Taxation in Vietnam

Value-Added Tax (VAT)

VAT is charged on most goods and services in Vietnam. Generally, goods and services are subject to the standard VAT rate of 10%. In a number of special cases, VAT is exempted or charged at the rate of 5% (for fundamental items) or 0% (for exported goods and services). Companies are required to register with the tax offices in order to obtain a VAT code.

Corporate Income Tax (CIT)

CIT is charged on profits of companies in Vietnam. The current standard CIT rate is 20% from 2016. Tax incentives are also offered to investment projects which meet certain conditions, primarily in relation to encouraged business lines and geographical areas. CIT is provisionally calculated and paid on a quarterly basis (quarterly CIT declaration is no longer required), before being finalised for the fiscal year, within 90 days of the financial year end. Tax losses incurred in any tax year are allowed to be offset against different business activities of the same company and be carried forward for 5 consecutive years. Tax losses of a quarter can also be carried forward to the following quarter of the same fiscal year. Carry back of tax losses is not allowed.

Withholding Tax (WT)

Withholding Tax, which is a combination of VAT and CIT (or PIT), is charged on payments made by companies in Vietnam for certain purchases of goods and services from overseas suppliers (corporate or individual). The WT declaration is categorised into 3 types:

• Withholding Method (or also referred to as Direct Method by law)
• Hybrid Method
• Vietnamese Accounting System (VAS) Method (or also referred to as Declaration Method by law)

Personal Income Tax (PIT)

Foreign and Vietnamese employees working in Vietnam are subject to PIT. As a general rule, PIT is a liability of the employee but the obligation to temporarily withhold or pay the PIT may initially rest with the employer. Where employees are remunerated on a gross basis, the employer is liable to withhold PIT payable before making the income payment to the employees, and remit the tax withheld to the State. If the employer remunerates the employees on a net basis, the employer is liable to gross up the net income, calculate the applicable PIT and pay such PIT to the tax office.

The PIT obligation is determined on a number of factors but mainly on the taxpayer’s physical presence in Vietnam for the relevant tax year.

(From Guide to Doing Business in Asia Pacific 2016-2017 - © Mazars Group and Mazars in Vietnam)