CIRCULAR

GUIDING THE ESTABLISHMENT, ORGANIZATION, OPERATION, MANAGEMENT AND USE OF SCIENCE AND TECHNOLOGY DEVELOPMENT FUND OF ENTERPRISES

Pursuant to the Law on Enterprise Income Tax No. 14/2008/QH12 dated June 03, 2008 and documents guiding for implementation;
Pursuant to Article 45 of the Law on Technology Transfer No.80/2006/QH11 dated November 29, 2006 documents guiding for implementation;
Pursuant to the Law on Science and Technology No. 21/2000/QH10 dated June 28, 2000;
Pursuant to the Law on Enterprise No.60/2005/QH11 dated November 29, 2005;
Pursuant to the Decree No.118/2008/ND-CP dated November 27, 2008 of the Government providing functions, duties, powers and organizational structure of the Ministry of Finance;
After having opinion of the Ministry of Science and Technology, the Ministry of Finance guides on the establishment, organization, operation, management and use of science and technology development fund of enterprise as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of adjustment and subjects of application

This Circular guides on the establishment, organization, operation, management and use of science and technology development fund (hereinafter collectively called as the Fund) according to provisions of the Law on Enterprise Income Tax.

Subjects that are established the Fund according to provisions in this Circular are the enterprises established according to provision of the Law on Enterprise (hereinafter collectively called as Enterprises)

Article 2. Objects of establishment, competence and form of Fund organization

1. Objects of establishment

The Fund established by Enterprises to form finance source to invest in activities of science and technology of enterprises in Vietnam through activities of research, application and development, technology innovation, product innovation, production rationalization in order to improve the competitiveness of enterprises.

2. Competence of establishment

Based on the needs and financial capabilities to invest in the activities of science and technology of enterprises, persons who are the highest authority of the enterprises shall decide the establishment; define the tasks, powers and organizational apparatus of the Fund. Person who are the highest authority of the enterprises including:

a) Chairman of management board (for shareholding companies);

b) Chairman of the members' Council or company’s owner (for limited liability companies, partnerships);

c) Owner of private enterprise (for the private enterprises) or General Director, Director (for enterprise without management board) of enterprises.

3. Form of Fund organization

The Fund is a part, has no legal entity status and attached to the enterprises, due to the highest competent person of enterprise takes responsibility for the implementation.

Article 3. Source of forming the Fund

The State encourages enterprises to establish the Fund in order to perform purposes specified in Clause 1 of Article 2 of this Circular. The Fund was formed from the following sources:

1. A portion from income for calculating enterprise income tax in the tax period (enterprises decide themselves to deduct a specific amount but not exceeding 10% of taxable income in the period).

Income for calculating enterprise income tax is defined according to provisions of Law on Enterprise Income Tax and documents guiding for the implementation after all the losses transferred in accordance with regulations.

2. A part of transfer from the Fund of the development of science and technology of general company, parent company (for the subsidiaries or member enterprises) or transfer from Fund of development of science and technology of subsidiary companies, member enterprises into Fund of development of science and technology of general company, the parent company (for general company, the parent company). The transfer and the ratio of source transfer between the Fund of development of science and technology of general company, the parent company with Fund of development of science and technology of subsidiary companies, member enterprises and vice versa decided by management board’s chairman, chairman of the members' Council or General Director, Director on the basis of ratio of deducting Fund under the provisions in Charter of organization and operation of the Fund, investment demand for performance of science and technology activities in the member enterprises and needs, plans for the development of science and technology of the whole system.

The transfer of the Fund provided in clause 2 of this Article applies only for subsidiary companies, member enterprises which parent company holds 100% of capital.

3. Other sources under regulations of law.

Chapter II

SPECIFIC PROVISIONS

Article 4. Procedures for establishing Fund

Depending on the size of the Fund and investment needs of science and technology in the enterprises, Person with highest authority of enterprises shall decide organizational form, operation, management and takes responsibility for the operation of the Fund.

The decision to establish Fund, Charter of organization and operation of the Fund shall be sent by enterprises to tax agency where the enterprises registered to pay enterprise income tax before or at the same time of filing the statement of Fund appropriation, use in the first appropriation period.

The decision to establish the Fund, Charter of organization and operation of the Fund shall be sent by enterprises to the Department of Science and Technology, Department of Finance of centrally-affiliated cities and provinces where the enterprises locate it’s headquarter within 30 days since the date of having decision of Fund establishment.

Article 5. Using Fund from taxable income appropriation source

The use of capital source of Fund as provisions in Clause 1, Clause 2 of Article 3 of this Circular for the development objectives of science and technology of enterprises must comply with the provisions of law.

1. Capital source of Fund used for the implementation of activities of Science and Technology of enterprises as follows:

1.1 Funding to implement the themes and projects of science and technology of enterprises in Vietnam.

Themes and projects of science and technology of enterprises must be set up and taken responsibility, organized the implementation according to provisions of the State on consideration and approval procedures, trial (with an input valuation Council, output trial valuation Council) and results of theme is valuated by council of science and technology, trial meets the requirements as prescribed for science and technology, applied into business, production activities of enterprises.

1.2 Supporting the development of science and technology of enterprises in Vietnam:

a) To equip technical-material facilities to activities of science and technology of enterprises (building laboratories, testing facilities, machinery and equipment for research and development).

b) To purchase technology copyrights, use rights, ownerships of inventions, utility solutions, industrial design, information of science and technology, relative materials, products for activities of science and technology of enterprises in accordance with the Law on Technology Transfer.

For fixed assets mentioned in sections a and b point 1.2 clause 1 of this Article, the enterprises record to reduce the correlative Fund and must not deduct for depreciation but tracking for worn out fixed assets.

c) To pay salaries, hire specialists or sign contracts with institutions of science and technology to perform the activities of science and technology of enterprises.

d) Expenses for training human resource of science and technology of enterprises according to provisions of law on science and technology.

đ) Expenses for the activities of technical innovations, rationalizing production.

Technical innovations, rationalizing production must be confirmed by the state management agency on science and technology under regulations of law on science and technology in Vietnam.

e) Expenses for the activities of research cooperation and deployment on science and technology with domestic firms.

The activities of research cooperation and deployment of science and technology referred in this point must be approved by the state management agency on science and technology in Vietnam.

1.3. For the companies attached to general company or be subsidiary company are used the capital source of Fund for paying to the fund of development of science and technology of general company or parent company and vice versa according to the ratio prescribed in Clause 2, Article 3 of this Circular.

2. The Fund is only used for investment in activities of science and technology of enterprises in Vietnam. Enterprises are unused capital source of Fund to invest in other activities not associated with the development of science and technology of enterprises in Vietnam or the investment in the projects of science and technology have been financed by other funding sources.

Every year, enterprises must compile the statement of Fund appropriation, use and declare data on the rate of appropriation, the amount of appropriation in the declarations of enterprise income tax cost-accounting. The statement of Fund appropriation, use is sent to the tax agency where the enterprises registered for paying enterprise income tax, the Department of Science and Technology and Department of Finance. The deadline for submission of such statements is at the same time of submitting enterprise income tax cost-accounting.

In case general company or the parent company has the Fund of science and technology development which is formed from transfer source of Fund of the development of science and technology of subsidiary company, member enterprise or vice versa, the unit receiving the transfer and using Fund must report the situation of transfer receipt and use of the transferred amount of Fund to the tax agency that directly managed unit receiving the transfer and directly uses Fund

3. The spending from the Fund must have all lawful invoices, documents under regulations of law. In any year, the enterprise has needs to use for scientific and technological activities in excess of available balances in the Fund shall be selected or taken from the appropriation for the Fund in the subsequent years to cover the remaining lacking or is calculated as expenses when determining taxable income of enterprise income tax in the tax period, if necessary, it can be allocated for subsequent years so as not to affect the business results of enterprises.

4. Enterprises are not accounted as expenses to be deducted as determining taxable income in the tax period, expenses that have secured from the Fund of development of science and technology of enterprises.

5. Within five years from the next year of the setting up year, if the Fund is unused or used not up to 70% of or used for improper purposes, the enterprises must submit to the state budget the enterprise income tax was calculated per the income that deducted for the Fund appropriation but unused or used not up to 70% of or used for improper purposes and the interest arising from such enterprise income tax.

The amount .

The determination to :

5.1. Enterprise income used to calculate the tax . In , then the .

For according to model of general company, parent company receiving receiving .

5.2. Interest rate to and time

Example ​​an annual , the :

Rate of appropriate for Fund , % of the Fund, so the enterprise income tax applying to company in the Fund appropriation period is 25%. In this case, the amount which is

+ The amount 70% of the Fund (assuming