CIT OFFER FOR SOFTWARE PRODUCTION ACTIVITIES

From August 19, 2020, Circular 13/2020/TT-BTTTT issued on July 3, 2020 Regulations on determining the production of software products that meet the official process takes effect. Replacing Circular 16/2014/TT-BTTTT with the same previous content. The new circular adds and stipulates more details about the stages in the software production process as well as how to determine whether an enterprise satisfies the conditions to be considered as operating in software production. , to serve as a basis for competent authorities to consider the application of tax incentives. 

1. CIT incentives for enterprises engaged in the production of software products

According to Circular 78/2014/TT-BTC and Circular 96/2015/TT-BTC amending and supplementing this Circular, software manufacturing enterprises are entitled to the following incentives:
       • From year 1 to year 4: Exempt from CIT.
       • 5 years to 13 years (next 9 years): 50% reduction of CIT at 10% tax rate (5% payment)
       • From year 14 to year 15: 10% tax rate.
       • From year 16 onwards: Pay normal CIT.
 Note: Enterprises trading in software trading are not eligible for the above CIT incentives.

2. Conditions for enjoying PIT incentives from software product production activities

According to Article 4 of Circular 13/2020/TT-BTTTT, it is stipulated that an enterprise will be identified as having software product manufacturing activities if it performs at least one of two stages: Determination of requirements. , Analysis and design among 07 stages of software product manufacturing process including:
       • Identify customer requirements;
       • Analysis and design as required;
       • Programming, writing code;
       • Checking and testing software;
       • Completing and packaging software products;
       • Installation, transfer, user manual, maintenance, and warranty of software products;
       • Release and distribute software products.
Each stage will include many different contents (operations), enterprises need to perform at least one operation in the stage to be considered to have performed that stage.

It should be noted that software products manufactured by enterprises must be included in the List of software products promulgated under Circular 09/2013/TT-BTTTT to be eligible for software preferences tax

3. Composition of documents proving the satisfaction of conditions

The production of software products that meet the process is represented by one or more documents corresponding to each operation of the stages that the organization or enterprise has performed:
a. For the Requirement Determination stage:
       • Describe the idea of ​​how to develop the product;
       • Description of product characteristics (requirements) and product usage contexts;
       • Description of the proposal, survey results, results of clarification and completion of requirements for products;
       • Description of detailed business analysis;
       • Description of complete product requirements;
       • Description of process adjustment consulting content;
       • A record of requirements agreement, review of requirements, description of controllability and the basis for confirming product compliance;
• or similar documents.

b. For Analysis and Design stage:
       • Description of the request;
       • Describe the development problem;
      • Describe the appropriate techniques to be implemented to optimize the solution, analyze the correctness and testability of the software, analyze the influence of software requirements on the operating environment, list Lists of requests that are prioritized, approved, and updated as necessary;
       • Description of data model, functional model, information flow model;
       • Description of the software solution;
       • Solution design, software system design, data design, architectural design, unit design, component module design of the software;
       • Design security, information safety for software;
       • Design the customer experience interface;
       • or similar documents.

c. For the Programming stage, write the code
       • Some of the main source code segments show that the enterprise has written software code;
       • Description of the integrated software system;
       • or similar documents.

d. For the Software Testing and Testing stage
       • Test scripts, test software units and modules;
       • Description of software testing results, software system testing results, software functional testing results, software quality appraisal results;
      • Description of the likelihood assessment;
       • Description of security test results, information security for software;
       • Identify software that meets customer requirements;
       • Minutes of software acceptance;
       • or similar documents.

e. For installation, transfer, user manual, warranty, product maintenance
       • Minutes or transfer contract (product package or the right to use the product in the form of rental);
       • Instructions for software product installation (in case of package delivery);
       • Description of software product installation results (on the customer's system in the case of package delivery or on the service provider system in the case of software product leasing);
       • Training content, instructions (users or service users);
       • Describe the activities of testing software products after handover or software products on the service provider system;
       • Description of debugging activities for software products after handover or for software products on the service system;
       • Description of post-handover support activities during service leasing;
       • Description of product warranty activities after handover or during service leasing;
       • Description of software product maintenance (on the customer's system or the service provider's system)
       • or similar documents.

Organizations and enterprises engaged in software product production are solely responsible for the accuracy of the information in the tax incentive proposal dossiers for software production activities and self-determination of production activities. The software meets process; Send and update information about software products and stages in software product manufacturing activities that satisfy the process and deductible tax rates to the Ministry of Information and Communications (Information Technology Department) for synthesis. ; Ensure that its software product and software product production activities do not violate the law on intellectual property and other relevant laws.

4. Procedures to enjoy CIT incentives

According to the provisions of Circular 78/2014/TT-BTC, enterprises will not need to carry out any procedures to enjoy tax incentives, but only need to determine the tax incentives, tax rates by themselves. Incentives, tax exemption, tax reduction, losses are deducted from taxable income for self-declaration and tax finalization with tax authorities. The tax authority will be obliged to inspect and inspect the satisfaction of the above conditions of the enterprise, and in case the examination shows that the enterprise does not meet the conditions for enjoying tax incentives, the tax authority shall The tax authority will handle tax arrears and impose penalties for tax-related administrative violations by relevant Laws.

Thus, from August 19, 2020, to enjoy corporate income tax incentives for software product production, the products of organizations and enterprises must meet the requirements specified in this Circular. Decree 13/2020/TT-BTTTT stipulates the determination of software product manufacturing activities that meet the process.