On February 9, 2011, the Ministry of Finance issued Circular 15/2011/TT-BTC providing guidelines for establishing, organizing, operating, managing and using science and technology development funds of businesses in accordance with the enterprise income tax law.
The circular says that a science and technology development fund is established by a business to finance that business's scientific and technological operations in Vietnam, including research, technology application, development and renovation, product renovation and production streamlining activities that are all aimed at increasing the business's competitiveness.
That fund is to be made up with part of the business's taxable income of a certain tax payment period. The business decides how much it sets aside for the fund but takes no more than 10 percent of its taxable income of the concerned tax payment period for the fund. The business's taxable income is calculated according to the enterprise income tax law and documents providing guidelines for implementing this law after its losses are handled according to law.
A science and technology development fund of a business that is a subsidiary or member company of a bigger corporation or a parent company is also made up with part of funding of the science and technology development fund of the corporation or parent company, while a science and technology development fund of a corporation or parent company is made up with part of funding of science and technology development funds of its subsidiaries or member companies. This is only subject to parent companies that own 100 percent of their subsidiaries' capital and subsidiary companies whose capital is wholly owned by their parent companies.
Such a science and technology development fund is only used for businesses' Vietnamese-based scientific and technological operations. Businesses must not use the fund for non-scientific/technological purposes in Vietnam or for scientific and technological projects that have been financed by a different source of capital.
If the fund is not yet used or just less than 70 percent of the fund's capital is used for five years (commencing from the second year of the fund) or the fund is used for the wrong purposes, the related business must pay an enterprise income tax related to the unused funding and interest emerging from that enterprise income tax. Funding that is used for the wrong purposes is not taken into account regarding the business's investment in science and technology development.
Circular 15/2011/TT-BTC took effect on February 9, 2011./.