THE CLASSIFICATION OF HIGH-TECH ENTERPRISES
The technology industry in Vietnam is witnessing rapid changes. Enterprises also now face stricter requirements to be classified as “high-tech enterprises” with the right to earn high-tech incentives from the Government.
On March 16, 2021, the Prime Minister of Vietnam issued Decision No. 10/2021/QD-TTg on the criteria for the classification of high-tech enterprises (“Decision 10”); replacing the criteria in Decision No. 19/2015/QD-TTg dated 15 June 2015 (“Decision 19”).
To qualify as a high-tech enterprise, one must satisfy two sets of criteria: (1) the general criteria as prescribed in the Law on High Technology and the Law on Investment ; and (2) the specific criteria as prescribed in Decision 10.
(1) General criteria remains unchanged, which requires:
– the manufacture of high-tech products (as listed by law); and
– the application of environmental-friendly and energy-saving technologies that meet local and international standards.
(2) Specific criteria requires (i) revenue from high-tech products; (ii) research and development (R&D) expenditure; and (iii) a high-quality workforce:
Revenue from high-tech products must be at least 70% of the enterprise’s total annual net revenue;
The ratio of annual R&D expenditure to gross revenue minus input value must be:
– for enterprises with a minimum capital of VND6,000 billion and a minimum workforce of 3,000 employees: at least 0.5%;
– for enterprises not meeting the above, but with a minimum capital of VND100 billion and a minimum workforce of 200 employees: at least 1%; và
– for the other enterprises: at least 2%.
Decision 10 also provides detailed explanations for:
– annual R&D expenditure: depreciation of investment for infrastructures, fixed assets, annual expenditure on R&D; expenditure on training/training assistance for R&D at the enterprise, science and technology organizations, training facilities in Vietnam; royalties, fees for purchasing industrial property rights for R&D; fees for registration/protection of inventions, utility solutions in Vietnam;
– input value: value of domestic and imported materials, components for manufacturing.
The ratio of the number of employees with a college degree or higher working in R&D to the total number of employees must be:
- for enterprises with a minimum capital of VND6,000 billion and a minimum workforce of 3,000 employees: at least 1%;
- for enterprises not meeting the above, but with a minimum capital of VND100 billion and a minimum workforce of 200 employees: at least 2.5%; and
- for all other enterprises: at least 5%.
For a brief comparison of the specific criteria between the new Decision 10 and the expired Decision 19, please refer below