CP dated December 26, 2013 elaborating and providing guidelines for implementation of the Law on Corporate Income Tax;

Pursuant to the Government's Decree No. 95/2014/ND-CP dated October 17, 2014 prescribing investment and financial mechanisms for science and technology activities;

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Pursuant to the Government’s Decree No. 87/2017/ND-CP dated July 26, 2017 defining functions, tasks, powers and organizational structure of the Ministry of Finance of Vietnam;

At the request of the Director General of the General Department of Taxation;

The Minister of Finance of Vietnam promulgates a Circular providing guidelines on tax obligations incurred upon contribution to and use of Funds for Science and Technology Development in enterprises.

Article 1. Scope and regulated entities

1. Scope: This Circular provides guidelines on tax obligations incurred upon contribution to and use of Funds for Science and Technology Development in enterprises (hereinafter referred to as “Funds”).

2. This Circular applies to: Enterprises that are established and operating in accordance with regulations of law of Vietnam (hereinafter referred to as “enterprises”), regulatory authorities, and other relevant organizations and individuals.

Article 2. Contribution to Funds

1. Each enterprise shall annually make contribution as a percentage (%) of its income subject to corporate income tax (CIT) to the Fund as prescribed in Clause 1 Article 17 of the Law on corporate income tax No. 14/2008/QH12, Clause 1 Article 18 of the Government’s Decree No. 218/2013/ND-CP dated December 26, 2013, and Clauses 1, 2 Article 9 of the Government’s Decree No. 95/2014/ND-CP dated October 17, 2014. To be specific:

a) A state-owned enterprise shall make a contribution equaling 3% - 10% of its income subject to CIT in the tax period. The specific contribution amount shall be subject to the enterprise’s capacity and planned funding for science and technology activities;

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2. Contributions to the Fund shall be determined in each CIT period and deducted from taxable income upon determination of CIT amount payable by the enterprise in the tax period.

Article 3. Rules for using the Fund

1. The Fund of an enterprise shall be used for financing its science and technology research and development activities and other tasks to be financed by the Fund as prescribed by law.

2. Any payments using the Fund must be supported by adequate invoices and receipts as prescribed. With regard to payments made using the Fund without invoices or receipts as prescribed, the enterprise is required to fulfill obligations to state budget as prescribed in Clause 1 Article 4 of this Circular.

3. An enterprise is not allowed to include the following amounts in its deductible expenses upon determination of CIT in the tax period, including payments made using the Fund and late payment fines and/or interests on CIT amounts payable determined according to the provisions of Clauses 1, 2 Article 4 of this Circular.

4. The Fund shall be used following the first in first out principle.

5. If an enterprise needs to overspend the Fund in a year on science and technology tasks, it shall include spending amounts in its deductible expenses upon determination of CIT in the tax period or use the planned contributions to the Fund for subsequent years for covering the insufficient amount as prescribed in Clause 7 Article 10 of the Government’s Decree No. 95/2014/ND-CP dated October 17, 2014.

Article 4. Tax obligations incurred in case of misused, unused or underused Fund

1. Tax obligations incurred in case of misused Fund

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2. Tax obligations incurred in case of unused or underused Fund

a) Within 05 (five) years from the establishment of the Fund as prescribed in Article 2 of this Circular, if none or less than 70% of the amounts annually contributed to the Fund has been used, the enterprise shall incur the CIT on unused amounts and interests on such CIT amount payable. Interests charged on the CIT amount payable shall be determined according to the provisions of Point b Clause 2 of this Article.

In case of transfer between Funds, the 05-year period regarding the amount transferred to the Fund of an enterprise shall start from the CIT period in which money is transferred to the enterprise’s Fund.

b) Interests shall be charged on the CIT amount payable on the unused amounts of the Fund at the interest rate of 1-year treasury bonds in effect upon the payment of such CIT amount for a period of 02 years as prescribed in Clause 2 Article 17 of the Law on corporate income tax No. 14/2008/QH12.

c) The used amounts of the Fund include: payments properly made using the Fund which have been recorded as prescribed; the sums advanced which are supported by adequate invoices and receipts but yet to be recorded for performing the Fund’s activities; amounts transferred from the Fund of a corporation to its affiliates, or from a parent company to its subsidiaries or vice versa; and amounts paid to the National Foundation for Science and Technology Development or to the relevant ministerial or provincial Fund for science and technology development (if any) in accordance with regulations of the Ministry of Science and Technology of Vietnam.

Transfer of money between Funds of a parent company or corporation and its subsidiaries or affiliates shall only apply to subsidiaries or affiliates of which 100% of charter capital is held by the parent company or corporation, and is not applied in the following cases:

- Transfer of money from a foreign-invested enterprise to its parent company located abroad;

- Transfer of money from a parent company located in Vietnam to its subsidiaries located abroad.

3. If both the receiving enterprise and the transferring enterprise are not eligible to CIT incentives, the CIT rate used for calculating the CIT amount payable shall be the one applied to the enterprise in each tax period upon contribution to its Fund or at the time of transfer of money between their Funds.

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a) If an enterprise makes contribution to its Fund while it is enjoying CIT incentives (preferential CIT rate, tax exemption or tax reduction), and misuses or uses none or less than 70% of the amounts contributed to its Fund during the period of enjoyment of CIT incentives, the CIT amount payable shall be calculated at the preferential CIT rate applied upon its contribution to the Fund.

b) If an enterprise makes contribution to its Fund while it is enjoying CIT incentives, has received money from the Fund of another enterprise (transferring enterprise), and misuses or uses none or less than 70% of the sum of amounts contributed to its Fund and received amounts, the CIT amount payable shall be calculated as follows:

- With regard to amounts contributed by the enterprise to its Fund, the CIT amount payable shall be calculated at the preferential CIT rate applied upon its contribution to such Fund.

- With regard to amounts received from another enterprise, the CIT amount payable shall be calculated as follows:

+ If the transferring enterprise is not eligible to CIT incentives at the time of transfer, the CIT amount payable shall be calculated at the normal CIT rate.

+ If the transferring enterprise is enjoying CIT incentives at the time of transfer, the CIT amount payable shall be calculated at the preferential CIT rate applied to the transferring enterprise at the time of transfer.

The unused or misused portion of received amounts shall be determined according to the proportion of such received amounts to the Fund balance (i.e. the sum of amounts contributed by the enterprise to the Fund and received amounts).

5. Each enterprise shall itself calculate, declare and pay CIT amount payable on misused or unused amounts of its Fund, and assume legal responsibility in accordance with regulations of the Law on tax administration.

Article 5. Management of assets created using the Fund

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a) Fixed assets created to serve the enterprise’s science and technology activities;

b) Machinery and equipment purchased with transferred technologies as prescribed in Article 7 of the Law on Technology Transfer in order to partially or entirely replace the enterprise’s technologies in use with more advanced ones with the aims of enhancing productivity and quality of products or developing new products according to Point c Clause 3 Article 10 of the Government’s Decree No. 95/2014/ND-CP dated October 17, 2014;

c) Machinery and equipment purchased to serve technology innovation or directly serve the enterprise’s business in 02 years (2022 and 2023) as prescribed in Point b Clause 3 Article 3 of the National Assembly’s Resolution No. 43/2022/QH15 dated January 11, 2022.

2. Costs of repair or renovation of fixed assets which have been created using the enterprise’s Fund shall be also covered by such Fund.  

3. If fixed assets which have been created using the Fund to serve the enterprise’s science and technology activities are yet to be fully depreciated but are transferred to serve the enterprise’s business operations, their residual values shall be recorded as other incomes and depreciated as deductible expenses upon determination of taxable income.

4. If fixed assets which have been created using the Fund to serve both science and technology activities and business operations of the enterprise are yet to be fully depreciated, they shall be managed in accordance with the Ministry of Finance of Vietnam’s regulations on management, use and depreciation of fixed assets, and the enterprise shall not include depreciation of such fixed assets in its deductible expenses upon determination of taxable income.

5. If fixed assets which have been created as a result of the enterprise’s science and technology activities are transferred to serve the enterprise’s business operations, their values shall be recorded as other incomes and depreciated as deductible expenses upon determination of taxable income.

6. If fixed assets purchased using the enterprise’s Fund are transferred, the enterprise shall determine the residual values of such assets to record an increase or decrease in its Fund upon transfer of such assets.

7. If fixed assets which are used for the enterprise’s business operations are transferred to serve its science and technology activities, their residual values shall be determined to be recorded as expenses on purchase of fixed assets using the Fund, and shall be managed according to Clause 1 of this Article.

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9. Other assets shall be managed and properly used for defined purposes as prescribed.

Article 6. Management of Funds in case of enterprise restructuring

1. If a new enterprise is established after the enterprise restructuring in accordance with regulations of the law of Vietnam, this new enterprise shall inherit, manage and use the Fund(s) of the former enterprise(s).

2. If the enterprise restructuring is not subject to the provisions of Clause 1 of this Article, the enterprise(s) existing after the restructuring shall inherit, manage and use the Fund(s) of the enterprise(s) existing before the restructuring. Assignment of such Funds shall be subject to decision of relevant enterprise(s) and must be notified to tax authorities.

Article 7. Reporting on contribution, transfer and use of Funds

1. Each enterprise shall make annual report on contribution to, transfer and use of its Fund using Form No. 03-6/TNDN enclosed with the Circular No. 80/2021/TT-BTC dated September 29, 2021 of the Ministry of Finance of Vietnam.

2. In case of transfer of Funds between the enterprises as prescribed in Point c Clause 2 Article 4 of this Circular, the receiving enterprise shall make reports on receipt and use of transferred money.

3. Reports on contribution, transfer and use of Funds shall be submitted to the competent authorities mentioned in Clauses 1, 4 Article 11 of the Government’s Decree No. 95/2014/ND-CP dated October 17, 2014. Such reports shall be submitted within the same time limit with annual CIT finalization forms.

Article 8. Effect and implementation

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2. Articles 4, 12, 13, 14, 16, and 17 of the Joint Circular No. 12/2016/TTLT-BKHCN-BTC dated June 28, 2016 of the Ministry of Science and Technology of Vietnam and the Ministry of Finance of Vietnam are abrogated.

3. Spending contents and guidelines for use of Funds and transfer of Funds for science and technology development of enterprises to the National Foundation for Science and Technology Development or ministerial or provincial Funds for science and technology development shall comply with prevailing legislative documents on science and technology, and regulations adopted by the Ministry of Science and Technology of Vietnam.

4. If any legislative documents referred to in this Circular are amended or superseded, the new ones shall apply.

5. Difficulties that arise during the implementation of this Circular should be promptly reported to the Ministry of Finance of Vietnam for consideration./.

PP. MINISTER
DEPUTY MINISTER




Cao Anh Tuan