Vietnam has been dubbed the rising star for the Asian high-tech industry due to high foreign investment from multinationals such as Samsung, Microsoft, Intel, Jinko Solar Technology, AT&S, LG, and a host of others. Even the United States of America has become one of the largest markets of Vietnam’s booming software outsourcing industry.
The new wave of foreign investment in the high-tech industry has seen the Vietnamese government work out a series of important new criteria for Hi-tech enterprises setting up in the country. In March 2021, then Prime Minister Nguyen Xuan Phuc officially issued the new criteria titled Decision No. 10/2021/QD-TTg, which details the requirements for identifying hi-tech businesses in Vietnam.
New Criteria for the Hi-tech industry
On March 16, 2021, the prime minister issued Decision No.10/2021/QD-TTg detailing the criteria for determining high-tech enterprises, effective from April 30. This regulation applies to businesses manufacturing hi-tech products and providing hi-tech services in Vietnam.
Enterprises wanting to be recognised as hi-tech companies must be involved in manufacturing the listed hi-tech products focused on development under the provision of the law. Specifically, the listed hi-tech products are mandated to satisfy the following conditions:
- The product must have a high added-value ratio, that is, the economic enhancement the company gives the product must be high;
- The product must be highly competitive and delivers incredible socio-economic benefits, that is the product must deliver high value raising the demand in the market;
- The product must be exportable or ready to substitute imports; and
- The product must contribute to the improvement of national scientific research and technological advancement.
Secondly, not only is it mandatory for businesses to employ eco-friendly standards, but they must also make sure their products conform to the government’s energy-saving and environmental protection standards. This must be carried out in conformity with the technical regulations and standards of the Vietnamese government or those of a specialised international organization.
In addition, it has been made mandatory for the turnover earned from high-tech products of these enterprises to be at least 70 percent of the enterprise’s total annual net revenue.
These companies will have to arrive at a specific ratio of total expenditure on research and development (R&D) of the venture (this include devaluation of investment in infrastructure, fixed capital, yearly recurrent expenditures on R&D; utility solutions in Vietnam, etc.) per the estimation of total net income minus input value every year.
For companies with a total capital of VND6 trillion($260.87 million) and have 3000 or more employees, this percentage must be at least 0.5 percent. Companies with a total capital of VND100 billion ($4.35 million) and 200 or more employees must reach at least 1 percent. However, all other companies not falling into these two categories mentioned above must reach at least 2 percent.
|Total capital||No. of employees||%|
|VND 6 trillion ($260.87 million)||3000 or more||0.5%|
|VND 100 billion ($4.35 million)||200 or more||1%|
As regards the criteria on the number of employees with technical qualifications, for an enterprise to be considered a high-tech enterprise, they also have to meet a ratio of employees who graduated from college or another higher education institution. These employees have to be directly involved in research and development activities and must have signed labour contracts for one year or more. More so, college degree employees must not exceed 30 percent of the total workforce at high-tech enterprises.
Decision No.10/2021/QD-TTg still applies this rule to small and medium enterprises; however, for businesses with a total capital of VND6 trillion and 3,000 employees or more, this ratio must be at least 1 percent. Furthermore, companies having a total capital of VND100 billion with 200 or more employees must reach at least 2.5 percent. However, businesses not in these two categories must reach at least 5 percent.
This regulation aims to bolster hi-tech investments in the country, as more enterprises are relocating and setting up their businesses in Vietnam. Furthermore, it will also be easier for domestic and foreign businesses to enjoy preferential stimulus granted to hi-tech firms.
How Cekindo Can Help
Are you confused about this new regulation and how it impacts your business? Cekindo is here to help. Our dedicated and highly skilled consultants will help you understand the hi-tech industry regulation and how it affects your businesses. Contact our consultants to learn more.