The following taxes may affect foreign-invested projects and foreigners working in Vietnam: • Corporate Income Tax; • Capital Transfer Tax; • Value-Added Tax; and • Personal Income Tax.
1. Corporate Income Tax 1.1 CIT rates
The Law on CIT has a standard CIT rate of 25% for FICs, including foreign parties to BCCs since 1 January 2009. FICs and foreign parties to BCCs which obtained investment licenses or certificates before 1 January 2009 will continue to enjoy the preferential tax incentives as stipulated in their investment license or certificate.
1.2 Preferential rates Other than the standard rate, preferential rates of 10% (for 15 years or the whole operation period) and 20% (for 10 years) apply to a number of investment projects which satisfy certain conditions such as investment in certain fields of business and/or encouraged geographical locations. In addition to preferential CIT rates, FICs and foreign parties to BCCs may enjoy CIT exemption between 02 to 04 years and a 50% reduction in CIT between 04 to 09 years subsequently.
CIT preferential rates, exemptions and reductions
Newly established enterprises in:
Locations: with specially difficult socio-economic conditions; Economic Zones, High Tech Zone established under PM's decision
Sectors: high technology, scientific research and technology development, investment in development of specially important infrastructure facilities of the State; production of software products.
15 years from the first year of revenue generation
15 years from the first year of revenue generation (maximum 30 years at PM's approval)
(5 years for newly-established enterprises in the socialization sectors operating in areas other than areas with difficult or specially difficult socio-economic conditions)
1.3 Carried-forward losses
During the operation, any losses incurred by FICs or foreign parties to BCCs in any tax year may be carried over to the following years and such losses are deductible from taxable income. Losses may be carried forward for a maximum period of 05 consecutive years as from the year following the year in which the loss arose. Carrying-back of losses is not permitted.
1.4 Profit remittance tax From 01 January 2004, profits derived from foreign investments in Vietnam have not been subject to profit remittance tax when remitted out of Vietnam.
2. Capital Transfer Tax
Capital transfer tax for assessable income is 25% for corporations, 20% for individual tax residents, and 0.1% of the transfer price for individual non-tax residents.
After obtaining the amendment for the investment certificate, the transferor must register the transfer of capital with the tax authority.
3. Value-Added Tax A tax placed on goods and services for use in production, exchange or consumption. VAT is calculated from the original sale/purchase price of the goods or service.
The applicable VAT rates are:
0% - Exported goods and services and international transportation
5% - Encouraged goods and services
10% - Normal rate for most goods and services
Goods/Services with VAT Exemption:
The difference between being subjected to VAT at 0% and exempted from VAT is the input VAT can be claimed from the tax authority.
The following imported items may be exempted from VAT:
4. Personal Income Tax (PIT)
Under the new Law on Personal Income Tax, taxpayers are tax residents and non-tax residents.
Tax Residents on a worldwide-sourced income (regardless of source of income) and Vietnam-sourced income are subjected to Personal Income Tax.
Non-tax Resident: All others are subjected to PIT on income sourced in Vietnam.
Income Exemption and Permissible Deductions
PIT Exemption on the following source of incomes:
Family deductions: Tax residents are eligible for deductions from taxable business incomes and employment incomes prior to the tax assessment. These include:
Dependent: An individual whom relies on a taxpayer for support. These include:
*** Taxpayers are allowed to list as many dependents but can only report each dependent once.
Other deductions may be from business incomes and employment incomes for the compulsory contributions of social, health, professional indemnity, or other statutory insurances.
Donations to licensed charity organizations, such as humanitarian funds and study encouragement funds, may also be deducted from business incomes and employment incomes of taxpayers.
PIT Rates Applicable to Tax Residents
Progressive tax rates on each portion of business/employment income:
Current Exchange rate: USD 1 (approx. as of 2012) = VND 20,850
Portion of Annual Assessable Income
Flat Tax rates on other taxable income:
Gains on transfer of securities
Value transfer of securities (Gains are unable to be determined)
Gains on transfer of immovable properties
Value transfer of immovable properties (Gains are unable to be determined)
PIT rates applicable to non-tax residents
5. Import and Export Duties
The export duties have tax rates varying between 0% and 50% of the FOB (free on board) price of the exported goods and it is charged on primarily agricultural products (rice, forest products, and fish) and natural minerals.
Petroleum oil has an export duty rate between 0% and 8%.
Import Duties – Three categories
Between 0%-150% of the CIF (Cost, Insurance, and Freight) price of the imported goods.
Imports from countries, including MFN (most favored nation) status with Vietnam.
Imports from countries with a special preferential agreement with Vietnam.
Ex: ASEAN member nations, along with Japan, China, Korea, Australia, and New Zealand
Up to 70% above the preferential rates applicable to MFN countries.
Imports from all other countries.
To be eligible for the preferential rates or special preferential rates, a Certificate of Origin must accompany the imported goods.
Import Duty Exemptions
Foreign investment companies and parties to BCCs may be exempted from import duties if any of these conditions apply:
***Import duty exemptions also apply in the case of project expansion, replacement, or renovation of technology.
Investment projects in difficult socio-economic areas or in encouraged sectors shall be exempt from import duties for goods that cannot be domestically produced.
The duration for exemption begins from the date of commencement of production to a maximum of 5 years. This includes raw materials and components. This 5-year tax exemption does not apply to projects in the production and assembly of automobiles, motorcycles, air conditioners, refrigerators, and other items identified by the Prime Minister.
Goods imported in various circumstances may also qualify import duty exemption such as export processing, petroleum, software, and ship building. The investment certificate requires FICs and parties to BCCs to register the list of import duty exempted goods with local custom office.