Quick answer: Research and development (R&D) expense serving production or business is CIT-deductible like ordinary expense, and may additionally reach a bonus incentive layer if the R&D project meets high-tech or investment-incentive criteria. The hardest part is proving an expense “is R&D” rather than ordinary production cost.
Applicable legal bases
The instruments below are in force as of the writing date (20/10/2026) and directly govern this article:
- Corporate Income Tax Law 67/2025/QH15 (effective 01/10/2025) — deductible expenses and the incentive framework.
- Law 115/2025/QH15 amending the Technology Transfer Law (effective 01/4/2026) — technology criteria and lawful technology ownership.
- Investment Law 143/2025/QH15 (effective 01/3/2026) — R&D-linked encouraged industries.
- Decree 236/2025/ND-CP (effective 15/10/2025) — guiding the CIT Law.
In-depth analysis
R&D in FDI enterprises typically takes three forms: a standalone R&D center serving the group, an R&D unit attached to a factory for process improvement, and new-product piloting before mass production. For tax, all three can be deductible if they serve the business and are documented — but only activities meeting scientific-research and new-technology-development criteria touch the bonus incentive layer.
The boundary between R&D and ordinary production cost is the main battleground on audit. Buying machinery for mass production is not R&D; buying the same machinery to pilot a new technology may be R&D — the difference lies in purpose and evidence, not in the invoice. Enterprises need research proposals, experiment logs and result reports: a dossier proving the “novelty” of the activity. Without it, every expense gets pushed back to ordinary cost.
For FDI, R&D also ties into intra-group technology transfer. A parent licensing technology to its Vietnamese subsidiary for royalties: the royalty is deductible to the subsidiary if business-serving and arm’s length, while bearing foreign contractor tax when paid abroad. Note Law 115/2025/QH15 on lawful technology ownership for capital contributions in technology — a parallel legal layer alongside the tax layer.
Four pillars of the R&D dossier
- Research proposal and objectives: describing novelty, technical goals and roadmap — approved before spending.
- Separate accounting: a dedicated R&D project code in the accounting system; R&D costs segregated from routine production costs.
- Logs and reports: records of experiments and outcomes, achieved or not — even failure evidences genuine research.
- People and assets: research staff assigned in writing; R&D-dedicated assets tracked separately.
Common risks and prevention
- Labeling production costs as R&D: sweeping minor improvements into R&D. Only scientifically or technologically novel activities qualify — maintain written assessment criteria.
- No separate accounting: R&D costs blended into general production. Open a dedicated project code when research starts.
- Off-market royalties to the parent: reassessed with the excess disallowed. Prepare transfer-pricing documentation for intra-group technology fees.
- Missing contractor tax on outbound fees: royalties and technical service fees paid to foreign organizations bear foreign contractor tax; failure to withhold risks penalties and deductibility.
Frequently asked questions
1. Is R&D expense deductible beyond ordinary expense?
Business-serving R&D is deductible like ordinary expense when conditions are met. Any bonus layer applies to projects meeting the current criteria — check the text; do not assume every R&D dong earns extra incentives.
2. Is failed experimentation deductible?
Yes, if it was genuine research with evidence. Failure does not strip R&D character — an honest failure report is strong evidence of real research.
3. How are costs allocated for an R&D center serving the global group?
The Vietnam-serving portion is deductible; the rest must be allocated on a reasoned, documented basis. Unallocable costs are hard to defend on audit.
4. How is technology contributed as capital valued?
Contributed technology must be valued per rules, and the contributor must be its lawful owner under Law 115/2025/QH15. Baseless valuations may be adjusted on review.
Key takeaway for investors
Treat each R&D project as a standalone investment: an approved proposal, a dedicated accounting code, logs and result reports. When the tax authority asks “is this really R&D”, the most persuasive answer is not an explanation but a thick dossier proving novelty from day one.
This article has been quality-reviewed by the FLAW AI Legal Council This content is legal reference only and does not replace counsel for a specific case.
