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How to open an IT company in Vietnam and which preferential taxes are available?

Vietnam is a promise land to start-up tech companies. The Vietnam Government has been trying to create many favorable conditions for R&D, IT companies, etc., by many investment incentives, such as preferential taxes. Furthermore, the Vietnamese IT human resources are highly appreciated, because they are young, smart, well foreign language skills (such as English and Japanese) and cheaper (compared with salaries for IT dev in other development countries). For more information, you can visit 2 biggest IT recruitment platforms in Vietnam:

https://itviec.com

https://www.vietnamworks.com/it-software-jobs-i35-en

 

Legal procedures involved in starting an IT company

IT services are non-conditional business in Vietnam. Therefore, it is quite easy to set up such companies

How much money do you need to open an IT company?

There is no requirement for minimum capital under current regulations. In fact, Vietnamese authority agencies will consider capital level depends on each investment project. In order to have a feasible IT project,  in general, the minimum required capital is 20.000 USD.

Licenses

(i) Investment Registration Certificate (“IRC”)

– Time: from 15 working days

– Check list of documents: Certificate of establishment or equivalence of the corporate investors (legalized by the Consulate of Vietnam and translated into Vietnamese); or passports of individual investors (notarized in Vietnam). Documents relating to financial status of the investors: financial statement of corporate investors or bank statements of individual investors. Lease agreement or equivalence (MOU) to prove the right of the Investor to use the Project’s premise (see more details in this Article). Dossiers (draft by law firm and signed & stamped by investors): Application for issuance of the IRC, Investment proposal, explanatory for invest project and Power of Attorney authorizing.

(ii) Enterprise Registration Certificate (“ERC”)

– Time: from 4 working days 

– Check list of documents: Certificate of establishment or equivalence of the corporate investors (legalized by the Consulate of Vietnam and translated into Vietnamese); or passports of individual investors (notarized in Vietnam). Dossiers (draft by law firm and signed & stamped by investors):  Application for issuance of the ERC, Charter, List of members/shareholders,  Power of Attorney authorizing, etc.

It’s almost done. After all these steps, you will have a legal IT company in Vietnam.

 

Conditions for IT companies to enjoy tax incentives

You may heard the information that IT companies may enjoy many preferential taxes in Vietnam. It’s true, but the incentives are not applied for all IT companies, but only for software production companies so far! Going into details, the company shall satisfy these conditions in order to enjoy preferential taxes:

The business line shall be software production;

The software production process shall be the combination of following stages: 

Step 1. Determination of requirements including the following tasks: determinations of customers’ requirements, analysis; collection and development of requirements; consultancy on process adjustment; aggregation and approval of requirements.

Step 2. Analysis and design, including the following tasks: description of requirements; establishment of development algorithms; data modeling; functional modeling; information flow modeling; determination of software solutions; design of software system; design software units and modules.

Step 3. Programming, coding, including the following tasks: software coding; programming of software units and modules; software adjustment and modification; integration of software units; integration of software system.

Step 4. Software testing, including the following tasks: development of testing scenarios for software units and modules; software testing; software system testing; software function testing; software quality inspection; assessment of possibility of errors; determination of customers’ satisfaction; software transfer.

Step 5. Software completion and packaging, including the following tasks: software description documents; instructions on installation and use of software; software packaging, registration of designs; registration of intellectual property rights.

Step 6. Installation, transfer, instructions, maintenance, warranty, including the following tasks: instructions on software installation; software installation; giving instructions to users; software testing after transfer; software repair after transfer; support & warranty after transfer; software maintenance.

Step 7. Publishing, distribution of software product, including the following tasks: marketing, advertising, selling, distribution of software product; publishing of software product.

 

Which preferential taxes are available for IT companies?

If an IT company arises incomes from software production which satisfy the above conditions, it may enjoy these preferential taxes:

1 – Value added tax (“VAT”): ELIMINATE  (In general, a 10% VAT rate will be applied for all arise from income)

2 – Corporate income tax (“CIT”):

First 4 years after establishment: tax-free;

From 5th – 13th year: 5% CIT rate;

From 14th – 15th year: 10% CIT rate;

From 20th year: 20% CIT rate.

3 – Personal income tax (“PIT”)

Under Governmental Resolution No. 41/NQ-CP on tax incentives for development application information technology in Vietnam in May 2016, the PIT on salary-based and wage-based incomes of individuals working in hi-tech sections of the information technology industry is reduced by 50%. Since there is no guiding regulations of Finance Ministry and other related Ministries so far, this rule is still not applied. Feline Legal will keeping update when the new regulations are enforced.

SHOULD YOU ENGAGE IN A LAWYER AND AN ACCOUNTANT

Company registration may seem like a major step in a new business venture for many people. Like anything, it can be daunting if you haven’t done it before and you definitely to make sure that it’s done correctly. Otherwise, you may waste a lot of time and pay fines if you do mistake, even a little one.

The process is generally quite smooth if you involve a professional to help you out. Every one wants to spend less time administering their business and more time running it. In Feline Legal, with many years experience in corporate services, lawyers and accountants will assist you and provide advance with forming your company. We also complete the paperwork, register your company and follow steps after that. You can save a lot of time and enjoy good services with reasonable price

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