Worldwide Tax Summaries
In September 2021, the Ministry of Finance (MoF) officially issued Circular 80/2021/TT-BTC (Circular 80) providing detailed guidance on the Law on Tax Administration on various matters, which also have a chapter focus on the tax filing mechanism for foreign companies doing e-commerce, digital business, and other business in Vietnam without a permanent establishment (PE). The General Department of Taxation (GDT) officially launched the portal for direct tax registration, declaration, and payments by e-commerce companies in Vietnam on 21 March 2022. The GDT published the names of 103 foreign companies registering up to June 2024.
In addition, the government also issued Decree 85/2021 setting out, inter alia, new rules on e-commerce detailing obligations of foreign traders that have e-commerce activities in Vietnam and related parties.
On 9 February 2022, Vietnam signed the MLI, becoming the 99th jurisdiction to join the Convention. As a result, potentially 75 of Vietnam’s double tax agreements (DTAs) would be amended once the MLI comes into effect. Taxpayers should be aware of these potential changes to DTAs and the impact this may have on their plans for structuring their investments and transactions to claim treaty benefits in Vietnam.
In May 2023, Vietnam deposited its instrument of ratification for the MLI (BEPS Convention). The BEPS Convention entered into force on 1 September 2023 for Vietnam.
Under the BEPS Pillar 2 model issued by the Organisation for Economic Co-operation and Development (OECD), each in-scope multinational enterprise (MNE) should pay a minimum effective tax rate of 15% on profits in each of the jurisdictions where they operate.
On 29 November 2023, the Resolution on Global Minimum Tax policy in Vietnam (‘the Resolution‘) was approved by the National Assembly and came into effect from 1 January 2024.
The Resolution provides that Vietnam will adopt (i) the Qualified Domestic Minimum Top-Up Tax (QDMTT) rule and (ii) the Income Inclusion Rule (IIR). Both rules are intended to protect Vietnam’s tax revenue in the context of Pillar 2 global implementation. The QDMTT rule targets foreign inbound investment while the IIR targets Vietnam’s outbound investment.
| QDMTT | IIR | |
| In-scope taxpayers | Vietnamese subsidiaries of MNEs whose foreign ultimate parent entity (UPE) has revenue in its consolidated financial statement of at least 750 million euros (EUR) in at least two of the four fiscal years immediately preceding the fiscal year under review. | Vietnamese UPE, intermediate parent company, or partially-owned parent entity located in Vietnam that owns (directly or indirectly) a low-taxed subsidiary at any time during the fiscal year and has revenue in its consolidated financial statement of at least EUR 750 million in at least two of the four fiscal years immediately preceding the fiscal year under review. |
| Mechanism | In-scope taxpayers shall pay a top-up tax equal to the top-up tax percentage (15% minus the group effective tax rate of all constituent entities in Vietnam) multiplied by the excess profit for each fiscal year. The calculation of Global Anti-Base Erosion (GloBE) income, excess profit, and effective tax rate in Vietnam is determined by reference to all constituent entities, regardless of their profit or loss position, following the OECD’s GloBE rules. |
In-scope taxpayers shall pay tax in an amount equal to their allocable share of the top-up tax of that low-taxed constituent entity for the fiscal year. |
Following the OECD’s GloBE rules, the top-up tax will be paid to the central state budget, unlike corporate income tax (CIT), which is shared between central and provincial state budgets.
Tax filing obligations:
Safe harbour and penalty relief:
All taxes are imposed at the national level. The standard corporate income tax (CIT) rate is 20%. Enterprises operating in the oil and gas industry are subject to CIT rates ranging from 25% to 50%, depending on each contract. Enterprises engaging in prospecting, exploration, and exploitation of certain mineral resources are subject to CIT rates ranging from 32% to 50%, depending on each project.
The government has issued Decree 64/2024 on extension of deadlines for tax and land rental payments in 2024, which took effect from the signing date of 17 June 2024 to 31 December 2024.
There is no concept of tax residency for CIT. Business organisations established under the laws of Vietnam are subject to CIT and taxed on worldwide income. 20% CIT shall be applicable to foreign income. There are no provisions for tax incentives for such income.
Foreign organisations carrying out business in Vietnam without setting up a legal entity in Vietnam and/or having Vietnam-sourced income are considered foreign contractors, irrespective of whether the services are performed inside or outside Vietnam. Payments to foreign contractors are subject to Foreign Contractor Tax (FCT), which consists of value-added tax (VAT) and CIT elements. See the Withholding taxes section for more information.
Preferential CIT rates of 10%, 15%, and 17% are available where certain criteria are met.
Special investment incentives are available for research and development (R&D) and large investment projects specified in the Law on Investment.
The Vietnamese government also has included a plan to review the impact of international tax reforms (e.g. Pillar 1 and Pillar 2) and amend or make changes to the domestic tax laws accordingly. With the policy relating to the global minimum tax rate, the application of tax incentives could be changed.
In June 2024, a draft law on CIT was posted on the official website of the government for public comments. It is expected that the draft law will be presented to the National Assembly for consideration in October 2024 and ratified in May 2025. The draft law makes various amendments to the existing regulations on CIT incentives, including proposed changes to the incentivised sectors, proposed changes in incentivised locations, and simplified rules for business expansions. The draft law also emphasises that in cases of any inconsistency between other laws and the CIT Law the CIT Law shall prevail.
See the Tax credits and incentives section for more information.
Taxable profit is the difference between total revenue, whether domestic or foreign sourced, and deductible expenses (see the Deductions section), plus other assessable income.
Taxpayers are required to prepare an annual CIT return, which includes a section for making adjustments to accounting profit to arrive at taxable profit.
There are no local, state, or provincial income taxes in Vietnam.
There is no concept of tax residency for CIT. Enterprises established under the law of Vietnam are subject to CIT in Vietnam. In addition, Vietnam has a broadly worded ‘permanent establishment’ definition.
In Vietnam, a PE is defined as “a fixed place of business through which a foreign enterprise carries out part or the whole of its business or production activities in Vietnam”. The PE of a foreign enterprise shall include:
Foreign enterprises with their PEs in Vietnam shall pay tax on the taxable income earned in Vietnam (irrespective of whether it relates to the PE) and on the taxable income generated out of Vietnam and related to operations of the PEs.
Where a treaty on avoidance of double taxation to which Vietnam is a signatory contains different provisions relating to PE, such treaty shall apply (see the Withholding taxes section for a list of countries with which such treaties exist).
VAT applies to goods and services used for production, trading, and consumption in Vietnam (including goods and services purchased from non-residents), with certain exemptions. Depending on the category of goods or services, the VAT rates are as follows:
On 29 June 2024, the National Assembly approved a VAT reduction for the period from 1 July 2024 to 31 December 2024. The 2% VAT reduction will be applicable to goods and services that are currently subject to 10% VAT (with certain exceptions).
A separate category includes supplies not subject to output VAT, but where related input VAT can, nevertheless, be credited. This category includes the following:
There are stipulated categories of VAT exemptions, including certain agricultural products; goods/services provided by individuals having annual revenue of 100 million Vietnamese dong (VND) or below; imported or leased drilling rigs, aeroplanes, and ships of a type that cannot be produced in Vietnam; transfer of land use rights (LUR) (detailed guidance is provided to specific cases); various financial services; various securities activities including fund management; capital assignments; foreign currency trading; debt factoring; certain types of insurance; medical services and elderly/disabled people care service; postal and telecommunications provided by the government; education, printing/publishing, public transportation, export of unprocessed natural resources, etc.
When a supply cannot be readily classified based on the tax tariff, VAT must be calculated based on the highest rate applicable for the particular range of goods that the business supplies.
Taxpayers must file VAT returns on a monthly basis by the 20th day of the subsequent month or on a quarterly basis by the last day of the first month of the following quarter (for companies with prior year annual revenue of VND 50 billion or less).
From 1 July 2022 onwards, all businesses, economic organisations, business households, and individuals paying tax under the declaration method must use e-invoices (except for certain cases).
Customs duties generally comprise import duty and import VAT. Most goods imported into Vietnam are subject to import duty and import VAT, except those that meet the conditions for exemption, such as goods imported for the production of subsequently exported goods under toll manufacturing or contract manufacturing arrangements or imported goods of export processing enterprises’ production activities, goods imported to form fixed assets of incentivised investment projects (in this case import VAT is not exempted), etc.
In addition to import duty and import VAT, there are also export duty, import special sales tax (SST), environment protection tax (EPT), anti-dumping tax, anti-subsidy tax, and safeguard tax, which are applied to only a limited number of goods. Anti-dumping tax, anti-subsidy tax, and safeguard tax are all considered as supplemental import duties applicable to the imported goods under certain scenarios.
Import duty is computed on an ad valorem basis (i.e. multiplying the imported good’s dutiable value by the corresponding import duty rate).
Import duty rates are classified into three categories: ordinary rates, preferential rates, and special preferential rates.
Preferential rates are applicable to imported goods from countries that have most-favoured-nation (MFN, also known as normal trade relations) status with Vietnam. The MFN rates are in line with Vietnam’s World Trade Organization (WTO) commitments and are applicable to goods imported from other WTO member countries.
Special preferential rates are applicable to imported goods from countries that have a special preferential trade agreement (or free trade agreement [FTA]) with Vietnam. Currently, effective FTAs to which Vietnam is a party include:
In addition, negotiations on the FTA with the European Free Trade Association (Vietnam and Iceland, Liechtenstein, Norway, and Switzerland), with the United Arab Emirates, and between ASEAN member states and Canada are in progress.
To be eligible for preferential rates or special preferential rates, the imported goods must be accompanied by an appropriate Certificate of Origin. When goods are sourced from non-preferential treatment/non-favoured countries, the ordinary rate (being the MFN rate with a 50% surcharge) is imposed.
Import VAT is applied to imported goods at a rate most commonly of 10%. The VAT reduction as mentioned above is also applied at import stage.
Export duties are charged only on a few items, basically certain natural resources. Rates range from 0% to 40%.
SST is a form of excise tax that applies to selected goods and services. Goods that are manufactured and/or imported into Vietnam and subject to SST include cigars/cigarettes, spirits, wine and beer, automobiles, motorcycles, air conditioners, airplanes, petrol, etc. For goods, SST is charged at the production or importation stage. Imported goods (except for various types of petrol) are subject to SST at both the import and selling stages. The SST paid at importation will be creditable against SST paid at the selling stage.
The SST rates range from 7% to 150% for motor vehicles for the transport of fewer than 24 people.
The National Assembly ratified a new law amending and supplementing a number of provisions under certain laws, including the Law on SST. Accordingly, SST rates applicable to electric cars will be significantly reduced over the next five years, effective from 1 March 2022.
In February 2023, the MoF released a proposal to revise the SST law for public comments. In July 2023, the government assigned the MoF to complete the dossier requesting the amendment of Law on SST. The government also requested to amend the law, including the legal basis for tax bases and SST rates, hybrid tax calculation method for certain products, and appropriate solutions to increase SST rates.
In June 2024, the MoF released an updated version of the draft SST Law, which sets out a roadmap for tax rate increases from 2026 through 2030 and expands the scope of SST to include new products and services, notably beverages with a certain sugar content.
The draft law is proposed to be submitted to the National Assembly for consideration at the 8th National Assembly meeting in October 2024 and for approval at the 9th National Assembly meeting in May 2025.
Foreign investors generally pay rental fees for land use rights. The range of rates is wide depending upon the location, infrastructure, and the industrial sector in which the business is operating.
In addition, owners of houses and apartments have to pay land tax under the law on non-agricultural land use. The tax is charged on the specific land area used based on the prescribed price per square metre at progressive tax rates ranging from 0.03% to 0.15%.
Recently, the land rental fees are entitled to a 30% reduction for 2022 and 2023 to support the economic restoration and development after COVID-19.
Certain assets, including houses, land, automobiles and motorcycles, etc., that are subject to registration of ownership are subject to stamp duty. The stamp duty rates vary depending on the asset transferred.
Please see the Other taxes section in the Individual tax summary.
On 17 November 2020, the National Assembly issued the new Law on Environment 72/2020/QH14, which took effect from 1 January 2022, setting out a comprehensive guidance on environmental protection matters.
Environmental or green taxes include taxes on energy, transport, pollution, and resources. Energy taxes are taxes on energy products and electricity used for transport, such as petrol and diesel, and for other purposes, such as fuel oils, natural gas, coal, and electricity used in heating.
Below are some common types of green taxes.
NRT is payable by industries exploiting Vietnam’s natural resources, including petroleum, minerals, natural gas, forest products, natural seafood, natural bird’s nests, and natural water. Natural water used for agriculture, forestry, fisheries, salt industries, and sea water for cooling purposes may be exempt from NRT, provided that certain conditions are satisfied. The tax rates vary depending on the natural resource being exploited, ranging from 1% to 40%, and are applied to the production output at a specified taxable value per unit. Various methods are available for the calculation of the taxable value of the resources, including cases where the commercial value of the resources cannot be determined. Crude oil, natural gas, and coal gas are taxed at progressive tax rates depending on the daily average production output.
EPT is an indirect tax that is applicable to the production and importation of certain goods deemed detrimental to the environment, the most significant of which are petroleum and coal. The tax is calculated as an absolute amount on the quantity of the goods.
The tax rates vary among the goods applied from VND 500/kg for restricted use chemicals to VND 50,000/kg for plastic bags.
In the new Law on Environment, the government introduced the concept of a carbon trading plan and an intention to impose a cap on carbon emission, i.e. carbon emission quota to all manufacturing companies that emit carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3). Enterprises that are in the list of sectors producing greenhouse gas need to be inspected.
Branches of foreign entities are subject to the same CIT regime as entities incorporated in Vietnam.
At present, there are no provisions for valuing inventories or determining inventory flows. There is a separate tax guidance for making provision for inventories and certain other provisions.
Gains from the revaluation of assets for the purposes of capital contribution or transfer upon division, de-merger, consolidation, merger, or conversion of business are subject to the standard CIT rate.
Gains derived from the sale of interest in a Vietnam company are in many cases subject to 20% CIT. This is generally referred to as capital gains tax (CGT) although it is not a separate tax as such. The taxable gain is determined as the excess of the sale proceeds less historical cost (or the initial value of contributed charter capital for the first transfer) less transfer expenses.
Recently there has been a move to tax not only the transfer of interest in a Vietnamese entity, but also the transfer of interest in overseas parents (direct or indirect) of a Vietnamese company. Under the 2019 tax administration law and its guiding instruments, the taxing position may be strengthened.
Transfers of securities (bonds, shares of public joint stock companies, etc.) by a foreign entity are subject to CIT on a deemed basis at 0.1% of the total sales proceeds. Gains derived by a resident entity from the transfer of securities, however, are taxed at 20%.
On 11 June 2024, a draft law on CIT was released for public consultation. The draft law includes a proposal to drastically amend the Capital Gains Tax regime effective from 1 January 2026. Accordingly, tax on securities transfers would remain unchanged but transfers of capital would be subject to CGT at the rate of 2% on the sales proceeds, irrespective of whether there is a gain or not.
Dividends received from investments in other companies in Vietnam are not subject to CIT if they have been subject to CIT at the investee companies.
Interest income is taxed at the standard CIT rate.
Certain types of interest income are entitled to tax incentives granted to the investment project, depending on the conditions on which tax incentives are granted.
Currently, royalty income is subject to tax at the standard CIT rate.
Tax incentives that are available for investment in encouraged sectors do not apply to other income (except for income that directly relates to the incentivised activities, such as disposal of scrap), which is broadly defined.
The following income items are subject to the standard CIT rate and are not entitled to tax incentives (including preferential tax rate and exemption/reduction):
Foreign income, under the domestic tax law, is subject to the standard CIT rate with tax credits available (see Foreign tax credit in the Tax credits and incentives section).
Foreign income shall be taxed when earned. There are no provisions for tax deferral or preferential tax rates for foreign income.
Tax depreciation may differ from accounting depreciation. Depreciation in excess of the rates specified in the regulations on tax depreciation is not deductible. These regulations specify maximum and minimum permissible effective lives for various classes of assets, including intangibles. Current straight-line tax depreciation rates range from 2% to 33.33%.
The depreciation period of assets of the Build Operate Transfer (BOT) and Business Cooperation Contract (BCC) projects is the remaining life of the contract.
Pre-establishment expenses (i.e. expenses for setting up a company) and certain expenses (i.e. training, advertising before establishment, costs for the research stage, relocation cost) can be amortised over a period of up to three years from the commencement of operations. In order for pre-establishment and pre-operating expenses to be deductible for CIT purposes, supporting documents to substantiate the fact that these pre-operating expenses were necessarily and legitimately incurred for the establishment of the company should be available.
Interest expenses are generally deductible, except for certain cases.
Interest on loans corresponding to the portion of charter capital not yet contributed as scheduled is not deductible.
Interest on loans from non-economic and non-credit organisations exceeding 1.5 times the interest rate set by the State Bank of Vietnam is not deductible.
Interest on loans that has been capitalised is not deductible.
Tax deductibility of interest on loans is capped at 30% of earnings before interest, taxes, depreciation, and amortisation (EBITDA) when a taxpayer has related-party transactions (see Transfer pricing in the Group taxation section).
The decree on transfer pricing could be amended soon.
Provisions for bad debts are deductible if the provision is made in accordance with the guidance by the MoF. Certain conditions must be satisfied in order to set up a provision for bad debts (e.g. the debts must be supported by original documentation, the debts must be overdue under the terms of an economic contract, etc). In the absence of satisfying the necessary conditions, the provision for bad debts will generally not be deductible.
Administrative penalties and fines are specifically considered non-deductible.
Creditable input VAT, CIT, and other fees/charges are not deductible for CIT purposes.
The following other expenditures are specifically stated to be non-deductible:
For certain businesses (e.g. insurance companies, securities trading, lotteries), the MoF provides specific guidance on deductible expenses for CIT purposes.
Losses may be carried forward fully and consecutively for a maximum of five years. Carryback of losses is not permitted.
There are no special restrictions on the deductibility of royalties, loan interest, and service fees paid to foreign affiliates (except for those paid by branches). However, the payment must be defendable on an arm’s-length basis as required by transfer pricing regulations and substantiated by sufficient supporting documents for CIT deduction purposes (see Transfer pricing in the Group taxation section). Certain contracts for the transfer of technology and foreign loans must be registered with the competent authorities.
There is no provision for any form of consolidated filing or group loss relief in Vietnam.
On 5 November 2020, the government issued Decree 132/2020/ND-CP, setting out new rules on transfer pricing in Vietnam. Decree 132 takes effect from 20 December 2020, applies for the financial year 2020 onwards.
The ownership threshold required to be a ‘related party’ under Decree 132 is still 25%. Under Decree 132, a new related party definition (Item l Point 2, Article 5 of Decree 132) is introduced. An enterprise and an individual are considered related parties if they have the following transactions in a tax period:
The acceptable methodologies for determining arm’s-length pricing are analogous to those espoused by the OECD in the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (i.e. comparable uncontrolled price, resale price, cost plus, profit split, and comparable profits methods).
Under Decree 132, the acceptable arm’s-length range is raised to span the 35th percentile to the 75th percentile (tightened from the 25th to the 75th percentile range under Decree 20). As such, the minimum threshold is raised by 10%.
Therefore, taxpayers will need to re-assess their transfer pricing positions for financial year 2020 onwards to ensure that their margins fall within this tighter range. Specifically, it would be worthwhile to give further consideration to whether the current transfer pricing policy of the group (if any) applicable to the Vietnamese entity(ies) aligns with the arm’s-length range stipulated under Decree 132.
Taxpayers must first look for comparables in the same local market or region and then broaden to other countries in the region that have similar industry circumstances and economic development level.
Compliance requirements include an annual declaration of related-party transactions and transfer pricing methodologies used, and a taxpayer confirmation of the arm’s-length value of their transactions (or otherwise the making of voluntary adjustments).
Taxpayers engaged in related-party transactions solely with domestic related parties could be exempt from the requirements to disclose information on such transactions in the transfer pricing declaration forms, where both parties have the same tax rate and neither party enjoys tax incentives.
Companies that have related-party transactions must also prepare and maintain contemporaneous transfer pricing documentation. Decree 132 introduces a three-tiered transfer pricing documentation approach to collect more tax-related information on multinational companies’ business operations, specifically a Master File, Local File, and country-by-country (CbC) report. The three-tiered transfer pricing documentation has to be prepared and maintained in house by the submission date of the annual tax return.
If the taxpayer’s ultimate parent resides in Vietnam and has worldwide consolidated revenues in the fiscal year of at least VND 18,000 billion, the ultimate parent company in Vietnam is responsible for preparing and submitting the CbC report. Under Decree 132, the CbC report is required to be filed with the tax authorities within 12 months from the fiscal year-end. However, if the ultimate parent is outside Vietnam, the CbC report is not required to be filed locally. Instead, such CbC report (that has been filed by the headquarters of the local Vietnam company in its jurisdiction) would be made available to the Vietnamese tax authorities through the automatic exchange of information (AEOI) procedure. However, in certain circumstances, a company is required to submit the CbC report of the ultimate parent company and relevant notification locally within 12 months from the year-end and before or on the fiscal year-end of the ultimate parent company, respectively.
Under Decree 132, a taxpayer is exempt from preparing transfer pricing documentation (but not all other aspects of the Decree) if one of the following conditions is met:
There has been a marked increase in the number of transfer pricing audits performed in recent years, with these adopting an increasingly sophisticated approach. Common challenges by the tax authorities include questions on the validity of comparables selected in transfer pricing documentation, deductibility of intra-group service charges, and fluctuations in segmented and/or whole company profit margins over years. Companies in loss-making positions also draw attention from the tax authorities and are expected to be in the position to explain their business circumstances. Most general tax audits will now include a review of the taxpayer’s transfer pricing position.
Under Decree 132, the cap on tax deductibility of interest increases to 30% of EBITDA. The cap applies to net interest expense (i.e. after offsetting with interest income from loan and deposit).
Non-deductible interest expenses can be carried forward to the subsequent five years. Certain types of financing are excluded from the cap, including interest on official development assistance (ODA) loans, various preferential loans made by the government, and loans made for implementing national programs and state social benefit policies.
Taxpayers have the option to enter into unilateral, bilateral, or multilateral APAs with the tax authorities. The GDT has been in negotiations with the competent authorities of various overseas jurisdictions, but no APA has been concluded.
On 18 June 2021, the Ministry of Finance issued Circular 45/2021/TT-BTC, setting out new rules on APAs in Vietnam. Circular 45 takes effect from 3 August 2021 and replaces the existing APA Circular 201 issued in 2013.
There are no thin capitalisation requirements in the tax legislation. However, the level of permitted debt funding will be limited by virtue of licensing requirements. The maximum amount of debt funding is the difference between the licensed investment capital and charter capital.
Decree 132, however, provides that deductible interest on loans shall be subject to the cap of 30% of EBITDA (as above).
Vietnam does not have any CFC legislation.
In respect of Vietnamese enterprises earning income from overseas investment, CIT (or a kind of tax with a nature similar to CIT) paid in a foreign country or paid on behalf by its partner in the country receiving the investment (including tax levied on the dividend) is allowed to be creditable. The credit shall not exceed the CIT amount payable in Vietnam.
The foreign income tax that is entitled to exemption or reduction in accordance with the foreign law shall also be credited.
Tax incentives are granted based on regulated encouraged sectors, encouraged locations, and size of the projects. Business expansion projects, which meet certain conditions, are also entitled to CIT incentives. New investment projects and business expansion projects do not include projects established as a result of certain acquisitions or reorganisations.
The sectors that are encouraged by the Vietnamese government include education, health care, sport/culture, high technology, environmental protection, scientific research and technology development, infrastructural development, processing of agricultural and aquatic products, software production, and renewable energy.
New investment or expansion projects engaged in manufacturing industrial products prioritised for development are entitled to CIT incentives if they meet one of the following conditions:
Locations that are encouraged include qualifying economic and high-tech zones, certain industrial zones, and designated difficult socio-economic areas.
Large manufacturing projects (excluding those related to the manufacture of products subject to special sales tax or those exploiting mineral resources) are entitled to CIT incentives as follows:
The two common preferential rates of 10% and 17% are available for 15 years and 10 years respectively, starting from the commencement of generating revenue from the incentivised activities. The duration of application of the preferential tax rates can be extended in certain cases. When the preferential rates expire, the CIT rate reverts to the standard rate. The preferential rate of 15% applies for the entire project life in certain cases. Certain social sectors (e.g. education, health) enjoy the 10% rate for the entire life of the project.
Special investment incentives are available for the qualified R&D and large investment projects specified in the Law on Investment. The CIT incentives vary depending on a number of criteria. The most favourable package comprises a preferential tax rate of 5% for a period of 37 years, 6 years of tax exemption, plus a 50% CIT reduction for a subsequent 13 years. In addition, there is also exemption/reduction from land rental fee and water rental fee for a period of time.
Investors may be considered for tax holidays and reductions. The holidays take the form of a complete exemption from CIT for a certain period beginning immediately after the enterprise first makes profits from the incentivised activities, followed by a further period where tax is charged at 50% of the applicable rate. However, where the enterprise has not derived profits within three years of the commencement of generating revenue from the incentivised activities, the tax holidays/tax reduction will start from the fourth year of operation.
Criteria for eligibility to these holidays and reductions are set out in the CIT regulations.
As noted above, R&D and investment projects that are entitled to special investment incentives would enjoy longer tax exemption and reduction periods.
Certain incentives, including a lower CIT rate, are granted to small and medium enterprises (SMEs) (various criteria applied to be considered as SMEs).
Tax incentives that are available for investment in encouraged sectors do not apply to other income earned by a company (except for certain income).
Additional tax reductions may be available for engaging in manufacturing, construction, and transportation activities that employ several female staff and/or ethnic minorities. CIT reduction must correspond with the actual payment for those employees.
Business entities in Vietnam are allowed to set up a tax-deductible R&D Fund. Enterprises can appropriate up to 10% of annual profits before tax to the fund. Various conditions apply.
In May 2024, the Ministry of Planning and Investment (MPI) released a draft decree on the establishment of an investment support fund for public comment.
Taxpayers that qualify requirements in terms of revenue or investment capital in the high-tech industries can have access to grant support from the fund. The fund is proposed to be operational in 2024 and available to taxpayers’ financial years that start on or after 1 January 2024.
Green incentives are financial benefits to encourage projects and investments that reduce environmental harm. They include environmental cash grants for such projects and tax incentives that reduce tax liabilities to stimulate investments that mitigate environmental impact.
Apart from the tax incentives, in-scope projects shall be granted with other incentive schemes, such as: land related benefits (e.g. priority in the allocation of land, reduction of land rental); preferential financial schemes; exemption and reduction of environmental protection taxes and fees; and subsidies to environmental-friendly products and services.
Foreign Contractor Tax (FCT) is withheld on payments to foreign contractors.
FCT on payments to foreign contractors applies where a Vietnamese contracting party (including a foreign-invested enterprise incorporated in Vietnam) contracts with a foreign party that does not have a licensed presence in Vietnam, irrespective of whether the services are provided in Vietnam or overseas.
This FCT generally applies to payments derived from Vietnam, except for the pure supply of goods (i.e. where the responsibility, cost, and risk relating to the goods passes at or before the border gate of Vietnam and there are no associated services performed in Vietnam), services performed and consumed outside Vietnam, and various other services performed wholly outside Vietnam (e.g. certain repairs, training, advertising, promotion).
In addition, certain distribution arrangements where foreign entities are directly or indirectly involved in the distribution of goods or provision of services in Vietnam are subject to FCT (e.g. where the foreign entity retains ownership of the goods; bears distribution, advertising, or marketing costs; is responsible for the quality of goods or services; makes pricing decisions; or authorises/hires other Vietnamese entities to carry out part of the distribution of goods/provision of services in Vietnam).
Foreign contractors can apply to be deduction-method VAT payers if they adopt the Vietnamese accounting system. If accounting records are adequate, the foreign contractor will pay CIT on actual profits, but otherwise on a deemed-profit basis.
For direct (non-deduction-method) foreign contractors, VAT and CIT will be withheld by the contracting party at deemed rates. Various rates are specified according to the nature of the contract performed. For CIT, the FCT rate varies from 0.1% to 10%. For VAT, the FCT rate can also range from 2% to 5%. The VAT withheld by the contracting party is an allowable input credit in its VAT return.
Foreign contractors can pay FCT using a hybrid method. The hybrid method allows foreign contractors to register for VAT and accordingly pay VAT based on the deduction method but with CIT being paid under the direct method rates on gross turnover. To apply this method, the foreign contractors need to satisfy certain conditions.
A summary of VAT and CIT FCT rates for certain activities follows:
| Types of payment | Deemed VAT rate (%) (2) | Deemed CIT rate (%) |
| Supply of goods in Vietnam or associated with services rendered in Vietnam (including in-country import-export and imports, distribution of goods in Vietnam or delivery of goods under Incoterms where the seller bears risk relating to goods in Vietnam) | Exempt (1) | 1 |
| Services | 5 | 5 |
| Restaurant, hotel, and casino management services | 5 | 10 |
| Construction, installation without supply of materials, machinery, or equipment | 5 | 2 |
| Construction, installation with supply of materials, machinery, or equipment | 3 | 2 |
| Transportation | 3 (3) | 2 |
| Interest | Exempt | 5 |
| Royalties | Exempt/5 (4) | 10 |
| Transfer of securities | Exempt | 0.1 |
| Financial derivatives | Exempt | 2 |
| Other activities | 2 | 2 |
Notes
The FCT applied to interest payments to an overseas lender is 5%. Offshore loans provided by certain government or semi-governmental institutions may obtain an exemption from the interest FCT where a relevant DTA or inter-government agreement (IGA) applies.
Interest earned from bonds (except for tax-exempt bonds) and certificates of deposit are subject to 5% FCT. The sale of bonds and certificates of deposits are subject to deemed tax of 0.1% of the gross sales proceeds.
A 10% royalty FCT applies in the case of payments made to a foreign party for transfers of technology or software licence. Transfers of technology are defined very broadly. Certain contracts for the transfer of technology must be registered with the competent authorities.
Recently, the MoF has sought to impose a 5% VAT on the payments for the right to use a trademark.
Foreign companies engaged in or selling goods/services via e-commerce, digital platform, and other business in Vietnam without a PE now have to directly register and file tax returns in Vietnam for their income from selling goods/services to Vietnamese corporations and individuals. Foreign companies will be awarded with a tax code, declare tax online at the portal of the GDT on a quarterly basis, and pay tax online.
The tax payable will be determined based on the revenue derived in Vietnam at the deemed rates in accordance with the current VAT and CIT regulations (refer to the withholding tax [WHT] rates set out above). The tax rates would depend on the nature of goods or services provided by foreign suppliers.
If foreign companies do not directly register, declare, and pay tax in Vietnam, Vietnamese organisations and parties have the following responsibilities:
FCT applies on management fees and head office charges/services at the rates applicable to services (see above).
A Vietnam-based lessee is required to withhold tax from payments to an offshore lessor. 5% VAT and 5% CIT is applicable to the rental charge if it is an operating lease. If it is a finance lease, the rental payment will be exempt from VAT and subject to 5% CIT.
The above FCT rates may be reduced by a relevant DTA.
Circular 80/2021 provides new guidance on claiming tax treaty benefits, including the procedures and documents required for the submission. Notably, a formal review and approval process is now introduced.
A deadline for the tax authorities’ review and assessment of treaty claims is 30 days upon receipt of sufficient documents. The tax authority is required to issue a decision that approves the amount of tax eligible for exemption/reduction or notifies in writing to taxpayers the reasons for any rejection of the claim. This timeline can be extended for 10 days where the tax authority needs to conduct further examination to confirm the position. This could remove the current uncertainty in applying tax treaty benefits of foreign companies.
| Recipient | FCT (%) | |
| Interest | Royalties | |
| Non-treaty | 5 | 10 |
| Treaty: | ||
| Algeria (1, 2) | 15 | 15 |
| Australia | 10 | 10 |
| Austria (2) | 10 | 7.5/10 |
| Azerbaijan (2) | 10 | 10 |
| Bangladesh (2) | 15 | 15 |
| Belarus (2) | 10 | 15 |
| Belgium (2) | 10 | 5/10/15 |
| Brunei Darussalam (2) | 10 | 10 |
| Bulgaria (2) | 10 | 15 |
| Cambodia (2) | 10 | 10 |
| Canada (2) | 10 | 7.5/10 |
| China (2) | 10 | 10 |
| Croatia | 10 | 10 |
| Cuba | 10 | 10 |
| Czech Republic (2) | 10 | 10 |
| Denmark (2) | 10 | 5/15 |
| Egypt (1) | 15 | 15 |
| Estonia | 10 | 7.5/10 |
| Finland (2) | 10 | 10 |
| France | 0 | 10 |
| Germany (2) | 10 | 7.5/10 |
| Hong Kong (2) | 10 | 7/10 |
| Hungary | 10 | 10 |
| Iceland (2) | 10 | 10 |
| India (2) | 10 | 10 |
| Indonesia (2) | 15 | 15 |
| Iran (2) | 10 | 10 |
| Ireland (2) | 10 | 5/10/15 |
| Israel (2) | 10 | 5/7.5/15 |
| Italy (2) | 10 | 7.5/10 |
| Japan (2) | 10 | 10 |
| Kazakhstan (2) | 10 | 10 |
| Korea (North) (2) | 10 | 10 |
| Korea (South) (2) | 10 | 5/15 |
| Kuwait (2) | 15 | 20 |
| Laos | 10 | 10 |
| Latvia (2) | 10 | 7.5/10 |
| Luxembourg | 10 | 10 |
| Macau (2) | 10 | 10 |
| Macedonia (1) | 10 | 10 |
| Malaysia (2) | 10 | 10 |
| Malta (2) | 10 | 5/10/15 |
| Mongolia (2) | 10 | 10 |
| Morocco (2) | 10 | 10 |
| Mozambique | 10 | 10 |
| Myanmar (2) | 10 | 10 |
| Netherlands (2) | 10 | 5/10/15 |
| New Zealand | 10 | 10 |
| Norway (2) | 10 | 10 |
| Oman (2) | 10 | 10 |
| Pakistan (2) | 15 | 15 |
| Palestine | 10 | 10 |
| Panama | 10 | 10 |
| Philippines (2) | 15 | 15 |
| Poland | 10 | 10/15 |
| Portugal (2) | 10 | 7.5/10 |
| Qatar (2) | 10 | 5/10 |
| Romania (2) | 10 | 15 |
| Russia | 10 | 15 |
| San Marino | 10/15 | 10/15 |
| Saudi Arabia (2) | 10 | 7.5/10 |
| Serbia (2) | 10 | 10 |
| Seychelles | 10 | 10 |
| Singapore (2) | 10 | 5/10 |
| Slovakia (2) | 10 | 5/10/15 |
| Spain (2) | 10 | 10 |
| Sri Lanka (2) | 10 | 15 |
| Sweden (2) | 10 | 5/15 |
| Switzerland | 10 | 10 |
| Taiwan | 10 | 15 |
| Thailand (2) | 10/15 | 15 |
| Tunisia (2) | 10 | 10 |
| Turkey (2) | 10 | 10 |
| Ukraine (2) | 10 | 10 |
| United Arab Emirates (2) | 10 | 10 |
| United Kingdom (2) | 10 | 10 |
| United States (1, 2) | 10 | 5/10 |
| Uruguay | 10 | 10 |
| Uzbekistan (2) | 10 | 15 |
| Venezuela (2) | 10 | 10 |
Notes
Vietnam deposited its instrument of ratification for the MLI (BEPS Convention). The BEPS Convention entered into force on 1 September 2023 for Vietnam. Taxpayers should be aware of these potential changes to DTAs and the impact this may have on the plans for structuring the investments and transactions to claim treaty benefits in Vietnam.
In early July 2024, the GDT sent an official letter to local tax departments announcing the effective date of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC agreement) with Vietnam is 1 December 2023. The implementation date to support information exchange for tax periods starts from 1 January 2024.
The GDT also encloses a list of countries/territories that have signed the MAAC agreement and announces types of taxes that the agreement will apply, including VAT. Accordingly, the GDT requests local tax departments to implement the MAAC agreement in accordance with regulations on effective date and implementation date.
The standard tax year is the calendar year. However, different accounting year-ends can be used if approval is obtained from the authorities.
The annual final CIT return and the audited financial statements must be filed no later than the last day of the third month as of the ending date of a calendar year or a financial year.
Enterprises are required to make quarterly provisional CIT payments (no later than the 30th day of the next quarter) based on the quarterly business results. The total provisional CIT payment of four quarters of a tax year must not be less than 80% ('80% rule') of the total CIT liability for the year. Any shortfall will be subject to late payment interest, counting from the deadline for payment of the quarter 4 provisional CIT liability.
Final payment of CIT is due with the final CIT return (i.e. the last day of the third month as of the ending date of a calendar year or a financial year).
There are detailed regulations setting out penalties for various tax offences. These range from relatively minor administrative penalties to tax penalties amounting to various multiples of the additional tax assessed.
In practice, imposition of penalties has been arbitrary and inconsistent. However, in recent periods there has been a much tougher stance adopted by the tax authorities. Hence, where tax is paid late (e.g. as a result of a tax audit investigation), there is a significant likelihood of penalties being imposed.
Tax audits are carried out regularly and often cover a number of tax years. Prior to an audit, the tax authorities send the taxpayer a written notice specifying the timing and scope of the audit inspection.
The general statute of limitations for imposing tax is ten years and for penalties is five years. Where the taxpayer does not register for tax or commits evasion liable to criminal prosecution, the tax authorities can collect unpaid tax and penalties at any time.
Transfer pricing is commonly discussed in the press, and the enterprises that are attracting the attention of the tax authority are generally multinational companies that have many inter-company transactions, have reported losses for many years, and/or are expanding businesses.
The regulations on the conditions to enjoy CIT incentives are complicated. The guidance to classify new investment and investment expansion (these are subject to different incentive regimes) is not entirely clear. In addition, the ability to apply tax incentives is conditional on compliance to the strict accounting system requirements. Taxpayers are required to self-assess their eligibility to the tax incentives. The tax authorities therefore in tax audits focus on reviewing the taxpayers’ fulfilment of the conditions.
The tax authorities are strictly reviewing the documentation of expenses, including contracts, invoices, evidence of work done/benefit received, etc. Insufficient documentation is resulting in disallowance of input VAT credit/refund and CIT deductibility.
The customs authority has been requested to provide the tax authority with information of companies engaged in in-country import/export transactions in an effort to collect under-declared FCT arising from these transactions.
We have seen the tax authority seek to impose FCT on reimbursements of expatriate remuneration costs by Vietnamese entities. Companies need to ensure that supporting documents are available to show amounts have been reimbursed at cost.
In several fields, foreign investment will not be licensed or will only be licensed under special conditions. In accordance with the 2020 Law on Investment, a decree was issued that provides the lists of business sectors where market access by foreign investors is not allowed or allowed with certain conditions.
All buying, selling, lending, and transfer of foreign currency needs to be made through credit institutions and other financial institutions authorised by the State Bank of Vietnam (SBV).
Outflow of foreign currency by transfer is authorised for certain transactions, such as payments for imports and services abroad, refund of loans contracted abroad and payment of interest accrued thereon, transfer of profits and dividends, and revenues from transfer of technology.
All monetary transactions in Vietnam must be undertaken in Vietnamese dong. Exceptions are applicable to payments for exports made between principals and their agents, and payments for goods and services purchased from institutions authorised to receive foreign currency payments such as for air tickets, shipping and air freight, insurance, and international communications.
According to the Law on Enterprises, a foreign-invested enterprise may be established as either a single member limited liability or a limited liability with more than one member, a joint-stock company, or a partnership.
IP rights are protected by the Civil Code (1995 and 2005), the Law on Intellectual Property (2005, amended 2009, 2019, and 2022), and a host of subordinate legislation.
Vietnam is signatory to the Paris Convention, the Madrid Agreement on International Trademark Registration, and the Patent Cooperation Treaty, and is a member of the World Intellectual Property Organisation. Vietnam has entered into an agreement on copyrights with the United States (US). According to the Vietnam-US Bilateral Trade Agreement, Vietnam is further under the obligation to adhere to the Berne Convention.
Vietnam’s National Assembly ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 12 November 2018. Under the CPTPP, Vietnam has five years from the effective date of this agreement to update its Law on Intellectual Property to be consistent with the CPTPP provisions.
In 2019 and 2022, the National Assembly ratified amendments to the Law on Intellectual Property to improve the efficiency of IP rights protection activities and reflect Vietnam's international commitments on IP protection (e.g. CPTPP, EVFTA, and RCEP). The latest amended IP Law was effective from 1 January 2023, except for the regulations on protection of test data for agricultural chemicals (which will take effect from 14 January 2024).
The government released a decree providing the extension of deadlines for payment of taxes and land rental fee applicable for the 2024 tax year for certain industries (with some exceptions).
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