Legal regulations governing software products

In the context of rapid digital transformation, software products have increasingly become valuable assets for enterprises while simultaneously leading to numerous legal issues relating to intellectual property, taxation, and e-commerce activities.

I. Current demand for software products among enterprises and individuals

Within the rapid advancement of digital technology, the demand for software products among enterprises and individuals continues to increase and has become an indispensable component of business operations, management activities, and everyday life. From accounting software, human resource management systems, sales management solutions, and customer relationship management platforms to educational applications, entertainment software, and online communication tools, software products contribute significantly to optimizing workflows, reducing operational costs, and enhancing efficiency across various sectors.

For enterprises, investing in software products not only strengthens their competitive advantage but also facilitates digital transformation, data governance, and the automation of internal operations. Meanwhile, individuals are becoming increasingly dependent on software applications installed on smartphones, computers, and online platforms to meet their learning, working, and entertainment needs. Consequently, the software product market in Vietnam is experiencing substantial growth in both quantity and quality, accompanied by various legal issues concerning intellectual property rights, contractual relationships, and taxation within the information technology sector.

II. Concept of software products

1. What is a software product?

Pursuant to Point b, Clause 1, Article 13 of the Law on Digital Technology Industry 2025, a software product means a collection of instructions, commands, and digital data designed to direct digital technology devices to perform specific functions, including system software, application software, utility software, software tools, digital platform software, and other software products.

In practice, software products may exist in the form of computer applications, mobile applications, operating systems, enterprise management software, or online platforms serving various purposes. The value of a software product does not primarily limit in the physical medium containing it but rather in its source code, technical functionalities, and exploitation and usage rights. Accordingly, software products are regarded as a unique category of intellectual assets possessing substantial commercial and legal value within the digital economy currently. 

2. Classification of software products

Pursuant to Point b, Clause 1, Article 13 of the Law on Digital Technology Industry 2025, software products are classified into system software, application software, utility software, software tools, digital platform software, and other software products.

Based on information technology practices and relevant legal regulations, software products may also be categorized according to various criteria, including functionality, methods of deployment and exploitation, or target users.

• From a functional perspective, under Point b, Clause 1, Article 13 of the Law on Digital Technology Industry 2025, software products include system software, application software, utility software, software tools, digital platform software, and other software products.
• In addition, based on the mode of deployment and exploitation, software products may include software installed directly on devices, cloud-based software, or software provided in the form of online services.

3. What is the difference between a software product and a software service?

A software product is a technological product created for the purpose of transferring usage or exploitation rights to customers, whereas a software service refers to activities involving software support, development, installation, maintenance, upgrading, or operation performed in accordance with customer requirements.

For example, accounting software sold under a software license constitutes a software product, while maintenance services, bug fixing, or the development of additional features upon customer request are considered software services.

The distinction between these two concepts is particularly important as it directly affects tax treatment, commercial contractual arrangements, and intellectual property rights. Thus, enterprises should accurately determine the true nature of a transaction to ensure the proper application of legal regulations governing software products and software services.

III. Legal regulations governing software products

1. Regulations on intellectual property rights in software products

Pursuant to Clause 1, Article 22 of the Intellectual Property Law 2005, as amended and supplemented in 2022, computer programs are protected as literary works regardless of their form of expression or programming language. It means that software products are protected by copyright law from the moment they are created and fixed in a certain material form, irrespective of registration procedures.

The owner of a software product enjoys both economic rights and moral rights as prescribed by the Intellectual Property Law, including the rights to reproduce, distribute, modify, lease, or authorize others to exploit the software. In cases involving unauthorized copying, unlawful use of source code, or unauthorized software distribution, the rights owner may request civil, administrative, or criminal remedies depending on the nature and severity of the infringement. Thus, intellectual property protection constitutes a critical legal mechanism for safeguarding the commercial value and innovative nature of software products.

2. Are software products subject to value-added tax (VAT)?

Pursuant to Article 5 of the Law on Value-Added Tax 2024, technology transfer activities conducted in accordance with the Law on Technology Transfer, transfers of intellectual property rights under the Intellectual Property Law, software products, and software services as prescribed by law are not subject to VAT.

However, in order to qualify for VAT exemption, enterprises must accurately determine whether the goods or services supplied fall within the legal scope of software products or software services. In practice, many technology-related activities that do not constitute software products may still be subject to VAT under ordinary tax regulations. 

Thus, correctly identifying the legal nature of a software product is essential for the proper application of tax policies.

3. Time of determination of VAT obligations for software products

Although software products are not subject to VAT, enterprises are still required to determine the timing of tax declaration obligations in accordance with tax administration and invoicing regulations.

Pursuant to Article 8 of the Law on Value-Added Tax 2024, the time for determining VAT liability in respect of goods is the time when ownership or usage rights to the goods are transferred to the purchaser, or the time an invoice is issued, regardless of whether payment has been received.

In the case of software product transfers, revenue recognition and tax declaration obligations are generally determined upon completion of the transfer of usage rights or upon acceptance and handover in accordance with the contract. It serves as the basis for enterprises to fulfill their obligations relating to tax declaration, invoice issuance, and revenue accounting in compliance with applicable regulations. Accordingly, notwithstanding their VAT-exempt status, software products remain subject to all requirements concerning tax administration and declaration timing.

4. How are tax obligations determined in cases of software assignment or licensing?

In practice, software products are commonly exploited through two principal forms: assignment of ownership rights and licensing of usage rights. Each method entails different approaches to revenue recognition and tax obligations depending on the nature of the transaction and the parties involved.

If an enterprise fully assigns ownership of software, the resulting income shall be included in taxable corporate income in accordance with tax legislation.

If the enterprise merely grants a software usage license for a specified period, the revenue generated from such activity must likewise be declared and taxed in accordance with applicable accounting and tax regulations.

However, if the transaction falls within the legally defined scope of software products, it remains exempt from VAT. Accordingly, accurately identifying the applicable method of software exploitation constitutes an important basis for enterprises to properly fulfill their tax obligations.

IV. Questions regarding software products

1. Is revenue generated from selling software on international platforms subject to tax in Vietnam?

Pursuant to Point c, Clause 1, Article 2 of the Law on Tax Administration 2025, foreign organizations and foreign individuals conducting business activities through e-commerce platforms, digital platforms, and other services, including the sale of software products on international platforms such as App Store, Google Play, or foreign websites, are still required to fulfill tax declaration and tax payment obligations in Vietnam. Tax liabilities are determined based on the revenue and income generated, as well as the legal status of the business operator.

In addition, depending on the circumstances, enterprises may also be required to fulfill obligations relating to corporate income tax, personal income tax, or other obligations associated with cross-border transactions. Receiving payments through international accounts does not exempt taxpayers from domestic tax declaration obligations. 

Thus, revenue generated from the sale of software products on international platforms remains subject to Vietnam’s tax administration regime.

2. Are software products developed in Vietnam eligible for tax incentives?

Pursuant to Clause 1, Article 28 of the Law on Digital Technology Industry 2025, the production of digital technology products and the provision of digital technology services constitute investment incentive sectors and are entitled to incentives and support in accordance with laws on investment, taxation, land, and other relevant legislation.

The production of software products falls within the category of digital technology products and services encouraged by the State and may qualify for various tax incentive policies. Specifically, software development enterprises may enjoy corporate income tax incentives in accordance with the Law on Corporate Income Tax and its implementing regulations, provided that they satisfy the conditions applicable to incentivized investment sectors.

Furthermore, software products are classified as non-VATable goods and services. However, to benefit from such incentives, enterprises must demonstrate that their actual business activities fall within the software production sector as prescribed by specialized regulations. Accordingly, software products developed in Vietnam may enjoy a range of tax incentives if all statutory requirements are satisfied.

3. Are software products required to be issued with electronic invoices?

Pursuant to Article 11 of Decree No. 123/2020/ND-CP, as amended by Clause 8, Article 1 of Decree No. 70/2025/ND-CP, the following entities are required to use electronic invoices generated from cash registers connected to and transmitting data to tax authorities:

• Business households and individual business operators specified in Clause 1, Article 51, Clause 2, Article 90, and Clause 3, Article 91 of the Law on Tax Administration 2019 with annual revenue of 1 billion VND or more, and enterprises engaged in the sale of goods or provision of services directly to consumers, including shopping centers, supermarkets, and retail businesses (except automobiles, motorcycles, motorbikes, and other motor vehicles);
• Catering services, restaurants, and hotels;
• Passenger transportation services, road transport support services, artistic performance services, entertainment and recreational services, and cinema operations;
• Other personal services as classified under the Vietnam Standard Industrial Classification System.

4. Is tax declaration required when selling software through online platforms?

The sale of software products through websites, applications, or online platforms is still regarded as a business activity generating revenue and is subject to tax declaration obligations. Conducting business online does not alter the tax responsibilities of individuals or enterprises toward the State.

Business operators must declare revenue, account for income, and pay applicable taxes in accordance with relevant regulations. In cases where revenue is not declared or is inaccurately declared, taxpayers may be subject to administrative sanctions or tax reassessments and collections. Thus, the sale of software products through online platforms remains subject to full compliance with tax declaration and tax administration requirements.

5. Does providing software free of charge lead to tax obligations?

Providing software products free of charge does not necessarily mean that no tax obligations arise. In certain circumstances, if software is provided free of charge for advertising, promotional, or business-related purposes, enterprises may still be required to maintain accounting records and make declarations in accordance with applicable legal regulations.

Furthermore, if the free provision of software is associated with other commercial transactions or indirectly generates revenue, tax authorities may still assess corresponding financial obligations. Whether tax liabilities arise depends on the nature of the transaction and the intended purpose of the software.

Thus, enterprises should carefully evaluate the structure of free software distribution to ensure compliance with all relevant legal and tax obligations.

V. Why should you seek legal advice from NPLaw regarding software products?

Legal issues relating to software products are often highly specialized and simultaneously involve multiple areas of law, including intellectual property, taxation, information technology contracts, and e-commerce. Even a minor error in determining ownership rights, tax obligations, or contractual provisions may result in disputes or significant legal risks for enterprises.

With a team of lawyers experienced in technology law and digital commerce, NPLaw can assist enterprises in reviewing the legal compliance of software products, advising on copyright registration, drafting technology transfer agreements, and resolving tax issues arising during business operations. Thus, seeking legal advice from NPLaw enables enterprises to proactively prevent legal risks and effectively protect their legitimate rights and interests in relation to software products.

The above information is provided for reference purposes only. Should you require detailed advice regarding a specific matter, please contact NPLaw for prompt legal consultation.