1. Corporate Income Tax (CIT)

Tax rate: The common CIT rate is 20%.

Preferential tax: It will depend on other fields (For example: education, medical, culture, high technology), scale (For example: capital scale with over 6,000 billion or hiring over 3,000 employees) and areas where investment is encouraged (for example: industrial parks, high-tech parks).

Taxable Income: Total revenue regardless of whether it arises domestically or abroad, minus deductible expenses, plus other taxable income:

• The company must pay in advance taxes quarterly.
• Tax finalization deadline: March 31 every year. Companies must pay all taxes within this period.

Transfer profits abroad: Foreign investors are allowed to transfer profits abroad at the end of the fiscal year or the end of direct investment activities in Vietnam. Foreign investors are not allowed to transfer profits abroad in cases where the invested company has accumulated losses.

2. Foreign Contractor Tax (FCT)

FCT is applied to foreign organizations and individuals carrying out business or having income arising in Vietnam based on contracts or agreements with Vietnamese parties (including foreign-invested companies in Vietnam). FCT includes VAT and CIT, or PIT for individual income. FCT applies to several payments including loan interest, royalties, service fees, rent, insurance fees, transportation services, securities transfers, and goods provided in Vietnam or with according to services performed in Vietnam.

Dividends/Profits: Dividends/profits paid to shareholders/investors who are foreign companies are not subject to withholding tax or any other profit transfer tax.

Capital transfer tax: Income from the transfer of a company in Vietnam in most cases is subject to corporate income tax at a tax rate of 20%. In case the seller is a foreign organization, the Vietnamese organization or individual receiving the capital transfer is responsible for determining, deducting and paying taxes on behalf of the seller. The tax authority has the right to adjust the transfer price for capital transfer tax purposes in case the transfer price does not match the market price.

3. Value-added tax (VAT)

Scope of application:

• The subjects of VAT are goods and services used for production, business, and consumption in Vietnam (including goods and services purchased from foreign organizations and individuals). Domestic companies must calculate VAT on the value of goods and services sold.
• In addition, imported goods are also subject of VAT. Organizations and individuals are obliged to pay VAT at the import stage to the customs authority along with import tax. Imported services are subject to VAT according to the FCT regime.

Exported goods and services:

• Goods and services sold or supplied directly to organizations and individuals abroad, including organizations and individuals in non-tariff zones, will enjoy a VAT rate of 0% if the goods are, services are consumed outside Vietnam or in a non-tariff zone.
• Some services are not subjects of VAT with 0% rate, including: advertising, hotels, training, entertainment, travel and tourism provided in Vietnam to foreign organizations and individuals and several of services provided to companies in the non-tariff zone (including house rental services, transportation services for workers, some food and beverage services) and services provided in connection with the sale, distributes products and goods in Vietnam.

Tax declaration and payment: Taxpayers must submit VAT declarations monthly, no later than the 20th day of the following month or quarterly, no later than the last day of the first month of the next quarter (Applicable to companies with previous year’s revenue of 50 billion VND/year or less).

4. Import and export tax

Import Tax

Most goods imported into Vietnam are subject to import tax, unless they meet the conditions for tax exemption.

Import tax is calculated by multiplying the taxable value of each imported item by the corresponding import tax rate.

Import tax rates are divided into three types: normal tax rates, preferential tax rates and special preferential tax rates. The determination of special preferential tax rates will depend on the origin of the goods.

VAT is usually applied to imported goods at a tax rate of 5% or 10%. By December 31, 2024, goods subject to a 10% VAT rate will be subject to an 8% VAT rate, except for certain goods.

Export tax

Only a few items are subject of export tax, mainly natural resources such as sand, chalk, marble, granite, ore, crude oil, forest products, and metal scrap, etc. Tax rates range from 0% to 40%.

5. Personal Income Tax (PIT)

Tax residents are individuals who meet one of the following conditions:

• Reside in Vietnam for 183 days or more in a tax year;
• Have a permanent residence in Vietnam (including having a residence registered on a permanent/temporary residence card or having a rented house to stay in Vietnam for 183 days or more in the tax year) and cannot prove tax residency in another country.

Tax residents are subject to personal income tax on all taxable income arising within and outside Vietnam regardless of where the income is paid or received. Income from salary/wages is taxable according to the partially progressive tax rate schedule. Other income is taxed at different tax rates.

Individuals who do not meet the conditions to become residents are considered non-residents. Non-residents pay PIT at the 20% tax rate on income from salary/wages related to Vietnam and at different tax rates on their non-salary income. However, the taxation of some types of income needs to be referred to several provisions stipulated in the Double Taxation Avoidance Agreement with Vietnam.

Deduction of taxes paid abroad: For tax residents with income generated abroad, personal income tax paid abroad on the income generated abroad will be deducted from the tax amount paid in Vietnam.

Tax declaration and tax payment:

• For income from salary/wages, PIT must be declared and paid monthly or quarterly no later than the 20th of the following month or no later than the last day of the month following the declaration quarter. The amount of tax paid will be compared with the total tax liability calculated at the end of the year. The deadline for submitting the tax finalization declaration and the remaining tax amount to be paid is no later than the last day of the 3rd month of the next tax year for the personal income tax declaration of the employer and no later than the last day of the 4th month of the next tax year for the PIT declaration form of individuals.
• Foreign employees who are tax residents must make PIT finalization upon completion of their Vietnamese working term and before leaving Vietnam.

Time of writing: 28/10/2024

The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer  at  info@cdlaf.vn

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