In order to encourage the development of the software industry, the government has special preferential policies on Corporate Income Tax (CIT) for enterprises operating in this field, such as incentives on tax rates, CIT exemption and reduction period.
1. What are CIT incentives for enterprises producing software products?
According to the provisions of Circular No. 78/2014/TT-BTC amended and supplemented by Circular 96/2015/TT-BTC effective from 06/08/2015, enterprises with new investment projects and software product production activities are entitled to a preferential CIT rate of 10% for a period of 15 years from the first year of the new investment project of the enterprise with revenue.
Exempt form CIT
In particular, enterprises implementing investment projects to produce software products are exempt from CIT for 4 years from the first year of having taxable income from investment projects; In case there is no taxable income for 3 years from the first year of revenue from the project, the tax exemption period shall be calculated from the fourth year that the investment project generates revenue.
Reduction in the amount of tax payable
Enterprises implementing investment projects to produce software products are entitled to a 50% reduction in the amount of tax payable (applying a tax rate of 10%) in the next 9 years.
For example: In 2014, Enterprise A had a new investment project to produce software products. If in 2014 enterprise A had taxable income from a software product manufacturing project, the tax exemption period is calculated continuously since 2014. In case a new investment project producing software products of enterprise A generates revenue from 2014, and by 2016 the new investment project of enterprise A still does not have taxable income, the tax exemption and reduction period is calculated continuously since 2017.
Note CIT incentives only apply to enterprises implementing accounting regimes, invoices, vouchers, and paying CIT according to a declaration
During the period of enjoying CIT incentives, if an enterprise performs many production and business activities, it must separately calculate income from software product production activities (including preferential tax rates, tax exemption rates, and tax reductions) and income from other production and business activities to declare and pay taxes separately.
In case in the tax period, the enterprise does not separately calculate income from software product production activities and income from other products and business activities, the income portion of software product production activities shall be determined by the total taxable income multiplied by the percentage of revenue or deductible expenses of software product production compared to the total revenue or total deductible expenses of the enterprise in the tax period.
In case there is a deductible revenue or expense that cannot be accounted for separately, such deductible revenue or expense shall be determined according to the ratio of the deducted revenue or expense of the software product production to the total deductible revenue or expense of the enterprise.
2. How to determine the production of software products entitled to corporate income tax incentives?
Software manufacturing companies need to meet the process in Articles 3 and 4 of Circular 13/2020/TT-BTTTT on software product production activities and refer to Decree No. 71/2007/ND-CP, Circular No. 09/2013/TT-BTTTT to enjoy corporate income tax incentives according to the above provisions.