Taxes

As in the area of general investment and company regulation, Vietnam has embarked on a process to harmonize taxation for domestic and foreign companies as well as foreign individuals. It has also initiated a number of institutional and administrative reforms in order to improve the administration of taxation.

Personal Income Tax (“PIT”)

A PIT payer is any resident individual with taxable income arising either within or outside the territory of Vietnam, or any non-resident individual with taxable income arising within the territory of Vietnam. Residents and non-residents are subject to PIT at different rates, and on different ranges of income.

Tax residents are those individuals residing in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first date of arrival; or those having a permanent residence in Vietnam (including a registered residence, or a leased house in Vietnam with lease duration of 90 days or more in a tax year).

Individuals not meeting the conditions for being tax residents are considered as tax non-residents in Vietnam. Where an individual stays in Vietnam for more than 90 days but less than 183 days in a tax year, the individuals will be treated as a tax non-resident if they can prove that they are tax resident of another country.

The PIT rates vary depending on whether the income in question is irregular income or regular income. Taxable income is the income after deducting personal allowance of VND9 million/month and dependent allowance of VND3.6 million/month/dependent and other contributions applicable under the law.

Level

Taxable income/year

(VND million)

Taxable income/month

(VND million)

Tax rate (%)

1

Up to 60

Up to 5

5

2

Above 60 to 120

Above 5 to 10

10

3

Above 120 to 216

Above 10 to 18

15

4

Above 216 to 384

Above 18 to 32

20

5

Above 384 to 624

Above 32 to 52

25

6

Above 624 to 960

Above 52 to 80

30

7

Above 960

Above 80

35


Corporate Income Tax (“CIT”)

Enterprises incorporated in Vietnam and foreign enterprises permanently established in Vietnam must pay CIT on their worldwide income. Foreign enterprises that are not permanently established in Vietnam only have to pay CIT on income derived from Vietnam.

Currently, the standard CIT is 22%. Except for some cases provided by law, enterprises with total annual turnover not exceeding VND20 billion are entitled to the tax rate of 20%. 

Enterprises entitled to the tax rate of 22% shall be entitled to the tax rate of 20% as from 1 January 2016.

The CIT rate applicable to activities of prospecting, exploring and mining of petroleum and gas and other rare and precious natural resources in Vietnam are from 32% to 50% depending on each specific project and business establishment.

CIT incentives—preferential tax rates and duration of tax exemption and reduction are based on two main criteria: incentive (or special incentive) sectors; and difficult (or special difficult) socio-economic regions. The two preferential rates of 10% and 20% are available for 15 years and 10 years respectively, starting from the commencement of operating activities. When the preferential rate expires, the CIT rate generally reverts to the standard rate. CIT payers may be eligible for tax exemptions and tax reductions. The extent of the incentives depends on the combination of the sector and region where it takes place.

Value Added Tax (“VAT”)

Vietnam introduced a VAT in 1999 to replace the turnover tax. All business establishments are subject to VAT, regardless of size or sales of taxable goods. Although the real VAT payer is the purchaser of the goods and services, it is the seller’s responsibility to include VAT when they charge for the goods or services they have supplied. In the case of imported goods, the importer must pay VAT to Customs at the same time that they pay import duties.

The rate of VAT payable will depend on the goods and services in question.

  • VAT rate of 0% is applied to exported goods or services, including goods or services sold to enterprises without permanent establishments in Vietnam, goods processed for export, goods sold to duty free shops, exported services and construction and installation carried out abroad or for export processing enterprises.
  • VAT rate of 5% is applied generally to areas of the economy concerned with the provision of essential goods and services, such as clean water, fertilizer production, teaching aids, books, foodstuffs, medicine and medical equipment, husbandry feed, various agricultural products and services, technical/scientific services, rubber latex, sugar and its by-products.
  • Standard VAT rate of 10% applies to activities not specified as exempt or subject to the 0% or 5% rates.

Import and Export Duties

Import and export duties rates are subject to frequent changes. The import duty rates are classified into 3 categories: ordinary rates, preferential rates and special preferential rates.

Preferential rates are applicable to imported goods from countries that have Most Favoured Nation status with Vietnam. With the accession to the WTO, the Most Favoured Nation rates are in accordance with the WTO Commitments and are applicable to goods imported from other member countries of the WTO.

Special preferential rates are applicable to imported goods from countries that have a special preferential trade agreement with Vietnam. Vietnam has special preferential trade agreements with the following countries: ASEAN member states, Japan, China, Korea, Australia, New Zealand and some others.

Withholding Tax (“WHT”) for Foreign Contractors

Foreign contractors doing business in Vietnam or earning income in Vietnam without establishing a legal entity therein are subject to a WHT. WHT is applicable to payments of interest, royalties, services, construction, management fees, and the like. WHT is a combination of the VAT (in which the taxpayer is the customer, i.e., the Vietnamese enterprise) and the CIT (in which the taxpayer is the supplier, i.e., the foreign contractor) to which the transaction would have been subject if the payment had been made in Vietnam rather than abroad.

Depending on whether or not the foreign contractors adopt Vietnamese Accounting Standards, the WHT can be applied on a deemed method or a deduction method.

Related Chapters

Introduction to Vietnam

Culture and religion in Vietnam

Economy of Vietnam

The Government

Judiciary

Legal System

Regulatory Framework

Banking & Finance

Capital Markets

Land & Housing

Labour Law

Intellectual Property

Selected Sector Regulations

Dispute Resolution



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