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VIETNAM CORPORATE TAXATION
Vietnam has a comprehensive corporate tax system, which imposes tax obligations on companies operating within the country. Corporate tax is levied on the profits generated by a company and is one of the main sources of revenue for the Vietnamese government.
The current corporate tax rate in Vietnam is 20%. It is important for companies operating in Vietnam to understand their corporate tax obligations and to ensure that they are in compliance with local tax laws and regulations.
Other taxes levied by Vietnam include excise taxes, stamp charges, land use taxes, environmental protection taxes, and natural resource taxes.
The country’s tax authorities General Department of Taxation, is responsible for enforcing tax laws and regulations and collecting taxes.
Vietnam also offers various tax incentives and exemptions for companies operating in certain economic zones or high-tech industries. Additionally, Vietnam has signed tax treaties with many countries to avoid double taxation for international transactions.
CORPORATE TAX IN VIETNAM 2023
The standard corporate income tax rate in Vietnam is 20%. This rate applies to most companies operating in the country. However, certain types of companies and industries may be subject to different tax rates. For example, small and medium-sized enterprises (SMEs) may be eligible for a reduced corporate income tax rate of 10%.
However, for enterprises that operate in the field of oil, gas, and rare natural resources, the corporate tax ranges from 32% to 50%, depending on specific types of projects and businesses.
Furthermore, Vietnam has signed tax treaties with many countries to avoid double taxation for international transactions. These treaties may also affect the corporate income tax rate that applies to companies operating in Vietnam.
Business expenses are deductible for CIT calculation purposes if they are: 1) directly related to the company’s operations, 2) supported by legitimate invoices and documents, 3) supported by a non-cash payment voucher for amounts over VND 20 million, and 4) not on the list of non-deductible expenses as specified by tax regulations.
Losses from a financial year can be carried forward for up to five years but cannot be carried back or offset against profits from previous tax years. There is also no tax grouping regime in place for offsetting losses between companies within the same group.
VIETNAM TAX INCENTIVES AND TAX HOLIDAYS
There are two types of tax incentives offered to enterprises in Vietnam: preferential tax rates and tax holidays, and which businesses benefit from various rates will depend on the industries, the places where they do business, and the size of the investment projects.
The following are typical Vietnam company tax preferential rates:
- 10% for 15 years
- 17% for 10 years
- 10% for lifetime
- 17% for lifetime
The tax holiday applies to qualified businesses through tax exemptions and a reduction in the amount of income tax that must be paid.
DETERMINING TAXABLE CORPORATE INCOME
Income from typical sources, including production, trade in goods, and the rendering of services, is included in the definition of “Taxable Income.” Other sources of income are also included in taxable income, such as:
- Income from the sale of real estate and capital;
- Income from the ownership or use of assets;
- Earnings from the assignment, leasing, and sale of assets;
- Interest on loans, deposits, or revenue from currency exchange;
- Recoveries from reserve funds for emergencies;
- Recovering bad debts that have been written off;
- Income from debts payable to unidentifiable creditors;
- Undisclosed company income in prior years; and
- Income from production and/or business ventures outside of Vietnam is one of the other sources of income.
- Income through a capital contribution, a joint venture, or other association with regional businesses after the applicable corporate tax has been paid;
- Income generated by cooperatives through salt production, aquaculture, or agriculture;
- Revenue from direct technical services provided to agriculture;
- Income from contracts for conducting scientific research or creating technology, products that are undergoing experimental manufacture, or products that use the most recent technology in Vietnam;
- Income received from a business (apart from those in the banking and real estate trade sectors) where 30% of the workforce is made up of persons with disabilities, people in recovery from addiction, or people living with HIV/AIDS;
- Income from the provision of vocational training for members of ethnic minorities, people with disabilities, or kids in social trouble;
- Receivable funds for scientific study or for social, cultural, artistic, humanitarian, and other activities in Vietnam;
- Additional regulated sources of income.
- Office expenses (e.g. phone and broadband bills)
- Travel expenses for business trips (e.g. petrol, transport fares)
- Uniforms or protective gear clothing costs
- Wages and subcontractor expenses
- Costs associated with stock and/or raw materials for resale
- Bank charges or insurance fees.
- Heating and lighting the commercial space
- Rent for commercial space and company rates
- Costs of marketing and advertising
CORPORATE TAX RETURN FILING IN VIETNAM
Companies are required to file their annual corporate income tax (CIT) return and audited financial statements by the last day of the third month following the end of their calendar or financial year.
Based on their quarterly financial results, businesses in Vietnam are required to make provisional corporate income tax (CIT) payments every quarter.The 30th day of the following quarter is the deadline for these payments. Provisional CIT payments are made to make sure businesses are paying a portion of their CIT liability regularly rather than delaying payment until the end of the tax year.
It’s important to know that any gap will be subject to late payment interest if the total provisional CIT paid in the first three quarters of a tax year is less than 75% of the total CIT due for the year. The third quarter provisional CIT liability payment deadline will serve as the starting point for the calculation of late payment interest.
The final CIT return must be submitted by the last day of the third month after the end of the calendar year or financial year, together with the final payment of CIT. The company’s entire CIT liability for the year must be disclosed in the final CIT return, and any outstanding amounts must be settled at this time.
OTHER TAXES IN VIETNAM
Value Added Tax (VAT)
VAT (Value-Added Tax) is a consumption tax imposed on the sale and import of goods and services in Vietnam. Currently, there are four different VAT rates applicable based on the goods and services being purchased: 0%, 5%, 10%, and 15%.
- VAT is generally paid by the seller of goods or services, but the buyer is responsible for withholding and remitting the VAT to the tax authorities.
- VAT registration is mandatory for businesses with annual revenue exceeding VND 20 billion or for those who engage in certain specified activities.
- Businesses that are registered for VAT are required to file VAT returns on a monthly or quarterly basis, depending on the level of their taxable turnover.
- The export of goods and services is zero-rated for VAT purposes, meaning that businesses can claim back any input VAT incurred in the production or distribution of the exported goods or services.
Goods that are exported from or imported into Vietnam, as well as those moved from the domestic Vietnamese market into a non-tariff zone and vice versa, are all subject to customs duties. Transit, trans-shipment of commodities, humanitarian aid, non-refundable aid, and other specific products are exempt from customs taxes.
The transaction value of the items at the port of import (excluding insurance costs and international freight charges) or the actual amount owed up to the first port of entry is often used to determine the dutiable value. Ordinary rates, preferred rates, and exceptionally preferential rates are the three different sorts of tax rates. According to the Preferential Import Tariff, ordinary rates are universally established at 150% of the applicable item’s preferential tax rate.
Special Sales Tax (SST)
Special Sales Tax (SST), which is a type of consumption tax that is levied on specific goods and services that are considered luxury or harmful to the environment or public health. The SST rate varies depending on the type of goods or services being taxed, but it is generally higher than the standard Value Added Tax (VAT) rate.
Businesses that supply taxable goods or services are responsible for collecting and remitting the SST to the government. It is important for businesses in Vietnam to understand their SST obligations and ensure compliance with local tax laws and regulations.
Businesses must withhold, declare, and pay personal income tax “PIT” on the wages and salaries they pay their employees in accordance with the withholding mechanism used in Vietnam.
Residents and non-residents in Vietnam are assigned different PIT liabilities. While non-residents are liable to a flat rate of 20% on their income sourced in Vietnam, residents are subject to PIT on their worldwide income at progressive tax rates ranging from 5% to 35%.
For tax residents, there are a number of tax breaks available, including personal and dependent exemptions, mandatory insurance contributions, voluntary pension contributions, and donations to specific charitable, humanitarian, and educational promotion funds, which can be used to lower employment income assessed for PIT purposes.
Regardless of the source of the income, employment income received in relation to the labour done in Vietnam is accessible for PIT purposes without any adjustment for tax relief measures or deductions.
Penalties for various tax offences in Vietnam are outlined in specific regulations and can range from relatively small administrative fines to larger penalties that are multiple times the additional tax owed.
Historically, penalties have been imposed unevenly and unpredictably. However, the tax authorities have recently taken a stricter stance, increasing the likelihood of fines being imposed for overdue tax payments, such as those discovered through tax audit investigations.
It is crucial for businesses and individuals to stay informed and comply with tax laws and regulations in Vietnam to avoid any potential penalties.
Are there any exemptions or incentives for foreign companies doing business in Vietnam?
Yes, there are several exemptions and incentives for foreign companies doing business in Vietnam such as reduced CIT rates for new and high-tech companies, and exemptions for foreign-invested enterprises in certain economic zones.
Are there any double tax agreements in place between Vietnam and other countries?
Yes, Vietnam has double tax agreements with more than 70 countries to prevent double taxation and promote international trade and investment.
How often are tax returns required to be filed in Vietnam?
Companies are required to file monthly or quarterly VAT returns and annual CIT returns depending on their level of taxable turnover.
Are there any specific requirements for expatriates working in Vietnam regarding taxes?
Yes, expatriates working in Vietnam are subject to the same tax laws as Vietnamese citizens and are required to file tax returns if they meet the minimum income threshold. They may also be eligible for certain exemptions or reductions in taxes based on the terms of their employment contract and the laws of their home country.
What is the corporate income tax rate in Vietnam?
The corporate income tax (CIT) rate in Vietnam is 20%.
A CIT rate of 32 to 50 percent applies to businesses that are seeking, exploring, and exploiting petroleum and gas reserves in Vietnam. A CIT rate of 40 or 50 percent applies to businesses that are seeking , exploring, and exploiting rare minerals, including silver, gold, and gemstones.
Does CIT affect profit repatriation?
A corporation must ensure that it has finished the CIT declaration for the appropriate financial year and released audited financial statements before repatriating profits. The business must then notify the tax authority of its intent to repatriate profits. The gains may be distributed if, after seven days, the tax bureau doesn’t issue a notice.
Businesses should wait until the middle to the end of April before they may send their profits abroad. However, profit repatriation will not be permitted if the company’s financial accounts display an accumulated loss.