Chi phí chuyển giao công nghệ từ nước ngoài có được trừ không? – Technology transfer cost

Sometimes, businesses record technology transfer expenses from abroad without assessing the serious risks associated with this expense. The article summarizes some important notes.

1/ Technology transfer is a specialized field

In Vietnam, on June 19, 2017, the National Assembly issued Law No. 07/2017/QH14 on Technology Transfer, which took effect on July 1, 2018. It can be seen that when activities in this field arise, businesses need to promptly grasp related regulations such as:

• Subjects of technology transfer are allowed
• Specific regulations on technology transfer contracts
• In some cases, technology transfer must be registered with the Department of Science and Technology (Technology transfer from abroad to Vietnam; Technology transfer from Vietnam to foreign countries…)
• The price of technology transfer agreed upon by the parties but must be audited and implemented in accordance with the regulations on tax and price in some cases (Between parties in related relationships according to tax regulations…)

2/ Significant tax risks with technology transfer costs

2.1. Corporate income tax

Originating from the fact that technology transfer activities fall under the adjustment of specialized laws, costs related to technology transfer are often carefully considered and at risk of being excluded from expenses when calculating corporate income tax (For example, quoted from the post-tax inspection minutes)Specific documentation is guided in some letters, for example, letter 10835 Technology transfer contracts according to the provisions of the Technology Transfer Law that the Company signed with the Parent Company.

• Documents related to the implementation of technology transfer, including documents, certificates of foreign experts coming to Vietnam to carry out technology transfer, … that the Company and foreign experts must comply with legal regulations.
• The Company’s money documents and invoices of the Parent Company.
• And the Company must commit to implementing technology transfer arising in Vietnam and be responsible to the law.

In the case where the Company signed a contract (from 2013) with the parent company in Japan on the use of the parent company’s production technology to produce products and must pay a 1% royalty fee calculated on the gross revenue per month, According to the Technology Transfer Law (effective from 01.07.2018), the Company must re-sign the contract and must register the technology transfer contract with the Department of Science and Technology, then the copyright fee is only counted as expenses for the purpose of calculating corporate income tax.

In the case where Vietnam Tokai Co., Ltd. cannot provide documents, materials, papers proving that Tokai Kogyo Corporation (Japan) has industrial ownership and intellectual property rights for detailed instruction files (technical information, product production method…) to produce products in Vietnam due to the competent authority in Japan, Vietnam Tokai Co., Ltd. cannot count the payment fee for Tokai Kogyo Corporation (Japan) into expenses that are subtracted when determining corporate income tax.

Foreign contractor tax

Basically, if technology transfer activities meet the provisions of the Technology Transfer Law that are subject to foreign contractor tax, as follows:

• Not subject to VAT (In other cases, customers should note that the service may be subject to an additional 5% VAT from normal services)
• 10% corporate income tax in the form of income from royalties