What is software service? Are software services subject to VAT?
Posted on: 28/11/2024
What types of software services are currently available? Are software services subject to VAT?
What is software service? What are the types of software services?
According to Clause 10, Article 3 of Decree 71/2007/ND-CP: Software services are activities that directly support, serve the production, installation, exploitation, use, upgrade, warranty, maintenance of software, and other similar activities related to software.
Software is described as a computer program expressed in a symbolic, code, or language system to control digital devices to perform certain functions. (Clause 12, Article 4, Information Technology Law 2006)
Software products are software and accompanying documents that are produced and represented or stored in any physical form, which can be bought, sold, or transferred to another party for exploitation and use.
Software industry activities include the design, production, and provision of software products and services, including packaged software production; custom software production; embedded software production; software outsourcing activities, and providing, performing software services.
Currently, the types of software products and services according to Decree 71/2007/ND-CP include:
Types of software products include:
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System software;
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Application software;
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Utility software;
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Tool software;
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Other software.
Types of software services include:
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Administration, warranty, and maintenance services for software and information systems;
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Software quality consulting, assessment, and appraisal services;
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Software project consulting services;
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Software valuation consulting services;
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Software technology transfer services;
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System integration services;
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Security and safety services for software products and information systems;
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Software product distribution and supply services;
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Other software services.
Are software services subject to VAT?
According to Clause 21, Article 4 of Circular 219/2013/TT-BTC guiding objects not subject to VAT:
"21... Computer software includes software products and software services as regulated" which are not subject to VAT.
"The 10% tax rate applies to goods and services not specified in Article 4, Article 9, and Article 10 of this Circular.
The VAT rates specified in Articles 10 and 11 are uniformly applied to each type of goods and services at import, production, processing, or commercial business stages."
Based on the above regulations and guidelines, in principle:
If a company provides software services as regulated in Article 9 of Decree 71/2007/ND-CP, it is not subject to VAT according to Article 4 of Circular 219/2013/TT-BTC.
If a company provides services that do not meet the conditions in Article 9 of Decree 71/2007/ND-CP, they are subject to a 10% VAT according to Article 11 of Circular 219/2013/TT-BTC.
List of technology goods and services not eligible for VAT reduction according to Decree 44/2023/ND-CP:
Article 1 of Decree 44/2023/ND-CP provides a 2% VAT reduction for groups of goods and services currently subject to a 10% tax rate, excluding certain goods and services, including information technology goods and services as per the Information Technology Law.
Details are in Appendix III issued with Decree 44/2023/ND-CP.