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.
Where the vendor is a foreign entity, a Vietnamese purchaser is required to withhold the tax due from the payment to the vendor and account for this to the tax authorities. Where the purchaser is also a foreign entity, the Vietnamese enterprise which is transferred is responsible for the CGT administration and payment. The CGT declaration and payment is required within 10 days from the date of official approval of the sale by a competent body or, where approval is not required, 10 days from the date the parties reach agreement on the sale in the contract.
The tax authorities have the right to reassess the transfer price for CGT purposes where the price is deemed as not at an arms’ length market level.
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.
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 are however taxed at 20%.
Dividends received from investments in other companies in Vietnam are not subject to CIT if those 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.
Other significant items
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):
- Income from transfer of the right to make capital contribution; income from transfer of immovable property (except for income from investment in social houses); income from transfer of investment projects, transfer of the right to take part in investment projects, and transfer of the right to exploration and exploitation of minerals.
- Income from activities of prospecting for, exploration of, and exploitation of oil, gas, and other rare and precious resources; income from activities of exploiting minerals.
- Income from providing services subject to SST in accordance with the provisions of the law on SST.
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.