In today’s era of digitalization and rapid technological transformation, the increased adoption of software solutions and cloud computing platforms has become an essential and urgent need for organizations and businesses seeking to optimize their operations.
In Vietnam, software and software services are governed by the Law on Information Technology 2006 and Decree No. 71/2007/ND-CP. However, the Law on Telecommunications 2023, which came into effect in July 2024, introduces new provisions regarding cloud computing and cloud computing services, leading to confusion for many organisations and individuals in identifying the true nature of their services. The distinction between software services and cloud computing services is not merely a technical matter but also directly impacts a company’s value-added tax (VAT) obligations in Vietnam.
This article outlines the legal definitions of these service types under current legislation and introduces several reference bases to help differentiate between them.
1. Software Services
According to Decree No. 71/2007/ND-CP guiding the implementation of several provisions of the Law on Information Technology:
- Software products are defined as software and accompanying documentation that are produced and expressed or stored in any physical form, which can be sold or transferred to another party for exploitation or use (Clause 1, Article 3).
- Software services refer to activities that directly support or serve the production, installation, operation, use, upgrading, warranty, and maintenance of software, as well as other similar software-related activities (Clause 10, Article 3).
The Decree also provides a detailed list of software service types (Clause 3, Article 9), including:
- Administration, warranty, and maintenance of software and information systems;
- Consulting, assessment, and quality evaluation of software;
- Development and implementation of software projects;
- Valuation and technology transfer of software;
- System integration and cybersecurity for software;
- Distribution and provision of software products;
- And other related software services.
Pursuant to Clause 21, Article 5 of the VAT Law 2024, “software products and software services as prescribed by law” are not subject to VAT.
2. Cloud Computing Services
Under the Law on Telecommunications 2023, cloud computing services are defined in Clauses 10 and 11 of Article 3 as follows:
- Cloud computing is a model that enables flexible use, customization, and management of shared computing resources such as networks, servers, storage, and applications.
- Cloud computing services refer to telecommunications services that provide processing, storage, and retrieval functionalities to users via telecommunications networks and cloud infrastructure.
Since cloud computing is categorized as a telecommunications service, Article 9 of the VAT Law 2024 stipulates that such services are subject to VAT at the standard rate of 10%.
3. Criteria for Identifying Cloud Computing Services
Although the term “cloud computing service” is defined in legislation, it has not yet been further clarified in any guidance legal documents, resulting in inconsistent interpretations in practice. Meanwhile, many software products on the market offer cloud-based storage features or include the word “Cloud” in their names, which adds to the confusion for businesses trying to identify the nature of their services and determine the appropriate VAT rate.
Official Letter No. 783/THH-HTDL dated June 16, 2020, issued by the Authority of Information Technology Application under the Ministry of Information and Communications, provides guidance for public agencies on how to evaluate and implement cloud computing services. It outlines five key characteristics that define a cloud computing service:
| No. | Criteria | Description |
| 1 | On-demand self-service | Users can manage services without interacting with the provider |
| 2 | Broad network access | Services are accessible remotely from any location and device |
| 3 | Resource pooling | Infrastructure is shared among multiple users |
| 4 | Rapid elasticity | Services can scale up or down quickly to meet demand |
| 5 | Measured service | Usage is monitored and billed based on actual consumption |
In the same document, the Authority emphasizes that if a service does not satisfy all five criteria above, it should not be classified as a cloud computing service, even if it is related to an online software platform.
Comparison: Software Services vs. Cloud Computing Services
| Criteria | Software Services | Cloud Computing Services |
| Legal basis | Decree No. 71/2007/ND-CP | Law on Telecommunications 2023 |
| Nature | Support for software use, independent of shared computing infrastructure | Provision of computing, processing, and storage resources via network |
| Technical features | No requirement for network access or resource sharing | Requires resource pooling, elasticity, measurement, and self-service features |
| VAT treatment | Not subject to VAT (0%) | Subject to VAT (10%) |
4. Conclusion
The distinction between software services and cloud computing services is not merely academic—it has real implications for determining a business’s VAT obligations:
- If a business solely engages in software distribution, licensing, or technical services related to software, it may qualify for VAT exemption.
- For services that contain cloud computing elements, it is essential to analyze each component to determine which parts are taxable and which are not.
It is important to note that while the above analysis provides useful references, Official Letter No. 783/THH-HTDL dated June 16, 2020, is not a formal legislative document, but rather an internal administrative guideline. Therefore, in cases of uncertainty, businesses are advised to proactively consult with competent regulatory authorities, such as the Department of Information and Communications or the General Department of Taxation, to ensure accurate tax declaration and minimize legal risks while optimizing compliance costs.
Date written: 20/07/2025
Disclaimers:
This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.
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