The setup: an AI startup burning USD2 million/year on R&D, no profit yet. Vietnam offers a 10% preferential rate — worthless with no profit to tax. Singapore offers a 400% deduction on R&D spend — every dollar of R&D deducts four from taxable income, plus a 20% cash payout if there’s insufficient tax to offset. Same word “incentive”, but one rewards profit, the other rewards spending — a loss-making startup can only use one.
Vietnam: software-production incentives — rewarding profit
- Scope: software production; hi-tech and digital-tech enterprises.
- Form: long-term preferential CIT plus holidays/reductions (details under Law 67/2025/QH15, effective 1 October 2025).
- Strength: the more profit, the more saved — suits revenue-generating software firms.
- Weakness: early-stage loss-making startups get nothing.
Malaysia: Malaysia Digital (MD) — incentives for digital companies
- Scope: companies recognised with Malaysia Digital status (successor to MSC).
- Form: tax incentives for qualifying digital activities (time-bound CIT exemption/reduction) + perks for knowledge workers.
- Strength: a package built for digital companies, one-stop via MDEC.
Singapore: EIS — 400% R&D deduction, cash payout
- EIS (Enterprise Innovation Scheme): 400% deduction on the first S$400,000 of R&D spend per year (YA2024–2028); 250% above that.
- Cash payout: 20% of qualifying spend, up to S$20,000/year — loss-making startups still get cash.
- Strength: rewards R&D spending — the more research burned, the more earned, no profit needed.
Comparison
| Criterion | Vietnam | Malaysia | Singapore |
|---|---|---|---|
| Rewards what | Profit | Digital activity | R&D spend |
| Loss-making startup benefits | No | Partially | Yes (cash payout) |
| Tool | Preferential rate | MD status | 400% EIS |
Four decision points
1. Loss-making startups pick spend-rewarding regimes. Singapore’s EIS cash payout — Vietnam’s preferential rate waits for profit.
2. Where to register IP. IP in Singapore combined with EIS for R&D — co-locate IP and research structure.
3. AI talent costs. Singapore AI engineers cost 2–3x Vietnam’s — do tax perks cover the wage gap?
4. Incentive maintenance conditions. MD status and EIS both carry spending/headcount conditions — read before committing.
Frequently asked questions
1. What do software companies get in Vietnam?
Software production earns a long-term preferential CIT rate plus holidays/reductions under Law 67/2025/QH15 — but only valuable with profit.
2. What is Singapore’s EIS?
The Enterprise Innovation Scheme: 400% deduction on the first S$400,000/year of R&D (YA2024–2028), plus a 20% cash payout (up to S$20,000/year) for firms with insufficient tax to offset.
3. What does Malaysia Digital status offer?
Tax incentives for recognised digital companies (time-bound CIT exemption/reduction) and knowledge-worker perks — apply via MDEC.
4. Where should a loss-making AI startup locate?
Where R&D spending is rewarded (Singapore’s EIS cash payout) rather than where profit is rewarded — but factor engineer salaries.
5. Where to hold IP?
Consider where R&D is incentivised (Singapore EIS) with a good treaty network for royalties — IP structuring needs transfer-pricing advice.
This article has been quality-reviewed by the FLAW AI Legal Council.
