Vietnam Corporate Tax

Key Note

Corporate Income Tax (CIT) in Vietnam holds a pivotal position within the country’s tax framework, exerting significant influence on both local and foreign enterprises. Grasping the nuances of CIT is paramount for businesses operating in Vietnam, as it directly impacts their fiscal responsibilities. This article endeavors to furnish a comprehensive guide to CIT in Vietnam, encompassing its rates, exemptions, criteria for taxable income determination, and more, presented in a distinct and organized manner.

CIT Fundamentals

Interpretation and Application

Corporate Income Tax (CIT) constitutes a direct tax imposed on the profits earned by enterprises and organizations conducting business activities in Vietnam. Profit, in this context, alludes to an entity’s gross revenue minus its expenditure.

Payment Schedule

CIT obligations are met on a quarterly basis, necessitating enterprises to make provisional CIT payments each quarter within 30 days of the preceding quarter. These payments are based on approximations of business outcomes drawn from prior years.

Interest on Delayed Payments

In cases where the total payment falls short of 80 percent of the finalization amount at the time of the ultimate tax payment, the portion exceeding 20 percent becomes liable for late payment interest. This interest accrues from the deadline for the fourth-quarter tax payment until the tax deficit is fully cleared.

Entities Subject to CIT

Comprehensive Coverage

CIT in Vietnam encompasses a wide spectrum of business entities, including professional organizations, foreign corporations engaged in production and trade within Vietnam, and more.

Legal Framework

Entities subject to CIT in Vietnam are established under various legal statutes, including the Law on Enterprises, Law on Investment, Law on Credit Institutions, Law on Securities, and Commercial Law. This umbrella encompasses joint-stock companies, limited liability companies, partnerships, and business cooperation contracts.

Permanent Establishments

Foreign enterprises operating in Vietnam may establish permanent establishments, such as branches, representative offices, factories, and the like, through which they conduct business operations. These establishments may be subject to CIT on both domestic and international income associated with their activities.

CIT Rates and Special Provisions

Standard CIT Rate

The prevailing CIT rate for both domestic and foreign enterprises in Vietnam stands at 20 percent, except when specific conditions or exemptions come into play.

Unique CIT Rates

Certain industries or activities in Vietnam are subject to distinct CIT rates, which include:

  • Petroleum and gas exploration and exploitation: 32 to 50 percent
  • Rare mineral mining (e.g., silver, gold, gemstones): 40 or 50 percent
  • Platinum, gold, silver, tin, wolfram mines: 50 percent (or 40 percent in specific scenarios)
  • 3.3 CIT for Small and Medium-sized Enterprises (SMEs)

SMEs, characterized by companies with annual turnover not exceeding VND 20 billion (US$860,000), are subject to a 20 percent CIT rate.

Handling Multiple Tax Rates

In instances where an enterprise engages in diverse business activities subject to varying CIT rates, the CIT is computed by summing the income derived from each activity, each multiplied by the relevant tax rate for that specific activity.

Incentives for Taxation

Numerous local and foreign companies may be eligible for an array of tax incentives in Vietnam, encompassing reduced CIT rates, tax holidays, and circumstances where CIT can be as low as 10 percent.

Corporate Income Tax (CIT) Incentives

CIT incentives serve as a cornerstone of Vietnam’s allure to foreign investors, extending benefits to both local and foreign investors with the objective of promoting investment in sectors aligned with national development strategies. The types of projects qualifying for CIT incentives, alongside the nature and duration of these incentives, are explicitly delineated within Vietnam’s legal framework, including decrees and circulars.

There are two primary CIT incentives in Vietnam:

Preferential Tax Rates

  • A reduced tax rate of 10 percent applicable for the entire duration of the project.
  • A reduced tax rate of 10 percent for 15 years, commencing from the initial year of income generation.
  • A tax rate of 17 percent for the project’s entire duration.
  • A tax rate of 17 percent for 10 years, starting from the first year of income generation.

Tax Holidays

  • Tax exemption for 4 years, followed by a 50 percent reduction in payable tax amounts for the next 9 years.
  • Tax exemption for 4 years, followed by a 50 percent reduction in payable tax amounts for the subsequent 5 years.
  • Tax exemption for 2 years, followed by a 50 percent reduction in payable tax amounts for the next 4 years.

Import Duties and Tax Benefits

Vietnam extends import duty and tax benefits to enterprises for the importation of fixed assets, raw materials, supplies, and parts utilized in their projects. These incentives augment the cost-effectiveness of investment projects and are subject to regulations articulated within Vietnam’s laws and statutes.

Exemptions from Land Rent and Levies

To facilitate investments, Vietnam offers exemptions or reductions in land rents and levies, thereby easing the financial burden on businesses. This is particularly advantageous for investors looking to establish a physical presence in the country.

Incentives in Economic Zones

Vietnam has actively encouraged the establishment of economic zones across the nation, providing investors with enhanced access to infrastructure, skilled talent pools, and supplier networks. Furthermore, foreign investors in these zones can leverage tax incentives conferred by the Vietnamese government. In most instances, economic zones qualify investors for tax holiday incentives. In select cases, when a zone is situated in a disadvantaged area, preferential corporate income tax rates may also apply. To avail these incentives, foreign investors must set up their operations within zones that offer these privileges.

Determining Taxable Corporate Income

Taxable income comprises revenue from typical sources like production, trade, and services, as well as additional income sources such as capital transfers, real estate transfers, and interest on deposits.

CIT Exemptions

Certain categories of income, such as those stemming from scientific research and technological development contracts, are exempt from CIT.

Carrying Forward Net Losses

Business entities that fail to generate profits in a given fiscal year can carry forward their losses for a maximum of five years, though retroactive application to previous tax years is not permissible.

Jurisdiction of Tax Payments

Entities are mandated to remit CIT in the regions where their headquarters are situated. If an enterprise maintains a subsidiary cost accounting production establishment in a different province or city, taxes are calculated and remitted in both the locale of the headquarters and the locale of the production establishment.

Your Questions, Answered

We’ve picked the top questions that we get asked the most when it comes to Vietnam corporate tax. Check them out here.

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Our Vietnam Corporate Tax Services

In conclusion, Corporate Income Tax in Vietnam stands as a cornerstone of the nation’s tax structure, significantly influencing a diverse range of enterprises. Grasping the intricacies, rates, and exemptions is essential for businesses operating in Vietnam. This comprehensive guide aims to shed light on CIT in Vietnam, empowering enterprises to navigate their tax responsibilities effectively.

Keeping you updated with Vietnam’s corporate tax regulations and compliance requirements

Monitoring the statutory deadlines and meet the compliance filing deadlines

Preparation for filing of your estimated chargeable income and review of tax provision calculations

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