Circular No. 67/2022/TT-BTC guides on tax obligations when enterprises establish and utilize the Enterprise Science and Technology Development Fund.

CIRCULAR

Guidelines on tax obligations when enterprises establish and utilize the Enterprise Science and Technology Development Fund

use the Enterprise Science and Technology Development Fund

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

Pursuant to the Law on Corporate Income Tax No. 14/2008/QH12; Law No. 32/2013/QH13 amending and supplementing certain articles of the Law on Corporate Income Tax; Law No. 71/2014/QH13 amending and supplementing certain articles of various laws;

Pursuant to Resolution No. 43/2022/QH15 dated January 11, 2022 of the National Assembly on fiscal and monetary policies supporting the Economic and Social Recovery Program;

amending and supplementing certain forms of

Pursuant to Decree No. 218/2013/NĐ-CP dated December 26, 2013 of the Government detailing and guiding the implementation of certain provisions of the Law on Corporate Income Tax;

Pursuant to Decree No. 95/2014/NĐ-CP dated October 17, 2014 of the Government on investment and financial mechanisms for scientific and technological activities;

Pursuant to Decree No. 76/2018/NĐ-CP dated May 15, 2018 of the Government detailing and guiding the implementation of certain provisions of the Law on Technology Transfer;

Pursuant to Decree No. 87/2017/NĐ-CP dated July 26, 2017, issued by the Government, stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the proposal of the Director General of the State Revenue Administration,

The Minister of Finance issues this Circular guiding on tax obligations when enterprises establish and utilize the Enterprise Science and Technology Development Fund.

Article 1. Scope of Regulation and Applicability

Article 1. Scope of Regulation: This Circular guides on tax obligations when enterprises establish and utilize the Enterprise Science and Technology Development Fund (hereinafter referred to as the Fund).

Article 2. Applicability: Enterprises established and operating in accordance with Vietnamese law (hereinafter referred to as enterprises), state agencies, organizations, and other individuals related to the matter.

Clause 1. Annually, enterprises may allocate a percentage (%) based on corporate income taxable income to create the Fund according to Clause 1, Article 17 of the Law on Corporate Income Tax No. 14/2008/QH12, Clause 1, Article 18 of Decree No. 218/2013/NĐ-CP dated December 26, 2013 of the Government detailing and guiding the implementation of the Law on Corporate Income Tax, and Clauses 1 and 2, Article 9 of Decree No. 95/2014/NĐ-CP dated October 17, 2014 of the Government on investment and financial mechanisms for science and technology activities, specifically:

Point a) For state-owned enterprises: Allocate from 3% to 10% of corporate income taxable income for the tax period. The specific allocation ratio shall be based on the enterprise's capacity and needs for funding scientific and technological activities;

Point b) For enterprises not falling under point a of Clause 1 of this Article: Enterprises shall decide on the specific allocation ratio themselves, but it must not exceed 10% of corporate income taxable income for the tax period.

Clause 2. The allocation amount for the Fund is determined for each corporate income tax period and is deductible from the taxable income for corporate income tax purposes when determining the corporate income tax payable for the tax period.

Article 4. Principles of Utilizing the Fund

Clause 1. The Fund can only be used for investment in research and development of science and technology activities of enterprises and other permissible expenditures as stipulated by law.

Clause 2. Expenditures from the Fund must have complete invoices and receipts as required. For expenditures from the Fund without invoices and receipts as required, the obligation to pay into the State budget shall be carried out according to Clause 1, Article 4 of this Circular.

Clause 3. Enterprises shall not include expenditures from the Fund and late payment penalties and interest arising from corporate income tax payable as determined according to Clause 1 and Clause 2, Article 4 of this Circular in deductible expenses when determining taxable income for corporate income tax purposes for the tax period.

Clause 4. The utilization of the Fund follows the principle that allocations made earlier are utilized first.

1. Tax obligations when enterprises use the Fund for purposes other than intended

In case an enterprise uses the Fund for purposes other than intended, the enterprise must pay to the State budget the corporate income tax calculated on the corresponding income that has been contributed and the interest arising from such tax. The interest rate applied to the amount of corporate income tax recovered based on the portion of the Fund used for purposes other than intended shall be the late payment interest rate as stipulated by the Law on Tax Administration and guiding legal documents. The interest period shall be continuously calculated from the day following the date of the Fund contribution until the day before the date when the recovered tax is paid into the State budget.

2. Tax obligations when enterprises do not use or use less than 70% of the annual contribution to the Fund

a) Within five years from the date of establishing the Fund as prescribed in Article 2 of this Circular, if an enterprise does not use or uses less than 70% of the annual contribution to the Fund, the enterprise must pay to the State budget the corporate income tax calculated on the corresponding income that has not been used or used less than 70%, and at the same time must pay the interest arising from such tax. The interest arising from the corporate income tax payable shall be determined according to the provisions of point b, Clause 2 of this Article.

In case of receiving transferred funds, the five-year period for the received transferred funds shall be counted from the tax period of the corporate income tax of the transferred funds.

b) The interest rate applied to the amount of corporate income tax recovered based on the portion of the Fund not fully utilized shall be the interest rate of government bonds with a term of one year applicable at the time of recovery, and the interest period shall be two years as stipulated in Clause 2, Article 17 of the Corporate Income Tax Law No. 14/2008/QH12.

c) The amount of the Fund used includes: the amount of the Fund spent for the intended purpose and settled according to regulations; the amount temporarily borrowed and having full invoices and supporting documents but not yet meeting the conditions for settlement to carry out the activities of the Fund; the amounts transferred between the Fund of the holding company and its subsidiaries, or between the parent company and its subsidiary, or vice versa; and the amount deposited back to the National Science and Technology Development Fund or the Science and Technology Development Fund of the respective Ministries, provinces, or cities (if any) according to the regulations of the Ministry of Science and Technology.

The transfer between the Fund of the parent company, holding company, and the Fund of the subsidiary, enterprise, and vice versa only applies to subsidiaries or enterprises where the parent company holds 100% of the capital and does not include the following cases:

- Foreign-invested enterprises transferring to their parent companies abroad;

- Parent companies in Vietnam transferring to their subsidiaries abroad.

3. In case an enterprise contributes to the Fund and transfers the Fund without enjoying preferential corporate income tax, the corporate income tax rate used to calculate the recovered tax shall be the applicable corporate income tax rate for the enterprise during each tax period when contributing to the Fund or at the time of transferring the Fund.

4. Determination of corporate income tax for the case of establishing the Fund during the period when the enterprise enjoys preferential corporate income tax:

a) In case an enterprise contributes to the Fund during the period it enjoys preferential corporate income tax (applying preferential tax rates, tax exemption periods, or tax reduction periods), if the enterprise uses the Fund for purposes other than intended or does not use or uses less than 70% of the Fund contributed during the period it enjoys preferential corporate income tax, then the recovered corporate income tax shall be determined according to the preferential corporate income tax rate at the time of establishing the Fund.

b) In case an enterprise contributes to the Fund during the period it enjoys preferential corporate income tax and receives transferred funds from another enterprise (the transferring enterprise), if the enterprise uses the Fund for purposes other than intended or does not use or uses less than 70% of the contributed and transferred Fund, then the recovered corporate income tax shall be determined as follows:

- For the amount contributed to the Fund by the enterprise, the recovered corporate income tax shall be determined according to the preferential corporate income tax rate at the time of establishing the Fund by the enterprise.

- For the amount received from another enterprise, the recovered corporate income tax shall be determined as follows:

+ If at the time of receiving the transferred Fund, the transferring enterprise does not enjoy preferential corporate income tax, then the recovered corporate income tax shall be determined according to the non-preferential corporate income tax rate.

+ If at the time of receiving the transferred Fund, the transferring enterprise enjoys preferential corporate income tax, then the recovered corporate income tax shall be determined according to the preferential corporate income tax rate of the transferring enterprise at the time of transfer.

The determination of the amount of transferred funds used for purposes other than intended, not used, or used less than 70% shall be allocated according to the ratio between the amount of transferred funds and the Fund balance in the tax period (including both the contributed Fund and the amount of transferred funds).

5. Enterprises shall self-calculate, self-declare, and self-pay the corporate income tax on the Fund used for purposes other than intended, not used, or used less than 70%, and shall bear responsibility under the law as stipulated by the tax management laws.

Article 5. Management of Assets Formed from the Fund

1. Enterprises must establish fixed asset files formed from the Fund's sources for management and monitoring in accordance with the law, and shall not include depreciation expenses of fixed assets in deductible costs when determining corporate income tax revenue, including the following cases:

a) Fixed assets formed to serve the enterprise's scientific research and technological activities;

b) Purchasing machinery and equipment accompanied by technology transfer objects as stipulated in Article 7 of the Law on Technology Transfer to replace part or all of the existing technology with more advanced technology to enhance productivity, product quality, or develop new products according to point c, Clause 3, Article 10 of Decree No. 95/2014/NĐ-CP dated October 17, 2014 of the Government on investment and financial mechanisms for scientific and technological activities;

c) Purchasing machinery and equipment for technological innovation directly serving the enterprise's production and business activities within two years (2022 and 2023) as stated in point b, Clause 3, Article 3 of Resolution No. 43/2022/QH15 dated January 11, 2022 of the National Assembly on fiscal and monetary policies supporting the Economic Recovery and Development Program;

2. For fixed assets that have been invested from the Fund, if enterprises carry out repairs or upgrades, they continue to use the enterprise's Fund to cover these costs.

4. In the case where fixed assets formed from the Fund have not yet been fully depreciated and are simultaneously used for scientific research and technological activities and the enterprise's production and business activities, the enterprise continues to manage and monitor these assets according to the regulations of the Ministry of Finance on the management, use, and depreciation of fixed assets, and shall not include depreciation expenses of fixed assets in deductible costs when determining corporate income tax revenue.

5. In the case where fixed assets are formed from the results of implementing scientific and technological tasks of the enterprise and then transferred to serve the enterprise's production and business activities, the value of the fixed assets will be included in other income, and the value of those fixed assets will be subject to depreciation and included in deductible costs when determining corporate income tax revenue.

6. In the case where fixed assets purchased from the Fund are actually transferred, the enterprise must determine the remaining value to adjust the Fund's source when transferring the assets.

7. For fixed assets currently used for production and business activities that are switched to serve scientific research and technological activities, the enterprise must determine the remaining value of the fixed assets to purchase fixed assets from the Fund and follow the management provisions set forth in Clause 1 of this Article.

8. Liquidation of assets serving scientific and technological activities of the enterprise shall be carried out in accordance with current regulations.

9. For other assets, enterprises must organize management and monitoring in accordance with regulations to ensure proper use for intended purposes.

Article 6. Management of the Fund in cases of restructuring enterprises

1. In cases where an enterprise undergoes restructuring leading to the formation of a new enterprise according to Vietnamese law, the newly established enterprise shall succeed and be responsible for managing and using the Fund of the enterprise or enterprises before the restructuring.

2. In cases where an enterprise undergoes restructuring not falling under the circumstances specified in Clause 1 of this Article, the enterprise or enterprises after restructuring shall succeed and be responsible for managing and using the Fund of the enterprise before the restructuring. The division of the Science and Technology Development Fund shall be decided by the enterprise(s) and reported to the tax authority.

Article 7. Report on the establishment, transfer, and use of the Fund

1. Annually, the enterprise must prepare a report on the establishment, transfer, and use of the Fund according to Form No. 03-6/TNDN issued together with Circular No. 80/2021/TT-BTC dated September 29, 2021 of the Ministry of Finance guiding certain provisions of the Law on Tax Administration and Decree No. 126/2020/NĐ-CP dated October 19, 2020 of the Government detailing certain provisions of the Law on Tax Administration.

2. In cases where enterprises have transfers between Funds as stipulated at point c, Clause 2 of Article 4 of this Circular, the enterprise receiving the transfer must report on the receipt and use of the transferred Fund amount.

3. The report on the establishment, transfer, and use of the Fund must be submitted to the relevant authorities as prescribed in Clause 1 and Clause 4 of Article 11 of Decree No. 95/2014/NĐ-CP dated October 17, 2014 of the Government on investment and financial mechanisms for science and technology activities. The deadline for submitting the report is the same as the deadline for submitting the final income tax return of the enterprise.

Article 8. Effectiveness and Implementation

1. This Circular takes effect from December 23, 2022 and applies to the determination of tax obligations from the 2022 corporate income tax period.

2. Abolish Article 4, Article 12, Article 13, Article 14, Article 16, and Article 17 of the Joint Circular No. 12/2016/TTLT-BKHCN-BTC dated June 28, 2016 of the Ministry of Science and Technology and the Ministry of Finance guiding the content of expenditures and management of the Science and Technology Development Fund of enterprises.

3. The content of expenditures, guidance on the use of the Fund, and payment of the Science and Technology Development Fund of enterprises to the National Science and Technology Development Fund or the Science and Technology Development Fund of the respective ministries, provincial, and municipal departments shall be carried out in accordance with legal documents on science and technology and the regulations of the Ministry of Science and Technology.

4. In cases where legal documents cited by the relevant provisions in this Circular are amended, supplemented, or replaced by new legal documents, they shall be applied according to the new documents.

5. During implementation, if there are difficulties, organizations and individuals are requested to promptly reflect them to the Ministry of Finance for research and resolution.