DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.- Scope of regulation

This Decree stipulates a number of financial policies and mechanisms encouraging enterprises to invest in scientific and technological activities.

Scientific and technological activities to be encouraged under this Decree include:

1. Research and development activities (including basic research, applied research, experimental development) carried out by enterprises on their own or under contracts with domestic and foreign organizations and/or individuals;

2. Application of scientific and technological achievements, renewal of technologies, manufacture of new products;

3. Scientific and technological services:

a/ Services requiring high technical skills such as: instructions on installation and operation of technological lines, restoration, repair and adjustment of machinery, equipment, experimental instruments, measuring and control devices, scientific and technical equipment with an automatically-controlled component.

b/ Data processing, computing and analysis in direct service of research and development, control and test;

c/ Drawing up pre-feasibility and feasibility study reports;

d/ Activities relating to the protection of industrial property and technology transfer rights, and to the application of new technologies to production.

e/ Services of information, scientific and technological consultancy, training of technicians, fostering and raising of business administration knowledge.

Article 2.- Subjects of application

This Decree shall apply to enterprises of all economic sectors operating under Vietnamese laws.

Chapter II

INCENTIVE POLICIES AND MECHANISMS

Article 3.- Enterprise income tax rates

1. Enterprises operating under the Law on Domestic Investment Promotion (amended) and conducting high-tech application activities and/or providing scientific and technological services shall enjoy the following enterprise income tax rates with regard to the income earned from these activities:

a/ A tax rate of 25%;

b/ A tax rate of 20% for enterprises investing in geographical areas struck with difficult socio-economic conditions;

c/ A tax rate of 15% for enterprises investing in geographical areas struck with extremely difficult socio-economic conditions.

2. Foreign-invested enterprises and foreign parties to business cooperation contracts operating under the Law on Foreign Investment in Vietnam and having investment projects in the fields of high-tech application and development as well as scientific and technological services shall enjoy an enterprise income tax rate of 20% for 10 years from the time they commence their business and production activities.

Article 4.- Enterprise income tax exemption and reduction

1. Enterprise income tax shall be exempt in the following cases:

a/ Income earned from the performance of research and development contracts;

b/ Income earned from the performance of contracts for technical services in direct support of agricultural production;

c/ Income earned from capital contributed with the intellectual property rights, technical know-hows and/or technological processes.

2. Enterprises eligible for preferential treatment stipulated in this Decree shall not have to pay additional income tax on scientific and technological activities as prescribed in Clause 1, Article 10 of the Law on Enterprise Income Tax;

3. Enterprises operating under the Law on Domestic Investment Promotion (amended) and having projects for investment in scientific and technological service activities; projects for investment in the construction of new production lines, the expansion of production scope and/or the renewal of technologies shall enjoy the following preferences:

a/ Being exempt from enterprise income tax on the increased income of the first year and enjoying a 50% reduction of the payable tax amount for four subsequent years on the income earned as the result of new investment;

b/ Production and/or business establishments located in geographical areas struck with difficult socio-economic conditions shall be exempt from enterprise income tax on the increased income of the first three years and enjoy a 50% reduction of the payable tax amount for five subsequent years on the income earned as the result of new investment;

c/ Production and/or business establishments located in geographical areas struck with extremely difficult socio-economic conditions shall be exempt from enterprise income tax on the increased income of the first four years and enjoy a 50% reduction of the payable tax amount for seven subsequent years on the income earned as the result of new investment.

4. Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam having projects for investment in scientific and technological activities shall be exempt from enterprise income tax for the first year from the time the taxable income is generated and a 50% reduction of the payable income tax amount for two subsequent years.

Foreign investors who use their shared income for reinvestment shall be refunded with the paid enterprise income tax amounts as prescribed in Article 34 of Decree No. 30/1998/ND-CP of May 13, 1998 detailing the implementation of the Law on Enterprise Income Tax.

Article 5.- Privileges concerning the land use levy, land rent and land use tax.

1. If enterprises operating under the Law on Domestic Investment Promotion (amended) and investing in scientific and technological activities use their assigned or leased land for the construction of scientific and technological research establishments; laboratory and experimental offices, stations, farms and/or workshops, they shall be entitled to the following privileges concerning the land use levy, land rent and land use tax for such land area:

a/ For cases they are assigned land and have to pay land use levy:

- Enjoying a 50% reduction of the land use levy;

- Being exempt from the land use levy if they use the assigned land in geographical areas struck with difficult socio-economic conditions or with extremely difficult socio-economic conditions.

b/ For cases they lease land and have to pay land rent:

- Being exempt from the land rent for six years from the time they sign their land lease contracts;

- If they lease land in geographical areas with difficult socio-economic conditions they shall be exempt from the land rent for 15 years from the time they sign the land lease contracts;

- If they lease land in geographical areas with extremely difficult socio-economic conditions they shall be exempted from the land rent throughout the project implementation duration.

c/ For cases they are assigned land and have to pay land use tax:

- Being exempt from the land use tax for six years from the time they are assigned land;

- If they use the assigned land in geographical areas with difficult socio-economic conditions they shall be exempt from the land rent for 15 years from the time they are assigned land;

- If they use the assigned land in geographical areas with extremely difficult socio-economic conditions they shall be exempted from the land rent throughout the project implementation duration.

2. For investors under the Law on Foreign Investment in Vietnam investing in the scientific and technological field, if they lease land for the construction of laboratories, trial production workshops or for experiments and research they shall be entitled to privileges prescribed by current law provisions on land rent for such land area.

Article 6.- Import tax privileges

Imported goods which are machinery, equipment, raw materials and materials, scientific and technical equipment with an automatically-controlled component, test samples, measuring and experimental instruments in direct service of research and development projects and contracts which have not yet been domestically manufactured or have been domestically manufactured but fail to meet the requirements, shall be exempt from import tax.

Article 7.- Credit privileges

Enterprises operating under the Law on Domestic Investment Promotion (amended) and engaged in activities mentioned in Article 1 of this Decree shall be entitled to borrow medium-term and long-term capital loans with a preferential interest rate, up to 70% of their investment capital may be borrowed from the Development Support Fund, the Export Support Fund and the Scientific and Technological Development Support Fund.

In cases where an enterprise is guaranteed by the Development Support Fund to borrow medium-term and long-term capital from the Investment and Development Bank, it shall be granted by the Development Support Fund a funding to make up for the difference between the preferential and normal borrowing rates.

Article 8.- Other incentive policies

Article 9.- Procedures for consideration of privileges

The procedures for considering tax and credit privileges for projects regulated by this Decree shall comply with the regulations in documents guiding the implementation of the Law on Domestic Investment Promotion (amended).

In cases where a project is entitled to various preferential levels stipulated in different legal documents it shall only be entitled to the highest preferential level.

Chapter III

IMPLEMENTATION PROVISIONS

Article 10.- Handling of violations

Organizations and individuals that violate the stipulations of this Decree shall, depending on the nature and seriousness of the violations and their consequences, be disciplined or administratively sanctioned in accordance with the provisions of law; individuals who commit serious violations shall be examined for penal liability and if any damage is caused they shall have to pay compensation therefor according to the provisions of law.

Article 11.- Guidance for implementation:

The Minister of Science, Technology and Environment and the Minister of Finance shall have to guide the implementation of this Decree.

Article 12.- Implementation effect

This Decree takes effect 15 days after its signing. The previous provisions contrary to the provisions of this Decree are now annulled.

Article 13.- Responsibility for implementation:

The ministers, heads of the ministerial-level agencies, heads of the agencies attached to the Government, presidents of the People�s Committees of the provinces and centrally-run cities, chairmen of the managing boards, general directors and directors of enterprises shall have to implement this Decree.

On behalf of the Government
Prime Minister
PHAN VAN KHAI