What types of taxes in Vietnam will be applied to foreign companies?

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Currently, foreign investors doing business in Vietnam will be subject to many taxes. It is important that you understand the different types of taxes in Vietnam that you may be required to pay so that you can plan ahead and ensure compliance.

There are 4 main types of taxes in Vietnam that foreign businesses must pay: Corporate income tax (CIT), Value added tax (VAT), Personal income tax(PIT), License tax.

Let’s learn about taxes for foreign businesses in Vietnam in the article below!

Corporate income tax (CIT)

Corporate income tax is a tax levied on income from production, business activities and other income of businesses such as: income from property transfer, property rights,… and other income of taxpayers.

Corporate income tax is shown in the Law on Corporate Income Tax, Decree 12/2015/ND-CP, Circular No. 78/2014/TT-BTC and Circular No. 96/2015/TT-BTC and other related regulations guiding CIT implementation guide.

How to calculate corporate income tax:

Corporate income tax payable = [(Taxable income – (Tax-free incomes + Losses carried forward under regulations) × Tax rate]
Taxable income = (Revenue – Expenses deducted) + other incomes

The general CIT tax rate is 20%, effective from 01/01/2016.

Note: At year-end, the taxpayers must finalize CIT calculation and submit the tax finalization returns to the tax authority no later than the last day of the 3rd month since the end of the financial year.

Value added tax (VAT)

Value added tax is an indirect tax, levied on the added value of goods and services during the production, circulation and distribution process.

However, not all goods and services must pay tax.

Value added tax rates currently applied in Vietnam: 0%, 5%, 10% and the policy of reducing VAT from 10% to 8% from July 1, 2023 to December 31 /2023 (According to Clause 3, Article 8 of the Value Added Tax Law 2008; Clause 1, Article 1 of Decree 44/2023/ND-CP, goods and services not listed in sections 1.1, 1.2, 1.3 will apply the tax rate added value 8%)

Depending on each different subject, different VAT calculation methods will be applied. According to current regulations (stipulated in the 2008 Value Added Tax Law, amended in 2013 and related documents), VAT is calculated and paid according to 02 methods: deduction method and direct tax calculation on added value.

The deduction method:

Payable value added tax = Input value added tax – The output value added tax is deductible

The direct method:

Value added tax payable = Value added of goods or services sold × Value added tax rate

Note: The amount of VAT that businesses must pay depends on the group of goods and services produced and provided (there are many different VAT rates applied to groups of goods and services).

Personal income tax(PIT)

Income tax is the most common tax that foreigners must pay in Vietnam. The amount of income tax you pay is determined by your tax residency status, which is based on the amount of time you spend in the country. If you are a resident of Vietnam, you are obliged to pay income tax on all of your worldwide income, however, if you are a non-resident, you are only required to pay tax on income arising in Viet Nam.

Employment income includes salaries, wages, allowances and subsidies, remuneration in all forms; boards of directors, control boards, management boards and other organizations; and bonuses in any form except those received from the government.

Vietnam tax laws and regulations stipulate that taxpayers must be responsible for withholding Personal Income Tax (PIT) before declaring and submitting the tax returns to the tax authority along with the tax amount paid to the State Budget.

Taxable income, PIT tax rates, tax calculation methods are specified in Circular No. 111/2013/TT-BTC and Circular No. 92/2015/TT-BTC and in relevant legal documents.

PIT declaration must be prepared and submitted on a monthly or quarterly basis. At year-end, the taxpayers must finalize PIT calculation and submit the tax finalization returns to the tax authority no later than the last day of the 3rd month since the end of the financial year.

Note: Currently, Vietnam’s Tax Authority is not interested in the personal income tax policy of the country hosting foreign investors. They deduct a portion of the rate stated in their laws and investors deal with the double taxation processes themselves.

* Details of Personal Income Tax of foreigners in Vietnam

License tax

License fee (License tax) are considered the most basic tax in Vietnam. License tax is collected annually. This level is based on the registered capital or annual revenue of the enterprise.

Accordingly, taxpayers must declare and pay this fee amount to the state budget according to the provisions of Decree No. 139/2016/ND-CP (Decree 139) and Decree No. 22/2020/ND-CP amend and supplement Decree 139 (Decree 22).

Regarding details of license fees according to each size of registered charter capital of the taxpayer.

Size of registered charter capital	Annual Business License Fee
Over VND 10 billion	3,000,000 VND
Less than and equal to VND 10 billion	2,000,000 VND
Other (Branches, representative offices, business locations, public service units, and other economic organizations)	1,000,000 VND

Other types of Tax in Vietnam

Foreign contractor withholding tax means the tax obligations of foreign contractors when having any income inside Vietnam, which specifically refers to Circular 103/2014/TT-BTC.

Given such tax areas are not directly subjected to the taxpayers aforementioned, in practice, there would be many cases in the taxpayers shall be responsible for withholding, submitting and making payment of tax on behalf of foreign contractors to the State Budget in case the taxpayers seek for goods/ services from the foreign contractors.

Regarding tax rates of Foreign contractor withholding tax, kindly find the below table for detailed rate applied to each substance of transactions:

Description	Foreign contractor withholding tax rate (CIT)	Foreign contractor withholding tax rate (VAT)
Trades (disturbing, supply goods and/or associated with services rendered in Vietnam)	1%	1% or exempted
Services (in general)	5%	5%
Restaurant/ hotel/ casino management services	10%	5%
Services associated with good supply which could not separate the value of goods and services	2%	3%
Insurance	5%	5% or exempted
Reinsurance abroad, commission of the reinsurance transfer	0.1%	exempted
Leasing machinery and equipment	5%	5%
Leasing aircraft, airplane engines/ spare parts, vessels (for aircraft and vessel cannot be produced in Vietnam)	2%	exempted
Loan interest	5%	exempted
Derivative financial services	2%	exempted
Capital investment	0.1%	exempted
Construction, installation, including or excluding supply of materials, machinery, equipment	2%	3% or 5%
Royalty	10%	exempted
Transportation	2%	3% or 0%
Other business activities	2%	2%

In addition to the taxes mentioned above, taxpayers operating in some industries and business lines with special conditions may be subject to other taxes such as: environmental protection tax; natural resources tax; special consumption tax,…

How can we help you?

Many foreigners face the complexity and inconsistency of tax policy in Vietnam. Especially related to personal income tax policy.

This may be due to not filing on time, preparing personal income tax finalization documents in an amateurish manner, or misunderstanding tax rate policy.

GTax understands the basic needs of each business as well as the complexities related to tax policy. With a team of skilled experts and extensive industry experience in each department, GTax will help you solve any obstacles you may encounter, thereby providing the best service experience.

Compiled by GTax