Decree No. 119/1999/ND-CP On Certain Policies and Financial Mechanisms to Encourage Enterprises to Invest in Scientific and Technological Activities

DECREE OF THE GOVERNMENT

On certain policies and financial mechanisms to encourage enterprises to invest in scientific and technological activities

To encourage enterprises to invest in scientific and technological activities for the purpose of technological innovation, product quality improvement, and increased production and business efficiency;

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THE GOVERNMENT

Pursuant to the Law on Government Organization dated September 30, 1992;

At the proposal of the Minister of Science, Technology, and Environment,

DECREE:

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

Scientific and technological activities encouraged under this Decree include:

1. Research and development activities (including basic research, applied research, experimental implementation) conducted by enterprises themselves or through contracts with organizations and individuals both within and outside the country;

2. Application of scientific and technological results, technological innovation, and production of new products;

3. Scientific and technological services:

a) High-tech services such as: Installation and operation guidance for technology lines; restoration, repair, calibration of machinery, equipment, testing devices, measuring instruments, scientific and technical equipment with automatic control systems;

b) Data processing, calculation, and analysis directly serving research and development, inspection, and testing;

c) Preparation of pre-feasibility and feasibility study reports;

d) Activities related to industrial property rights protection and technology transfer, application of new techniques in production;

đ) Services related to information, scientific and technological consulting, training of technical staff, and enhancement of business management knowledge.

This Decree applies to all enterprises operating under Vietnamese law regardless of their economic components.

Article 2. Applicability

POLICIES AND INCENTIVE MECHANISMS

Chapter II
Article 3. Corporate Income Tax Rates

1. Enterprises operating under the Law on Encouraging Domestic Investment (amended) that engage in high-tech application and scientific and technological services shall be subject to corporate income tax rates as follows for income derived from these activities:

a) A rate of 25%;

b) A rate of 20% for enterprises investing in areas with difficult socio-economic conditions;

2. Foreign-invested enterprises and foreign parties participating in joint venture contracts operating under the Law on Foreign Investment in Vietnam that invest in high-tech application and development projects and scientific and technological services shall be subject to a corporate income tax rate of 20% for a period of 10 years from the commencement of their production and business operations.

c) A tax rate of 15% for enterprises investing in areas with particularly difficult socio-economic conditions.

Article 4. Exemption and Reduction of Corporate Income Tax

1. Corporate income tax exemption shall apply to the following cases:

a) Income from the performance of research and development contracts;

b) Income from the performance of technical service contracts directly serving agricultural production;

c) Income from contributing intellectual property rights, technical secrets, and technological processes as capital contributions.

2. Enterprises enjoying preferential treatment under this Decree shall not be required to pay additional corporate income tax on scientific and technological activities as provided for in Clause 1, Article 10 of the Law on Corporate Income Tax;

3. Enterprises operating under the Law on Encouraging Domestic Investment (amended) that invest in scientific and technological service projects; construction of new production lines, expansion of scale, and technological innovation shall enjoy the following incentives:

a) Exemption from corporate income tax on additional income earned in the first year and a reduction of 50% of the tax payable in the next four years due to this new investment;

b) For production and business establishments located in areas with difficult socio-economic conditions, exemption from corporate income tax on additional income earned in the first three years and a reduction of 50% of the tax payable in the next five years due to this new investment;

c) For production and business establishments located in areas with particularly difficult socio-economic conditions, exemption from corporate income tax on additional income earned in the first four years and a reduction of 50% of the tax payable in the next seven years due to this new investment.

4. Foreign-invested enterprises and foreign parties participating in joint venture contracts under the Law on Foreign Investment in Vietnam that invest in scientific and technological activities shall be exempt from corporate income tax for the first year from when they start generating taxable income and a reduction of 50% of the corporate income tax payable in the next two years.

Foreign investors may have the corporate income tax already paid refunded if they reinvest their distributed profits according to Article 34 of Decree No. 30/1998/NĐ-CP dated May 13, 1998 detailing the implementation of the Law on Corporate Income Tax.

Foreign investors using distributed income for reinvestment shall be refunded the corporate income tax already paid in accordance with Article 34 of Decree No. 30/1998/NĐ-CP dated May 13, 1998, detailing the implementation of the Law on Corporate Income Tax.

Article 5. Preferential treatment for land use fees, land rental fees, and land use taxes

1. Enterprises operating under the Law on Encouraging Domestic Investment (amended) that invest in scientific and technological activities, if they use allocated land or rented land to build scientific and technological research facilities; laboratories, stations, farms, experimental workshops, then for this area of land, the enterprise shall enjoy preferential treatment for land use fees, land rental fees, and land use taxes as follows:

a) In the case of being allocated land with payment of land use fee:

The land use fee shall be reduced by 50%;

The land use fee shall be exempted if the allocated land is used in areas with difficult socio-economic conditions or in areas with extremely difficult socio-economic conditions.

b) In the case of renting land with payment of land rental fee:

The land rental fee shall be exempted for six years from the date of signing the land lease contract;

If renting land in areas with difficult socio-economic conditions, the land rental fee shall be exempted for fifteen years from the date of signing the land lease contract;

If renting land in areas with extremely difficult socio-economic conditions, the land rental fee shall be exempted throughout the implementation period of the project.

c) In the case of being allocated land with payment of land use tax:

The land use tax shall be exempted for six years from the date of allocation;

If the allocated land is used in areas with difficult socio-economic conditions, the land use tax shall be exempted for fifteen years from the date of allocation;

If the allocated land is used in areas with extremely difficult socio-economic conditions, the land use tax shall be exempted throughout the implementation period of the project.

2. Foreign investors operating under the Law on Investment in Vietnam who invest in scientific and technological fields, if they rent land to build laboratories, experimental workshops, or to conduct experimental and trial research, for this area of land, the investor shall enjoy preferential treatment according to current laws regarding land rental fees.

Article 6. Preferential treatment for import duties

Imported goods are machinery, equipment, raw materials, scientific and technical equipment with automatic control components, experimental samples, measuring and testing tools directly serving projects and contracts for research and development which cannot be produced domestically or do not meet requirements shall be exempted from import duties.

Article 7. Preferential treatment for credit

Enterprises operating under the Law on Encouraging Domestic Investment (amended) that engage in activities stipulated in Article 1 of this Decree may borrow medium-term and long-term loans at preferential interest rates, with the loan amount up to 70% of the investment capital from the Development Support Fund, Export Support Fund, and Science and Technology Development Support Fund.

In cases where enterprises are guaranteed medium-term and long-term loans by the Development Support Fund at the Vietnam Bank for Social Policies, the Development Support Fund will cover the difference between the preferential interest rate and the regular interest rate.

1. When enterprises use technology resulting from scientific and technological research projects funded by the State budget (excluding technologies related to national security and defense secrets and other industrial property objects currently protected), they only need to pay remuneration to the authors who developed such technology. The amount of remuneration paid to the authors shall be 30% of the technology transfer price as stipulated in Article 23 of Government Decree No. 45/1998/NĐ-CP dated July 1, 1998 detailing regulations on technology transfer.

2. The State supports enterprises with a maximum of 30% of the total funding for implementing research projects aimed at creating new technologies in priority sectors encouraged by the State, carried out by enterprises or jointly with scientific institutions.

The Ministry of Science, Technology, and Environment shall take the lead in coordinating with relevant ministries and agencies to examine and decide on the level of support taken from the science and technology business fund.

3. State-owned enterprises engaged in business activities under the Enterprise Law may allocate 50% of additional post-tax income generated from applying new technology to reinvest in scientific and technological activities and reward individuals and groups inside and outside the enterprise who have contributed to researching, creating, and organizing the application of such new technology. The ratio between the reward amount and the reinvestment in scientific and technological activities shall be decided by the Director, but the reward amount shall not exceed 60% of the allocated funds. The maximum period for allocation shall not exceed three years from the date of additional income generation.

Article 9. Procedure for Granting Incentives

The procedure for granting tax and credit incentives for projects under this Decree shall be implemented in accordance with the provisions of guiding documents for the implementation of the Law on Encouraging Domestic Investment (amended).

In cases where a project is entitled to multiple levels of incentives stipulated in different legal documents, it shall only enjoy the highest level of incentive.

Chapter III
IMPLEMENTING PROVISIONS

Article 10. Handling of violations

Organizations and individuals violating the provisions of this Decree shall be subject to disciplinary action, administrative fines, or criminal responsibility, depending on the nature, severity of the violation, and the consequences caused, in accordance with the provisions of the law; individuals committing serious violations will be held criminally responsible, and if damage is caused, they must compensate according to current laws.

Article 11. Guidance on Implementation

The Minister of Science and Technology and the Environment, and the Minister of Finance shall be responsible for guiding the implementation of this Decree.

Article 12. Effective Date

This Decree takes effect fifteen days from the date of signature. Previous regulations that conflict with the provisions of this Decree shall be abolished.

Article 13. Responsibility for Implementation

Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial People's Committees, Chairpersons of Management Councils, General Directors, and Directors of enterprises shall be responsible for implementing this Decree./.