Startups in Vietnam are attracting a large amount of cash flow from investment funds. Photo: ST

Since the beginning of the year until now, before the fluctuations of the global economy, the market for capital calling for start-ups is quite gloomy, even being compared to entering the "capital calling winter". Therefore, the development of policies to encourage venture investment is a concern of many businesses.

The Ministry of Finance has just issued Official Letter No. 8030/BTC-TCDN responding to the petitions of the voters of Gia Lai province on the proposal to research and develop policies and laws to encourage venture investment.

According to the Ministry of Finance, in order to encourage organizations, individuals and businesses to make venture investments, mechanisms and policies have been issued, mainly in the fields of science and technology and innovative start-ups.

For example, the Law on Support for Small and Medium Enterprises and its guiding documents have provisions to support small and medium-sized enterprises and start-ups, and encourage organizations and individuals to invest in small and medium-sized creative start-ups. Law on Science and Technology, Law on High Technology, Decree No. 95/2014/ND-CP dated October 17, 2014 of the Government regulating investment and financial mechanism for science and technology activities, etc along with other legal documents, there are also requirements on encouraging participation in venture investment activities and establishing venture capital funds in Vietnam.

Regarding the implementation of policies related to the promotion of venture capital, which is the responsibility of the Ministry of Finance, the official letter responding to voters said that tax incentives are prescribed in tax laws under the jurisdiction of the National Assembly. In particular, there are also specific regulations on tax incentives applied to industries, fields and areas that need to be encouraged and prioritized for development according to the guidelines and orientations of the State.

For small and medium enterprises, according to the Law on Corporate Income Tax, there are no specific preferential policies for this object. However, according to the Ministry of Finance, in case small and medium-sized enterprises operating in preferential fields and industries specified in the law or in the eligible geographical areas for investment incentives, they are also entitled to the income tax policy corresponding to the actual conditions.

In addition, in the Law on Corporate Income Tax, there are corporate income tax incentives for enterprises having new investment projects in the field of high-tech venture investment on the list of priorities for developing investment. according to the provisions of the Law on High Technology. Enterprises are entitled to a tax rate of 10% for a period of 15 years, tax exemption for no more than 4 years, and a 50% reduction in payable tax for a maximum of no more than 9 subsequent years.

Investment value and the number of venture capital deals from 2013 to 2022. Source: Research by Do Ventures, NIC and Cento Ventures

Currently, the Ministry of Finance said that it has been conducting research, review and overall assessment of tax laws to report to competent authorities for consideration and amendment at an appropriate time according to the law and ordinances construction program of the National Assembly to ensure conformity with Vietnam's socio-economic conditions as well as international practices and the consistency of the tax policy system, creating favorable conditions for production and business.

Regarding the policy of granting interest rate compensation for small and medium-sized enterprises and creative start-ups in accordance with the Law on Support for Small and Medium-sized Enterprises, through review, the Ministry of Finance said that the policy of granting interest rate compensation which is specified in the Law on Supporting small and medium-sized enterprises (Article 17) and Decree No. 80/2021/ND-CP dated August 26, 2021 (Articles 26, 27) arises many problems and difficulties.

Therefore, the Ministry of Finance is coordinating with ministries and branches to agree on a plan to handle problems in guiding interest rate support as prescribed.

Regarding the Science and Technology Development Fund of enterprises, the Ministry of Finance said that it has issued Circular No. 67/2022/TT-BTC dated November 7, 2022 guiding on tax obligations when enterprises make deductions and use the enterprise's science and technology development fund; simultaneously, cooperate with the Ministry of Science and Technology in the process of formulating and promulgating Circular No. 05/2022/TT-BKHCN dated May 31, 2022 guiding the use of the Science and Technology Development Fund of enterprises.

Thus, according to the Ministry of Finance, policies to encourage venture investment have been issued mainly through legal documents including: Law on Science and Technology, Law on Technology Transfer, Law on High Technology, Law on Supporting Small and Medium Enterprises.

According to its assigned functions and tasks, the Ministry of Finance shall develop and issue guiding documents; or study and report to the authorities on problems in the policy implementation guidelines.

The Ministry of Finance said that the above-mentioned legal documents were developed by the Ministry of Science and Technology and the Ministry of Planning and Investment, which is in charge of developing and submitting to the competent authorities for promulgation. Therefore, the Ministry of Finance proposed the voters of Gia Lai province, on the basis of the implementation of current legal regulations, to review problems and make specific recommendations to the agency in charge of developing legal documents to research, revise and perfect policies to encourage venture investment.

According to the Innovation and Technology Investment 2023 Report conducted by the National Innovation Center (NIC), the Ministry of Planning and Investment, Forbes Vietnam and Do Ventures, all coordinated to implement, compared to a strong recovery strong when reaching a record of USD 1.44 billion in 2021, in 2022, venture capital investment into Vietnam decreased sharply by 56% compared to the previous year in 2021, but still increased by 41% compared to 2020. Total deals down 19% compared to 2021, but up 28% compared to 2020 figures.

However, amid the "funding winter", the report said, investors continued to express interest in Vietnamese startups, thanks to strong economic growth and the labor force of young skilled workers. Notably, domestic venture capital funds continue to play an important role in the Vietnamese ecosystem with increasing influence over domestic startups.