There are practical support and incentives applicable to investors conducting technology transferring activities in Vietnam.
Understanding ‘technology transfer’
Technology transfer is the transfer of ownership rights or usage rights of a part or whole of a technology from a party eligible to transfer the technology to a technology transferee.
Transfer of technology ownership rights is where the owner of a technology entirely transfers the right to possess, to use and to dispose of that technology to another organization or individual.
Transfer of technology usage rights means the permission granted by an organization or individual to another organization or individual to use their technology.
Example: Mazda Motor Corporation (Japan) transfers their automobile manufacturing technology to Truong Hai Company in order to expand their market in Vietnam. With the technology transfer and technical support from Mazda, Truong Hai Company is permitted to manufacture and assemble finalized automobiles using Mazda’s technology, which will then be sold to consumers.
When a technology is subjected to industrial property rights protection, the transfer of technology ownership rights or usage rights shall be conducted simultaneously with the assignment of industrial property rights.
Capital contribution in the form of technology is also an indirect form of technology transfer.
Article 16 and 17 of the 2006 Law on Technology Transfer
Technology transfer methods
Technologies can be transferred through:
Independent technology transfer contracts; or
Technology transfer component in the following projects or contracts:
- Investment projects.
- Franchise agreements.
- Agreements on transfer of industrial property rights.
- Purchase and sale agreements for machines and equipment with technology transfer.
Article 12 of the 2006 Law on Technology Transfer
Technologies permitted to be transferred
Technical know-how (information accumulated or discovered by a technology owner in the course of research, production or business, which is decisive to the quality and competitiveness of a technology or technological product).
Example: The technical know-how of the pilot project of in-house breeding and raising salanganes of Khanh Hoa Salanganes Nest Company is their experience of the habits of the birds, hobbies of the nesting place, and how to place columns for nesting, etc., to effectively attract salanganes to nest and lay eggs.
Technical knowledge regarding the transferred technology in the form of technological plan, technological process, technical solution, formula, technical parameter, drawing, technical diagram, computer program, or data information.
Example: Technical knowledge of sewing machine manufacturing technology includes technical instructions for the shaft component and detailed technical drawings noted with manufacture and process standards and materials used for each part.
Solutions to rationalize production or renew a technology: are solutions built on the basis of current technology to reduce costs or increase productivity and product quality.
Article 7 of the 2006 Law on Technology Transfer
Technology transfer procedures
Parties are allowed to negotiate technology transfers without having to follow administrative procedures, except for technologies restricted from transfer.
Technologies on the List of Technologies restricted from transfer must be approved by the Ministry of Science and Technology before being transferred, specifically as follows:
Article 23 of the 2006 Law on Technology Transfer
Dossier of application for approval of technology transfer:
- An application for approval of technology transfer;
- Documents on the applicant’s legal status: a copy of the Certificate of Investment Registration or Business Registration or other licenses related to the field of operation;
- Explanatory documents on the technology;
- Explanatory documents on the ability to meet requirements stipulated by law.
Dossier of application for Technology Transfer License:
- An application for a Technology Transfer License using the provided form;
- A copy of the Certificate of Investment Registration or Business Registration or other licenses related to the field of operation; Certificate of legal status of the parties representing and signing in the contract;
- A written approval of the technology transfer issued by the Ministry of Science and Technology;
- The original or a notarized copy of the technology transfer contract in Vietnamese and the applicable foreign language; the contract must be signed and sealed by the parties together with their initials and includes an affixed seal across the margins of the pages of the contract and appendices in case one of the parties is an organization;
- A list of documents on the technology, machinery, equipment and technical means (if any), enclosed with the technology transfer contract.
- If state capital is involved in a technology transfer, the authority competent to make investment decisions must submit a document affirming their agreement on the contents of the technology transfer and the estimated price of the to-be-transferred technology.
Article 24 of Law on Technology Transfer
Clause 1 and 2 Article 12 of Decree No. 133/2008/ND-CP
Negotiating technology transfer contracts
Parties entering into the contract and technology transfer
Authority of the technology transferor to be determined;
Information on the protection registration of the transferred technology;
Intellectual property rights of the transferred technology.
It is often complicated and difficult to evaluate the value of a technology. Transferors and transferees are encouraged to consult and discuss with experts in the field of transfer as well as utilizing market information as reference to determine the most appropriate price.
The parties should also regulate specific payment methods in the contract or appendix to facilitate a reasonable and effective payment process during the technology transfer.
Scope of transfer
Well-defined scope of transfer (whether it is transfer of ownership rights or usage rights) can help the parties understand their own rights and benefits and therefore avoiding later disputes.
Time of transfer
Parties to the technology transfer contract must clearly determine the time of technology transfer when assigning usage rights.
Drafting technology transfer contracts
In case of transferring more than one technical subject, a common contract or several different contracts can be made, provided that they do not contain duplicate contents on the same transferred technology.
In case of transferring a technology with machinery, equipment and technical devices, a list of and agreements on these machinery, equipment and technical devices must be provided in the contract or appendices thereof.
In case of transferring technical documents which contain technical solutions, technical know-how, engineering drawings, formulas or technological processes must specifically indicate the titles and contents of to-be-transferred technologies.
In case of technology transfer in the form of training, the contract or appendices thereof must include the number of technical workers and technicians; sectors or professions in which the training is provided; training expenses, duration and places; it must be ensured that transferees can assimilate and master the transferred technologies after the training.
In case of technology transfer in the form of sending technical consultants to provide technical assistance or consultancy to the technology transferee in applying transferred technologies to production, the contract or annex thereof must mention the number of consultants, as well as the contents, duration and expenses of technical assistance and consultancy.
Technology transfer contracts are not required to be registered before commencing according to Law on Technology Transfer, 2006.
Article 2 of Decree No. 133/2008/ND-CP
Registering technology transfer contracts
Technology transfer contracts are not subject to compulsory registration. However, contracting parties reserve the right to register their contracts if they wish.
To register a technology transfer contract, a technology transferee shall, within 90 days after entering into the contract, file a dossier with the Department of Science & Technology or the Ministry of Science and Technology.
In regards of transfers of technologies on the List of technologies encouraged for transfer, Registration Certificates shall serve as a basis for receipt of incentives (such as capital support, low-interest loans, tax exemptions and/or reductions, etc.).
Sample Certificate of Registration of Technology Transfer Contracts by the Ministry of Science and Technology
Decree No. 133/2008/ND-CP
Official fees for assessment of technology transfer contracts
Organizations and individuals receiving transferred technologies in localities with difficult or exceptionally difficult socio-economic conditions are exempt from the charge for examination of technology transfer contracts.
Clause 8 Article 32 of Decree No. 133/2008/ND-CP
Fees for assessment of technology transfer agreements for registration:
First time registration of technology transfer agreements:
The assessment fee shall be equal to 0.1 % of the total value of the agreement but not exceeding ~USD435 and not less than ~USD217.
Example: Total value of a technology transfer contract is USD200,000.
Amendment and supplement of technology transfer agreements:
The assessment fee shall be equal to 0.1 % of the total value of the amended/supplemented agreement but not exceeding ~USD217 and not less than ~USD130.
Example: Total value of an amended/supplemented contract is USD300,000.
Fees for assessment of agreements on transfer of restricted technologies:
Assessment fee for approval of technology transfer (preliminary license) is ~USD435.
Assessment fee for approval of technology transfer (official license) shall be equal to 0.1 % of the total value of the agreement but not exceeding ~USD435 and not less than ~USD217.
Article 4 of Circular No. 169/2016/TT-BTC
Incentives for technology transfer
Vietnam offers many policies and incentives for foreign investors to transfer their technologies to organizations and individuals in Vietnam.
Vietnam’s National Technology Renewal Fund has been established in order to facilitate enterprises in technology transfer.
The National Technology Renewal Fund aids in technology transfer, renovation, and completion through:
- Preferential loans;
- Loan interest support;
- Guarantees for loan of capital;
- Capital support.
The following activities are eligible for such incentives:
- Technology transfers that help develop agriculture, forestry and fisheries in rural and mountainous regions and areas with difficult or specially difficult socio-economic conditions;
- Incubation of technology and technological enterprises;
- Training of scientific and technological personnel in service of technology transfer, renovation, and completion;
- Small and medium enterprises transferring, renovating, or completing technologies which are on the list of technologies encouraged for transfer.
Up to 30% of total project cost can be supported by the National Technology Renewal Fund.
Vietnam allows foreign investors to contribute capital to investment projects in the form of technology.
Tax incentives for technology transfer:
- Import tax exemption applies to goods imported for direct use in the research, development or renewal of technologies, including machines, equipment, spare parts, supplies and means of transport which are yet to be produced domestically, and technologies which are yet to be produced domestically; scientific documents, books and newspapers.
- Specialized machines, equipment and transportation, which cannot be produced domestically and are currently used for technology transfer contracts, are not subject to value-added tax.
- Technology incubators or technology business incubators are entitled to: income tax exemption for four years, a 50% reduction of payable income tax amounts for nine subsequent years, and land use tax exemption.
In addition, foreign investors who participate in the transfer of technologies on the list of those encouraged for transfer or in the transfer of technologies to areas with difficult or exceptionally difficult socio-economic conditions are entitled to the following preferences:
- Foreign investors and their family members are granted multiple entry visas of a validity duration suitable to the period of performance of technology transfer contracts;
- Favorable conditions for residence and travel.
Article 39, 44, and 46 of the 2006 Law on Technology Transfer
These contents were written based on the existing Law on Technology Transfer in 2006.
The National Assembly of the Socialist Republic of Vietnam has promulgated the Law on Technology Transfer of 2017, which we will update when it comes into effect on July 1st, 2018.
Should investors require support in technology transfer (including M&A activities), M&A Vietnam will appoint lawyers to consult, negotiate contracts, and carry out administrative procedures, etc.