Foreign Investment Restrictions and Business Conditions for IT-Related Businesses
2. Incentive Schemes for IT-Related Businesses
A Vietnamese-qualified lawyer provides a systematic explanation of the foreign investment restrictions, ownership limits, and licensing requirements applicable to IT-related businesses in Vietnam (software development, SaaS, e-commerce, game distribution, etc.). The article also carefully addresses the practical handling of industry classifications that are often misunderstood during preliminary review, as well as points of caution for foreign entrants. NEXORA LAWFIRM has extensive experience supporting Japanese IT companies with local entity establishment, technology-related investment projects, license acquisition, and partnership arrangements, providing comprehensive support to minimize regulatory risk and ensure a smooth market entry.
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1. Overview of Regulations
Business: IT-Related Business (Computer Services and Computer-Related Services)
1. Official Business Name under Vietnamese Law
CPC Code
VSIC Code
2. Computer programming services
842
6201
3. Computer consultancy and computer facilities management services
6202
4. Software development
5820
5. Information technology services and other computer-related services
841
6209
6. Data processing, hosting, and related services
843
6311
Investment and Business Conditions
Conditions under WTO Commitments
Conditions under Vietnamese Domestic Law
IT businesses are fully open to foreign investors and foreign-invested enterprises. There is no issue with 100% foreign ownership.
Cross-border service provision is also permitted. In this case, a Japanese company may enter into an outsourcing agreement or a cloud service agreement with a Vietnamese counterparty, provide services, and receive payment from the Vietnamese counterparty. (*Foreign contractor tax must be paid in Vietnam in this case.)
"Points to Note"
Where a company engages in data processing business, it must comply with personal data protection regulations and cybersecurity law requirements regarding server security. (This is not a foreign-investment-specific restriction; the same treatment applies to domestic operators.)
We recommend carefully examining intellectual property issues, particularly those relating to employee inventions.
2. Incentive Schemes for IT-Related Businesses
An IT business operating in Vietnam may qualify for incentive schemes if it falls under any of the following categories.
① Software manufacturing under the Law on Information Technology
② Manufacturing of network information security products and provision of network information security services under the Law on Network Information Security
③ Manufacturing of products derived from scientific and technological achievements under the Law on Science and Technology
By completing certain application procedures, IT businesses falling under the above categories can receive the following incentives.
Corporate income tax: A reduced rate applies compared with the standard corporate income tax rate (20%). In particular, projects in high technology and science and technology fields are exempt from corporate income tax for the first four years, followed by a 50% reduction for the subsequent nine years. A preferential rate of 10% may also apply for the first 15 years.
Point to Note
Because the IRC's operating period is linked to the incentive period, care must be taken at the time the IRC is obtained.
Import duties: Import duties may be exempted where certain conditions are met. This is particularly common for IT-related equipment, components, and materials required for software development.
High-Tech Park incentives: Vietnam has established several high-tech parks (such as Saigon Hi-Tech Park and Danang Hi-Tech Park), and enterprises operating within these parks receive a range of incentives, including corporate income tax reductions, preferential land lease rates, and import duty exemptions. High-tech parks are equipped with the infrastructure needed for IT companies to conduct business smoothly, with environments particularly well suited to cloud computing and data center operations.
Incentives for R&D investment: The Vietnamese government provides tax incentives to support research and development (R&D) activities by IT companies. In particular, a certain percentage of R&D expenses can be deducted for tax purposes, as part of broader measures to encourage technological innovation.