This is a proposed amendment to supplement provisions concerning the Science and Technology Development Fund of enterprises mentioned in the draft Decree amending and supplementing certain articles Decree No. 95/2014/ND-CP on investment and financial mechanisms for scientific and technological activities.
The draft report on the implementation of Decree 95 by the Ministry of Science and Technology states that after nearly 10 years of implementation, the Decree has achieved certain results. The amendment of Decree No. 95/2014/ND-CP stems from the shortcomings in investment and financial mechanisms for scientific and technological activities and changes in related laws.
USE OF FUNDS FROM THE SCIENCE AND TECHNOLOGY DEVELOPMENT FUND ONLY REACHES 60%
Regarding the establishment and use of the Science and Technology Development Fund of enterprises, according to statistics from the General Department of Taxation, Ministry of Finance, the amount of money and the number of enterprises that establish the Fund are not significant; the use of funds from the Fund for scientific and technological activities only reaches 60%.
In the period of 2015-2021, the total amount of funds established nationwide reached over VND 23,000 billion and over VND 14,000 billion was used to promote the development of scientific and technological activities and to serve the production and business activities of enterprises. Some enterprises have proactively established and efficiently used these resources for their scientific and technological activities and innovation.
State-owned enterprises have to allocate 3-10% of pre-tax profits, while other enterprises are only required to allocate a maximum of 10% or even no allocation to the Fund.
The figures on the situation of establishment and use of the Fund in 2022 provided by the General Department of Taxation in November 2023 show that there are about 220 enterprises that established and used the Fund in 2022, with a total amount of funds established of about VND 6,500 billion.
About VND 3,200 billion has been used from the Fund, of which the amount used from the funds established in 2022 is about VND 848 billion.
Compared to 2021 (with 254 enterprises establishing and using the Fund with a total amount of funds established of VND 3,349 billion and an amount used of VND 684 billion), the figures on the establishment and use of the Fund in 2022 have significantly increased.
Regarding the existing limitations in the establishment and use of the Fund, the draft report points out the lack of equality in the regulations on the proportion of fund allocation among enterprises.
Accordingly, state-owned enterprises have to allocate 3-10% of pre-tax profits, while other enterprises are only required to allocate a maximum of 10% or even no allocation to the Fund. This goes against the policy of mobilizing resources for scientific research and technological innovation in enterprises, the report states.
In addition, the fund allocation rate is not suitable for the structure and scale of enterprises in Vietnam. The majority of enterprises in Vietnam are small and medium-sized enterprises, and their pre-tax income is not large. If they apply the same maximum fund allocation rate of 10%/year, the amount of funds allocated to small and medium-sized enterprises will be very small, even if accumulated for 5 years, it will not be enough for these enterprises to invest in scientific research and technological innovation.
On the other hand, FDI enterprises have a high demand for scientific research and technology transfer, but based on actual surveys, almost no FDI enterprises allocate funds to this Fund.
The draft also proposes to amend the regulations on the fund expenditure. Supplement the expenditure items for scientific and technological activities as regulated in Article 4 but not specified in Article 10 of the Decree. Amend and supplement point c, clause 3 on expenditure items “purchasing equipment, machinery, and materials for technological innovation to directly serve the production and business activities of the enterprise” according to the provisions in point b, clause 3 of Resolution No. 43/2022/QH15 on financial policies, monetary support for the Program of Economic and Social Recovery and Development to meet the technological innovation needs of enterprises.
In the proposed options, Option 1: “Purchase machinery, equipment, and materials to partially or completely replace the technology currently in use with more advanced technology, to directly serve the production and business activities of the enterprise, improve productivity, and product quality or develop new products.”
Option 2: “Purchase equipment, machinery, and materials for technological innovation to directly serve the production and business activities of the enterprise.”
The Ministry also proposes to supplement regulations on fund expenditure for digital transformation activities of enterprises. Supplement regulations to allow state-owned enterprises to invest in research and development, venture capital, and innovation startup.
Amend regulations in clauses 5 and 6 of Article 11 regarding the right of national, ministerial, provincial, and municipal agencies that have contributed to the National Science and Technology Development Fund or the Science and Technology Development Fund to request support from the Fund as follows: State-owned enterprises that do not have a need to use or do not fully use the Science and Technology Development Fund shall submit it to the National Technology Innovation Fund instead of the current Science and Technology Development Fund according to the current regulations.
Supplement regulations regarding the proposal for handling the remaining funds contributed by enterprises to the National Science and Technology Development Fund or the Science and Technology Development Fund at various levels. Currently, the National Science and Technology Development Fund manages the funds contributed by enterprises according to the regulations of Decree 95, but the enterprises that have contributed have not requested support from the National Science and Technology Development Fund, resulting in unused funds that have not been effectively utilized.
Therefore, the draft proposes regulations: After 5 years from when enterprises contribute to the National Technology Innovation Fund or the Science and Technology Development Fund of ministries, provinces, and cities, if the enterprises do not have a request to use the contributed funds, they shall not be required to request support from the National Technology Innovation Fund or the Science and Technology Development Fund of ministries, provinces, and cities.
The contributions of enterprises to the National Technology Innovation Fund or the Science and Technology Development Fund of ministries, provinces, and cities after 5 years will be supplemented with funds from the Funds for use in funding and providing loans according to the Fund’s regulations. The National Technology Innovation Fund or the Science and Technology Development Fund of ministries, provinces, and cities shall be responsible for reporting and proposing plans for handling the remaining funds to the higher-level managing agency for processing according to the regulations.”
