DOING BUSINESS IN VIETNAM 2020 - Investing in Vietnam, Engaging the world - MINISTRY OF PLANNING AND INVESTMENT - Deloitte
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MINISTRY OF PLANNING AND INVESTMENT
FOREIGN INVESTMENT AGENCY
DOING BUSINESS IN VIETNAM 2020
Investing in Vietnam, Engaging the world
Abbreviation 3 II. Customs Duty and Procedures 52 Introduction 5 III. Land Rental Incentives 56 A. Country Profile 6 E. Human Resources and Employment 58 B. Trade and Investment 12 F. Foreign Exchange Control 65 I. Trade Agreement 13 Useful websites 68 II. Foreign Direct Investment 13 Deloitte Vietnam 71 C. Setting up an investment in Vietnam 17 Foreign Investment Agency 72 D. Taxation and Customs 25 I. Taxation 26 2 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the world
ABBREVIATION
APA Advance Pricing Agreement FTA Free Trade Agreement
APEC Asia-Pacific Economic Cooperation GDP Gross Domestic Product
ASEAN Association of Southeast Asian GSO General Statistics Office
Nations
BCC Business Cooperation Contract IMF International Monetary Fund
BLT Build-Lease-Transfer IRC Investment Registration
Certificate
BOO Build-Own-Operate IP Industrial Park
BOT Build-Operate-Transfer M&A Mergers & Acquisitions
BT Build-Transfer O&M Operate & Manage
BTL Build-Transfer-Lease OECD Organization for Economic
Cooperation and Development
BTO Build-Transfer-Operate PIT Personal Income Tax
CIT Corporate Income Tax PPP Public-Private Partnership
CPTPP Comprehensive and Progressive RCEP Regional Comprehensive
Agreement for Trans-Pacific Economic Partnership
Partnership
DTA Double Taxation Avoidance SST Special Sales Tax
Agreement
EPE Export Processing Enterprise USD US Dollar
EPZ Export Processing Zone VAS Vietnamese Accounting Standards
ERC Enterprise Registration Certificate VAT Value Added Tax
EZ Economic Zone VND Vietnamese Dong
FCWT Foreign Contractor Withholding Tax WTO World Trade Organization
FDI Foreign Direct Investment
3
4 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the world
INTRODUCTION
I
n more than 30 years of social- a centralized to a market oriented
economy and its 96.92 million-strong
Vietnam has moved from being population, which features a large
one of the poorest nations in the world and young workforce as well as
to a lower middle-income country an increase in disposable income
with a number of convincing social- in recent years. The Vietnamese
economic achievements. Joining the Government has done an excellent job
Association of Southeast Asian Nations
(ASEAN) in 1995
Economic Cooperation (APEC) in 1998 2.79 percent (2019).
and the World Trade Organisation
(WTO) in 2007; expanding gross This guidebook was prepared by the
domestic product (GDP); improving Foreign Investment Agency of
infrastructure; and a steady increase Vietnam in cooperation with Deloitte
in foreign direct investment (FDI) Vietnam to provide readers with an
suggest that Vietnam has transformed overview of the investment climate,
into an attractive investment forms of business organization,
destination. taxation, and business and accounting
practices in Vietnam. Although we do
Vietnam has been enjoying strong our best to ensure that information
economic growth. Since 1990, contained in this book is current at
the time of writing, the rapid changes
Vietnam’s GDP per capita growth has
in Vietnam mean that laws and
been among the fastest in the world,
regulations may change to reflect the
averaging 6.4 per cent a year in the
new conditions. We hope that you
2000s. Despite crisis and uncertainties
find this book useful in your endeavour
in the global environment, Vietnam’s
to expand your business in Vietnam.
economy continues to grow, with GDP
expanding by 7.02 per cent in 2019,
Ministry of Planning and
and is expected to continue on this path.
Investment of Vietnam
Foreign Investment Agency
Overseas businesses are increasingly
attracted by the country’s move from
5
A COUNTRY PROFILE
COUNTRY PROFILE
Vietnam’s economy continues its fast growth driven by free trade
agreements (FTAs) with major developed countries and increasingly
deregulated business environment.
VIETNAM
Strategically located at the centre of Southeast Asia with convenient
access to commodity and cultural exchange.
A stable political A youthful and vibrant
environment, and an
country with digitally-savvy
attractive business
environment with and well-educated workforce,
high incentives for a developing culture of
foreign investors. entrepreneurship, and
openness to new ideas.
Competitive production
cost compared to Fast growing economy with
neighboring countries. GDP growth projected to be
between 6% to 7% during
2016-2019 period.
16 FTAs with major
developed markets.
6 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the world
COUNTRY SNAPSHOT
LOCATION POPULATION AND WORKFORCE
Southeast Asia Population: was estimated at 96.92 million people
The country borders with China, Laos, Cambodia, Ranked 15th in the list of most populated countries
Pacific Ocean and Gulf of Thailand People of working age in employment: 48.7 million
people (51.2% of total population)
Unemployment rate: 2%
LAND AREA
330,967 sq. km
ECONOMY
Nominal GDP ( 2019): USD 261.9 billion
GDP in 2019 increase by 7.02%,
COASTLINE the highest growth since 2011
3,260 km GDP per capita (2019): USD 2739.82
5 MUNICIPALITIES & 58 PROVINCES LANGUAGE
North: Hanoi – the capital Vietnamese (official language)
Centre: Da Nang City English (taught widely at school as a second language)
South: Ho Chi Minh City – the largest city
CLIMATE AND WEATHER BUSINESS HOURS
The climate varies from North to South with three Under the Vietnamese Labor Code, normal working
hours should be 8 hours/day, or 40 - 48 hours/week.
distinctive climate zones: tropical in the South (rainy
season from April to September; dry season from
October to March); monsoonal with hot and rainy
season in the Centre and North (May to September);
cold and damp in the highlands and the North
(October to March). It is also blessed with plenty of
sun throughout the year. CURRENCY
Vietnamese Dong (VND)
Source: General Statistics Office (GSO), Economist Intelligence Unit
7
POLITICAL STRUCTURE Vietnam is a socialist country under the leadership of the Communist Party of Vietnam. The 14th National Assembly of Vietnam (term 2016-2021) has 489 Assembly, which is the highest-level representative body of Vietnamese people, has the power to exercise constitutional and legislative rights and to decide on critical issues of the country. 8 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the world
GDP BY SECTOR, 2018
8.0%
7.5% Product tax (net)
7.08% Agriculture,
7.0% 7.02% 10%
Forestry and
6.81% Fishery
6.5% 6.68% 15%
41%
6.21%
6.0% 5.98% Services
5.5% 5.42% 34%
5.0%
Industry &
4.5% Construction
4.0%
2018 2019
RETAIL SALES
(billion USD)
6.60% 250 173
195
168
4.09% 200 140
154
3.53% 3.54% 125
111
2.79% 150
2.66%
100
50
0.63%
0
2018 2019 2018
2018 MAIN EXPORT PARTNERS, 2018
(share of total)
Germany 11%
US 46%
South Korea 16%
243 237
214 211
180
173
150 148 162 166
132 131
Japan 18%
China 40%
2018
Source: GSO
9
A COUNTRY PROFILE
REGULATORY REFORM TO IMPROVE INVESTMENT CLIMATE
The regulatory framework has been constantly revised to incorporate more
favorable regulations for businesses to invest and operate in Vietnam. Since the
new Law on Investment and the new Law on Enterprises were passed in 2014,
many other laws, decrees and circulars have been put in place to provide
guidelines for better market access.
VIETNAMESE GOVERNMENT’S EFFORTS TO IMPROVE INVESTMENT CLIMATE
- Law No. 67/2014/QH13 on Investment
- Law No. 68/2014/QH13 on Enterprises
2014
- Decree No. 46/2014/ND-CP provides regulations on collection of land rent and water surface rent
- Circular No. 78/2014/TT-BTC guides the implementation of the Law on CIT
- Circular No. 103/2014/TT-BTC provides guidelines for fulfillment of tax liability of foreign entities doing business
in Vietnam or earning income in Vietnam
- Decree No. 118/2015/ND-CP provides guidelines for some articles of the Law on Investment
- Decree No. 96/2015/ND-CP provides guidelines for some articles of the Law on Enterprises
2015
- Decree No. 15/2015/ND-CP on investment in the form of public-private partnership
- Circular No. 38/2015/TT-BTC on customs procedures, customs supervision and inspection, export tax, import tax,
and tax administration
- Law No. 107/2016/QH13 on Export and Import Duties
- Decree No. 134/2016/ND-CP provides guidelines for the Law on Export and Import Duties
2016
- Circular No. 83/2016/TT-BTC guides the implementation of investment incentive programs
- Circular No. 130/2016/TT-BTC on guidelines on some articles of the Law on Value Added Tax, and the Law on
Special Sales Tax
- Law No. 04/2017/QH14 about provision of assistance for small and medium-sized enterprises (coming into force
2017
from January 1st, 2018)
- Decree No.32/2017/ND-CP on state investment credit
- Decision No. 3610A/QD-BCT slashes 675 conditions on business and investment under state management
- Decree No. 119/2018/ND-CP on electronic invoices for sale of goods and provision of services
- Decree No. 09/2018/ND-CP on trading activities of foreign investors
2018
- Decree No. 08/2018/ND-CP on business conditions under State management of the Ministry of Industry and
Trade
- Circular No. 25/2018/TT-BTC on amendments of some articles of Circular 78/2014/TT-BTC and Circular
111/2013/TT-BTC
- Resolution No. 50/NQ-TW on the direction of completing institutions and policies, improving the quality and
efficiency of foreign investment cooperation by 2030
- Resolution 23-NQ/TW on the national industry development strategy during 2018-2030
- Amended Law on Tax Administration No. 38/2019/QH14 (effective from 1 July 2020)
2019
- Decree No. 14/2019/ND-CP providing guidelines for the law on special sales tax
- Decree No. 05/2019/ND-CP provides a legal framework for the establishment and implementation of Internal Audit
- Circular No. 48/2019/TT-BTC on the making and settlement of provisions for devaluation of inventory, losses of
financial investments, bad debts and warranty at enterprises
- Draft amended Laws on Investment/Enterprises/Securities
10 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldRESTRUCTURING AND EQUITISING STATE-OWNED ENTERPRISES
The Vietnamese Government upholds its commitments to economic reform. The
equitisation of state-owned enterprises (SOEs) in recent years is an example
economy forward. The 2016-2020 roadmap for the equitisation of SOEs has been
outlined in Decision No. 58/2016/QD-TTg.
220
NUMBER OF EQUITISED
SOES DURING 2011-2018
175
73
55
45
26 23
14
2011 2012 2013 2014 2015 2016 2017 2018
Source: Vietnam Government Report on the equitisation of SOEs (2011-2018)
11TRADE AND
INVESTMENT
12Bilateral agreements
- Vietnam – Chile
- Vietnam – South Korea
- Vietnam – Japan
- Vietnam - Eurasian Economic
Union FTA
- Vietnam – EU FTA (not yet effective)
- Vietnam – Israel (in negotiation)
- Vietnam – EFTA (in negotiation)
Vietnam has established diplomatic
I. TRADE AGREEMENT relations with 185 countries, expanded
Vietnam has been actively engaging commercial and investment relations
in a number of free trade agreements with more than 220 markets and signed
to help accelerate the country’s more than 80 Double Tax Avoidance
integration into global economy in Agreements.
recent years. Key trade pacts include:
II. FOREIGN DIRECT INVESTMENT
ASEAN Economic Community
According to the Foreign Investment
(launched in December 2015)
Agency under the Ministry of Planning
and Investment, the total newly
Comprehensive and registered, adjusted capital, capital
Progressive Agreement for Trans- contributed and shares purchased by
foreign investors reached 38.2 billion USD,
(signed on March 8th, 2018) increase 7.2% as compare to the same
period in 2018. The realized capital of
Regional Comprehensive foreign direct investment projects was
Economic Partnership (RCEP) estimated at 20.38 billion USD, up 6.7%
(on-going negotiation) as compared to the same period in 2018.
Higher FDI disbursement throughout the
years implies the improvement in
Free trade agreements signed as an
investors’ confidence in the economic
ASEAN member country
outlook and their commitment to
- ASEAN - Japan
establish long-term investments in
- ASEAN - South Korea
Vietnam.
- ASEAN - India
- ASEAN - China Vietnam is one of the only few countries
- ASEAN - Hong Kong in the region that allows 100% foreign
- ASEAN - Australia - New Zealand ownership for most sectors. 375 SOEs
will be partially or wholly divested
during 2017-2020 period.
13B TRADE AND INVESTMENT
INVESTMENT INDUSTRIES
Vietnam has become an attractive Real Estate: The investment in real
investment destination for various estate sector accounted for 10 per
sectors, from manufacturing, 2018. Ho
real estate, energy, retail, and Chi Minh City stands out as the hub
construction, to arts, tourism, to attract most of the large-scale real
entertainment, and other services. estate projects.
Manufacturing: With advantages Other sectors: Green energy,
in a number of areas such as science & technology, wholesales,
competitive labor cost, raw and infrastructure development are
materials resources, lower entering a booming period, as the
barriers to trade, and many Government has given these sectors
designated investment incentives, priorities for development through
the manufacturing sector remains incentives and encouragement to
attract investors. Investment in these
2019, accounting for around 65 sectors is expected to increase in the
years to come.
REGISTERED AND DISBURSED FDI (2015-2019) FDI BY SECTOR (2019)
14%
4%
40,000 35,602 38,019
35,466
7%
Million USD
30,000
26,891
24,115
10% 65%
20,380
19,100
20,000 14,500
15,800
17,700
10,000
0
2015 2016 2017 2018 2019 Manufacturing Real Estate
Professional activities, Wholesale,
Registered FDI Disbursed FDI science and technology Retail & Repair
Others
14 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldMAIN EXPORT PARTNERS,
TOP 10 FOREIGN INVESTORS BY REGISTERED CAPITAL (AS OF DECEMBER, 2019)
80,000
70,000
60,000
Invesment Capital
50,000
(million USD)
40,000
30,000
20,000
10,000
0
g s
rea on ore an ina an nd mo
a
an
d nd
Ko gK ap Jap Ch Ta
iw Isla Sa ail lla
uth
n g in Th Ho
So Ho Sin Vir
g
tish
Bri
Source: Foreign Investment Agency
Foreign investors usually select industrial parks (IPs)/economic zones
densely populated cities with modern (EZs) where the infrastructure and
infrastructure and agglomerated transportation are specialized, and
convenience (e.g. Hanoi, Ho Chi special investment incentives are
Minh City, Da Nang) to implement given. FDI capital invested at IPs and
service-related projects. Whereas, EZs accounted for roughly
manufacturing and processing 80% of total registered capital in
investment projects are often located at manufacturing sector.
17 COASTAL
ECONOMIC ZONES
326 INDUSTRIAL PARKS 3 HI-TECH PARKS
– Hoa Lac Hi-tech Park
– Saigon Hi-tech Park
– Da Nang Hi-tech Park
15B TRADE AND INVESTMENT M&A TRANSACTIONS HEAD TO BREAKTHROUGHS IN 2019 The Government is establishing mechanism and policies to facilitate the private sector to join the State-owned enterprises (SOEs) restructuring process through capital contribution and share purchase as well as enhancing linkages in value chain between the SOEs and the private sector. The value of M&A transactions increased from US$1.1 billion in 2009 to US$7.64 billion in 2018. The total value of transactions in the decade hit US$55 billion. However, the value of M&A transactions in the first half of 2019 leveled off at US$1.9 billion, equal to 53% of the same period last year. According to the statistics of the Foreign Investment Agency, under the Ministry of Planning and Investment, foreign investors spent US$2.64 billion to purchase shares. Positive factors are opening a new era for M&A activities in Viet Nam with a number of opportunities for breakthrough and making M&A become a crucial investment attraction channel in the time ahead. M&A market in Viet Nam expects strong developments in the issuance and realization of policies as well as connectivity, trade transactions and innovation of buyers and sellers. 16 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the world
SETTING UP AN
INVESTMENT IN
VIETNAM
17C SETTING UP AN INVESTMENT IN VIETNAM
ESTABLISHING A NEW Some main corporate
BUSINESS ENTITY forms of doing business
in Vietnam include: (1)
Limited-liability company
INVESTMENT VIA M&A with one or more members;
(2) Joint-stock company; (3)
Partnership; (4) Business
OTHER FORMS OF INVESTMENT Cooperation Contract; and
(i.e. participating in contractual business
(5) Public-Private
forms or purchasing stakes of an existing
enterprise) Partnership Contract.
LIMITED LIABILITY COMPANY A limited liability company is a legal
entity established by capital contribution
which is treated as equity (or charter
capital) from its members. A limited
ty Compa
Liabili ny Established liability company is not allowed to issue
ted
mi by capital shares. The total number of members in
Li
contribution a limited liability company is restricted to
50 (applied to form of a limited liability
company with more than two members).
Maximum of Members of a limited liability company
50 members
the limited liability company within the
capital contributed – or undertaken to be
Members are contributed - to the company.
Not allowed liable for the nancial
to issue obligations within
shares A limited liability company may be
the capital
contributed established by foreign investors either in
one of the two following forms:
i. A 100% foreign-owned enterprise
(where all members are foreign
investors); or
ii. A joint-venture enterprise with at
least one Vietnamese investor.
18 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldJOINT STOCK COMPANY A joint stock company is a legal entity established
by its founding shareholders on the basis of their
subscription of shares of the joint stock company.
Established by
its founding
The charter capital of a joint stock company is
shareholders on divided into shares and each founding shareholder
p any the basis of their holds a number of shares corresponding to their
Com subscription of subscribed and paid-up shares in the joint stock
ck
shares
Joint Sto
company.
At least three
shareholders A joint stock company is required to have at least
(with no maximum three shareholders (with no maximum number of
number of shareholders). A joint stock company may take
shareholders)
the form of either (i) 100% foreign-owned; or (ii) a
joint venture between foreign and domestic
investors.
PARTNERSHIP
sh
rtner ip
Managing
Pa partners have A partnership may be established between two
unlimited liability for individual managing partners. The managing
all obligations of the partners have unlimited liability for all
partnership
obligations of the partnership. Besides managing
partners, a partnership may have contributing
Contributing
partners only liable
obligations of the partnership up to the value
obligations of the
partnership up to their
of their contributed capital.
contributed
capital
BUSINESS COOPERATION A Business Cooperation Contract (BCC) is normally
CONTRACT signed between foreign investors and Vietnamese
Signed between
investors in order to carry out certain business
foreign investors and activities.
ontract Vietnamese investors
nC
tio without the creation of a
BCC is executed without the creation of a new legal
new legal entity
ness opera
entity. Instead, parties to a BCC shall establish a
co-ordination board to implement and oversee the
Co
BCC’s parties BCC. The investors to a BCC mutually agree on
hold unlimited
si
allocation of responsibilities and sharing of
Bu
liability for the
profits/losses arising from a BCC. BCC’s parties hold
of the BCC unlimited liability for the financial obligations of
the BCC.
19C SETTING UP AN INVESTMENT IN VIETNAM
A Public-Private Partnership (PPP) contract is
PUBLIC-PRIVATE
an investment form set up on the basis of a
PARTNERSHIP contract between relevant government
authorities and project companies to perform
certain regulated infrastructure works and
artnership public services, e.g. transportation system,
eP
vat Comprise BOT, water supply system, power plants, educational
Pri
BT, BTO, BOO, and healthcare-related infrastructure, etc.
Public-
BTL, BLT, O&M
Contracts
PPP Contracts comprise Build-Operate-Transfer
(BOT), Build-Transfer (BT), Build-Transfer-
Set up Operate (BTO), Build-Own-Operate (BOO),
on the basis of a contract Build-Transfer-Lease (BTL), Build–Lease-
between relevant government
authorities and project Transfer (BLT) and Operate-Manage (O&M)
companies to perform certain Contracts.
regulated infrastructure
works and public
services
After signing PPP contracts with an authorized
state agency, foreign investors must establish a
project company in the form of a limited
liability company or a joint stock company.
PPP contracts clearly set out the rights and
obligations of foreign investors to such contracts.
20MERGERS AND ACQUISITIONS
The legal framework for M&A is set out under the Law on Enterprise and Law on
Investment and their guiding documents, which cover conditions, procedures
and tax consequences of such activities.
The Competition Law also has an effect on M&A activities. Where a merger or
acquisition may result in a legal entity with a market share accounting for 30%
to 50% of the relevant market, the legal representative of such entity must notify
the competition management body before the merger/acquisition is implemented,
unless the law provides otherwise. A merger or acquisition that results in a new
entity with its market share accounting for more than 50% of the relevant
market is prohibited, unless otherwise stipulated in the Competition Law.
Other investment forms
All indirect investment activities of foreign investors in Vietnam must be
conducted in Vietnamese Dong via an indirectly-invested capital account opened
at a permitted bank. Balances in indirectly-invested capital accounts of foreign
investors cannot be converted into time deposits, or saving deposits at credit
institutions and foreign bank branches.
Below are examples of frequently-conducted indirect investment activities in
Vietnam.
Capital contribution, sale/purchase Capital contribution, transfer of
of shares or contributed contributed capital in securities
capital in Vietnamese enterprises investment funds and fund
without directly participating in management enterprises in accordance
the enterprise management and with the laws on securities
administration
Sale/purchase of other valuable
Sale/purchase of bonds and other
papers in Vietnamese dong
types of stocks in the Vietnamese
permitted to issue within Vietnam’s
securities market
territory by organizational residents
21C SETTING UP AN INVESTMENT IN VIETNAM
SETTING UP A NEW BUSINESS
PROCEDURES FOR COMPANY SET-UP
In order to legally carry out business activities in Vietnam, foreign investors
must register their investment with the appropriate licensing authorities. Under
the new Law on Investment and Law on Enterprises, foreign investors now go
through two steps:
PROCEDURES FOR NEW COMPANY SET-UP
Step 1 Step 2 Step 3
15 days 3 days 5-7 days
Location IRC ERC Public
Selection Application Application Notification
(*) The timeline for setting-up projects prioritized by national or provincial Government shall be shortened.
(**) Please note that IRC is required only for investments by foreign investors or deemed-to-be foreign investors
(i.e. companies with more than 51% of charter capital held by foreign ownership).
PROCEDURES FOR BRANCH, REPRESENTATIVE OFFICE SET-UP
Step 1 Step 2 Step 3 Step 4
7 days 5-7 days 5-7 days
Location RO/Branch License Seal/Tax ID Public
Selection Application Registration Notification
22 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldAs part of the set-up procedures, various types of documents will be required
depending on the type of company/business activities that is being set up, etc.
All legal documents issued by overseas authorities must be translated into
Vietnamese and must be validated by the Vietnamese Embassy in the home
country of the investor.
RELEVANT LICENSING AUTHORITIES
CERTIFICATE IRC ERC
Projects located INSIDE Provincial Management Board
industrial zones, export of Industrial/ Economic Zones
processing zones, high-tech
zones & economic zones Provincial Department of
Planning and Investment
Projects located OUTSIDE Provincial Department of
industrial zones, export Planning and Investment
processing zones, high-tech
zones & economic zones
LIQUIDATION AND CLOSING BUSINESS
The termination, liquidation, or dissolution, of an enterprise shall occur in the
following circumstances:
The operation period in the The dissolution is decided by
company’s charter expires owners/ general partners/ board of
without a decision on extension members/ shareholders
Failure to maintain minimum
required number of members Business Registration
for 6 consecutive months
without business conversion
23C SETTING UP AN INVESTMENT IN VIETNAM
The company shall be dissolved only when all debts and liabilities are settled
and the company is not involved in any dispute at a court or arbitration body.
The liquidation procedures generally take about 6 - 12 months, which normally
Step 1 NOTIFICATION OF DISSOLUTION DECISION
Business
Registration Tax Authority
Authority
7 days
from approval date National
Business Employees
Registration Portal
Step 2 TAX FINALISATION / TAX AUDIT & TAX CODE CANCELLATION
2-3 months
Tax Authority
Step 3 SUBMIT DISSOLUTION DOSSIERS & RETURN IRC/ERC
5 days Business
Registration
from debt clearance date Authority
24 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
D
TAXATION AND
CUSTOMS
25I. TAXATION
The Vietnamese tax system is comprised of the following:
i. Corporate Income Tax (CIT);
ii. Personal Income Tax (PIT);
iii. Value Added Tax (VAT);
iv. Foreign Contractor Withholding Tax (FCWT); and
v. Other taxes (i.e. Special Sales Tax, Import & Export Duties, Natural
Resources Tax, Property Tax, Environment Protection Tax, Business
License Duty & Registration Fee).
All taxes are levied at the national level. There are no local taxes.
Please refer to the following pages for your further reading.
Type of Tax Page
Corporate Income Tax 28
Personal Income Tax 34
Value Added Tax 39
Foreign Contractor Withholding Tax 44
Other Taxes 51
Special Sales Tax 51
Environment Protection Tax 52
26 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
TAX COMPLIANCE TIMELINE
NO. TAX TYPE/ TIME LIMIT MONTHLY QUARTERLY FINALIZATION
20 day of the following
th
30 day of
th
90th day from
month the following
quarter or calendar
year-end date
1 Corporate Income Tax N/A (provisional
payment only)
2 Personal Income Tax (*) (calendar year)
3 Value Added Tax (**) N/A
4 Foreign Contractor 10th day following the payment day; or 20th of the month
Withholding Tax following the payment month if registering to file FCWT on a
monthly basis
5 Compulsory Social/ The last day of the month
Health/ Unemployment
Insurance
6 Stamp Duty Upon occurrence
7 Export Duty Upon occurrence
8 Import Duty Upon occurrence
50
shall be applicable.
12-month operation within a
50 billion or less, otherwise the
monthly basis or quarterly basis.
27CORPORATE INCOME TAX (CIT)
TAXPAYERS
1 2
Foreign
Vietnam- enterprises with or
incorporated without Permanent
enterprises Establishment
(PE)
Service
Branches/Agents establishment
Plants/
Construction sites Others
TAX CALCULATION
CIT PAYABLE = TAX RATE X ASSESSABLE INCOME
Assessable Total Deductible Other Carried
Income Revenue Expenses Income Loss
1. (Total revenue – Deductible expenses) is considered an income from main business activities.
Such income is entitled to CIT incentives, if any.
2. Normally, other forms of income are not entitled to CIT incentives, and thus, shall be subject to
the standard CIT rate of 20 per cent. Other income includes gains from foreign exchange revaluation,
income from disposal of fixed assets, interest income, ect. not related to main business.
Tax Rates
From 1 January 2016, the standard CIT rate is 20 per cent. The CIT rate for enterprises operating in
exploration and mining of petroleum, gas, and other rare and precious natural resources shall
range from 32 per cent to 50 per cent, depending on the project locations and conditions.
28 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
TAX INCENTIVES COMMENCEMENT RULE
Preferential tax rate
Generally, preferential tax rate is applicable from the first revenue-generation
year; except high-tech enterprises or projects.
Tax holiday
Generally, tax holiday is available from the first profit-making year or the fourth
revenue-generation year, where applicable, except high-tech enterprises.
BY LOCATION
CIT INCENTIVES
ACTIVITIES
PREFERENTIAL TAX RATE TAX HOLIDAY
With especiallly difficult 10% for 15 years • 4 years of tax exemption;
socio-economic conditions and
• Economic Zones • 50% reduction for the next
• High-tech Zones, including 9 years
concentrated information
technology parks established
under the Prime Minister’s
decision
• With difficult socio-economic 17% for 10 years • 2 years of tax exemption;
conditions and
• 50% reduction for the next
4 years
• Industrial Parks (which are not Not applicable • 2 years of tax exemption;
located in the favorable and
socio-economic locations) • 50% reduction for the next
4 years
29BY SECTOR
The current incentive scheme is applicable for sectors that are prioritized for
investment under the Government’s development policies.
CIT INCENTIVES
ACTIVITIES
(for example)
PREFERENTIAL TAX RATE TAX HOLIDAY
• High-tech enterprises (including 10% for 15 years • 4 years of tax
science and technology enterprises); exemption; and
research, application, and incubation of • 50% reduction for
hi- technology projects the next 9 years
• Environmental protection
• Investment for infrastructure
development (water plant,
power, road, port, etc.)
• Software production
• Supporting industries
• Socialised projects in regions with 10% for whole project’s • 4 years of tax
difficult/especially difficult duration exemption; and
socio-economic conditions • 50% reduction for the
next 9 years
• Socialised project not located in 10% for whole project’s • 4 years of tax
duration exemption; and
economic regions • 50% reduction for the
next 5 years
• Farming, husbandry, processing of 10% for whole project’s • Tax exemption and
duration reduction under
regions; forestry in difficult regions; incentives for location
production of plant varieties, animal (if applicable)
breeds; production of salt; preservation
of agriculture products, aquaculture
products and foods, etc.
30 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
CIT INCENTIVES
ACTIVITIES
(for example)
PREFERENTIAL TAX RATE TAX HOLIDAY
• Farming, husbandry, processing of 15% for whole project’s
agriculture and aquaculture products duration
• Manufacturing of steel, energy saving 17% for 10 years
products, machinery and equipment
serving agriculture, forestry, fisheries and
salt production, traditional crafts, etc.
BY BUSINESS SCALE
Investment incentives are granted to large projects manufacturing projects
(excluding those in product manufacture subject to special sales tax or those in
mineral resources exploitation) having either:
1. Total capital of VND 6,000 billion or more, disbursed within 3 years since being
licensed with:
- Minimum annual revenue of VND 10,000 billion by the 4th year of revenue
generation at the latest; or
- Regularly employing more than 3,000 employees by the 4th year of operation at
the latest.
2. Total capital of VND 12,000 billion or more, disbursed within 5 years since being
licensed and using technologies being evaluated under the Law on Hi-technology,
and the Law on Science and Technology.
CIT INCENTIVES
ACTIVITIES
PREFERENTIAL TAX RATE TAX HOLIDAY
• VND 6,000 billion capital project (1) 10% for 15 years • 4 years of tax
exemption; and
• 50% reduction in tax
• VND 12,000 billion capital project (2)
for the next 9 years
31DEDUCTIBLE EXPENSES
An expense might be deductible for CIT purpose if the following conditions are met:
1 2
Actually incurred and Supported by proper
relevant to the company’s documents
business activities
4
Payments above VND 20 Not in the list of
3
million must be supported non-deductible expenses
by bank payment vouchers
or deemed as made via
banks
In addition, payments above VND 20 cap of one-month average monthly salary;
million must be supported by bank • Costs of raw materials, supplies,
payment vouchers (or deemed as fuel, power and goods exceeding the
made via bank) to be deductible. reasonable consumption levels as
stipulated by the Government;
NON-DEDUCTIBLE EXPENSES • Interest on loans from non-economic
Below are notable examples of and non-credit organizations exceeding
non-deductible expenses: 1.5 times of the interest rate announced
• Depreciation expenses of fixed by the State Bank of Vietnam;
assets not in accordance with
• Interest expenses exceeding 20%
prevailing regulations, i.e. (i) not for
EBITDA for enterprises having related-
business purpose; (ii) not supported
by proper documentation; and (iii) party transactions;
exceeding the regulated depreciation • Interests on loans corresponding to
rates; the portion of charter capital not yet
• Labor expenses recorded but not contributed in accordance with registered
actually paid or not stipulated with contribution schedule;
clear conditions and amounts under • Periodical accrued expenses not paid or
labor contracts, collective labor
not fully paid at the end of the period;
agreements or company’s financial
policies;
losses, inventory devaluation,
bad debts, product warranties or
32 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
construction works, vocational risks activities. Losses from the transfer
not in accordance with the prevailing of real estate, investment projects,
regulations; rights to participate in investment
• Unrealized foreign exchange losses projects (except for mineral
due to the year-end revaluation of foreign exploitation and exploration
currency items other than account
payables; from other business activities.
• Overhead costs allocated to the
Permanent Establishment (PE) by foreign TAX DECLARATION AND PAYMENT
companies exceeding the amount Enterprises are not required to
determined based on the revenue-based submit the quarterly CIT declaration
allocation ratio; returns. However, provisional
• Contributions to voluntary pension payments are still compulsory and
funds and purchase of voluntary pension will be calculated and settled based
insurance, life insurance for employees on best estimation. In case the
exceeding VND 3 million/person/month;
payment interests, etc.; the sum of provisional CIT payments
• Donations other than certain donation is more than 20 per cent of the CIT
contributions for education, health care,
natural disaster or building charitable excess of 20 per cent shall be subject
homes, etc.; to late tax payment interest.
• Certain expenses related to the issuance,
purchase and sale of shares. prepared and submitted to the tax
authorities within 90 days from the
LOSSES
Tax loss is carried forward within tax liabilities arising from the tax
a maximum period of 5 years after
the loss-making year. The tax loss payments made quarterly shall
generated from January 2009 be settled within 90 days from the
must be carried forward consecutively end of fiscal year.
even during the tax exemption period. The standard tax year is the calendar
Carry-back of tax loss is not allowed. year. However, enterprises are able to
Losses from incentive business adopt a tax year, i.e. fiscal year, which
is different from the calendar year
income from non- incentive upon notification to tax authorities.
33PERSONAL INCOME TAX (PIT)
OVERVIEW
TAXPAYER TAX RESIDENT TAX NON-RESIDENT
Taxable Worldwide income Vietnam-sourced income
income
Tax rate on Progressive rate (5~35%) Flat rate (20%)
employment
income
Tax calculation Assessable Income = Taxable Income Assessable Income = Taxable
- Deductions Income
Deduction Personal deduction No deduction is claimed
Dependent deduction
Compulsory and (capped) voluntary
insurance contribution
Charitable or humanitarian donation
Tax relief Foreign tax credit is allowed on the foreign- Tax treaty exemption may be
sourced income applicable if conditions are met
TAX RESIDENCY
An individual is a tax resident if he/she
meets one of the following conditions:
• Residing in Vietnam for 183 days or
more in 12 consecutive months from Present in
the first arrival date or in a calendar Vietnam for
year; 183 days or
• Having a registered permanent more
residence in Vietnam as recorded by
a temporary/permanent residence
card;
• Having rented a house in Vietnam
House lease Permanent/
contract of 183 Temporary
with a term of 183 days or more
days or more residence card
within a tax year.
Note: An individual having registered address
or rented house over 183 days but residing less than
183 days in Vietnam may still be a tax resident if being
unable to prove residency of another country.
34 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
Tax residents are subject to PIT in remuneration and fringe benefits
Vietnam on their world-wide income whether in cash or in kind. However,
regardless of where such income is certain income items are not subject to
paid, earned or charged. Worldwide tax, typically:
employment income is subject to tax at • Once-off relocation allowances for
progressive tax rates ranging from 5 example, paid to foreigners first time
per cent to 35 per cent depending on comes to work in Vietnam; or Vietnamese
income level. citizens residing overseas return to
Individuals who do not satisfy any of work in Vietnam;
the above condition are classified as • Transportation allowance: from
non-residents and subject to tax only home to work and vice versa under the
on Vietnam-sourced income. The rate Company’s policy;
applicable to tax non-residents’ • Wedding and funeral allowances
Vietnam- sourced employment income under the Company’s policy and being
is currently fixed at 20 per cent. capped at one-month average monthly
Both residents and non-residents are salary;
also subject to PIT in Vietnam on • Airfare in kind one round trip per
incomes of non-employment nature year for employee to travel back to
which are taxed at different flat rates. home country;
• Tuition fee in kind for children to
TAX YEAR study from nursery to high school level
The Vietnamese standard PIT reporting at host country;
period is the calendar year. For foreign • Insurance premium: voluntary
individual, the fist tax year will be the non-accumulative insurance for health
12-consecutive-month-period from the & death;
first arrival date in Vietnam in case the • Membership/ healthcare/ entertainment
individual is present in Vietnam for in kind & non-identified beneficiary;
less than 183 days during the first • Supports for cure of fatal diseases to
calendar year. From the second year, employees (and close family members);
the tax year will be the calendar year. • Per-diem: Fully exempted if paid
under the Company’s policy;
EMPLOYMENT INCOME • Housing allowance: In excess of 15
Employment income includes per cent of total taxable income;
salaries and wages, and all forms of
35• Uniform allowance in cash below TAX RELIEF
VND 5 million/year or in kind; FOREIGN TAX CREDIT
• Overtime in excess of the normal rate. A tax resident is entitled to claim
for Foreign Tax Credit (i.e. the
NON-EMPLOYMENT INCOME amount of tax paid overseas
Non-employment income includes according to overseas regulations)
income from business, capital against their Vietnamese PIT on the
investment, inheritance, gifts, foreign-sourced income; however, the
prize winnings, transfer of capital, creditable amount shall not exceed the
transfer of real estate, sale of shares/ Vietnamese PIT payable according to
securities, royalties, franchising,
copyrights, etc. which are subject to income arising overseas.
TAX TREATY RELIEF
TAX DEDUCTIONS A tax non-resident may enjoy PIT
Tax residents of Vietnam are entitled to exemption in Vietnam via tax treaty
the following deductions from taxable application if certain conditions
income: under the treaty are met. To enjoy
• A personal deduction of VND 9 million
per month; are required.
spouse, children and other eligible
persons including parents in the amount TAX RATES
of VND 3.6 million per dependent per Employment Income
month (provided that certain conditions
are met); MONTHLY TAX RATE
ASSESSABLE
• Eligible charitable or humanitarian NON-
INCOME RESIDENTS
donations; (million VND) RESIDENTS
• Compulsory social insurance, Up to 5 5%
health insurance and unemployment Over 5 to 10 10%
insurance paid by employees; and Over 10 to 18 15%
• Contribution to private pension 20%
Over 18 to 32 20%
fund made by the employer and the
Over 32 to 52 25%
employee capped at VND 1 million
Over 52 to 80 30%
per month pursuant to the Ministry
of Finance’s guidance. Over 80 35%
36 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldNon-Employment Income
(applicable to both residents & non-residents)
NON-EMPLOYMENT
TAX RATE
INCOME
1% - 5% on revenue
Business Income *Depending on type
of business
Capital investment,
i.e. interest, dividends
5%
(except for bank
interest)
20% on net gains for
tax resident; 0.1% on
Capital transfer
sales proceeds for
non-resident
Securities / JSC share 0.1% on sales
transfer proceeds
Real estate transfer 2% on sales proceeds
Income from winning
prizes (in excess of 10%
VND 10 million)
Income from copyright
(in excess of VND 10 5%
million)
Income from royalty/
franchising (in excess 5%
of VND 10 million)
Income from gifts /
inheritances
10%
(in excess of VND 10
million)
37TAX DECLARATION AND PAYMENT
Each individual taxpayer must register for a personal tax code prior to the time
limit for his first PIT filing. In case the employer makes tax registration for
employees earning income from salaries or wages and tax registration for
employees’ dependents, the registration deadline shall be within 10 working
days before the submission of annual PIT finalization return.
Monthly TYPE OF INCOME DEADLINE
Employment income received
from Vietnamese employers 20th day of the following month
′s return)
Quarterly Employment income received
from Vietnamese employers 30th day of the following quarter
′s return)
Employment income received
via Company′s return)
10th day from the date of
Non-employment income
arising income
TAX FINALIZATION
Tax residents are required to file the PIT finalization return and settle outstanding
PIT liabilities within 90 days from the end of the tax year.
Residents foreign expatriates terminating their Vietnam assignment must file
PIT finalization dossiers prior to their departure dates (or within 45 days from
departure dates in case of authorization following a recent specific guidance)
38 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
VALUE ADDED TAX (VAT)
SCOPE OF APPLICATION
VAT is imposed on goods and services used for production, trading and
consumption in Vietnam (including those purchased from overseas
organizations and individuals).
TAX RATES
There are three types of VAT treatment: non-taxable items; items not required to
declare VAT and taxable items (at 0 per cent, 5 per cent and 10 per cent VAT rate).
Below are some notable cases:
NON-TAXABLE
• Land use rights;
• Insurance related to human;
• Loan, credit services;
• Education and vocational training according to prevailing regulations;
• Medical services;
• Machinery and equipment not locally produced, imported for some specific purpose;
• Temporarily imported goods;
• Capital transfer transactions between non-tariff zones and overseas;
• Intellectual property rights, software (except exported software);
• Unprocessed or semi-processed products of cultivation, agriculture, aquaculture; animal
breeding stock, seedlings, salt products, etc.;
• Imported goods/services for humanitarian aid;
• Exported products directly processed from main materials being natural resources and/ or
minerals whose total value plus energy cost makes up at least 51% of the prime cost.
39DECLARATION NOT REQUIRED
• Compensation, financial income;
• Project transfer;
• Transfer of assets within a company and dependent units;
• Capital contribution by assets;
• Commission for some agent services.
TAXABLE
Export goods and services;
0% International transportation;
Aviation and maritime services provided either directly for
foreign entities or through agents
Clean water, pesticide, services for digging, embanking,
5% dredging of canals, agricultural machinery and equipment,
sugar and by-products, medical equipment, teaching aids,
artistic, sports activities, etc.
10% Standard VAT rate, applicable to goods and services other
than those mentioned above
40D TAXATION AND CUSTOMS
TAX CALCULATION CREDIT METHOD
For general business activities, VAT The credit method is adopted by
liabilities must be paid to local tax enterprises maintaining complete
authorities where general business books of accounts, invoices and
activities take place while for documents in accordance with
imported goods, VAT liabilities will relevant regulations, including:
be collected by customs authorities • Enterprises with annual revenue
upon importation. subject to VAT of more than VND 1 billion;
There are two methods for VAT • Enterprises in other cases who
declaration: Credit method and voluntarily register for VAT declaration
Direct method. under credit method.
• Credit method: VAT liabilities are
calculated by offsetting input VAT
VAT calculation under credit method:
with output VAT;
• Direct method: VAT liabilities for VAT OUTPUT INPUT
specific goods and services are PAYABLE VAT VAT
calculated by using the deemed VAT
rates.
OF WHICH Output VAT shall be equal to the total VAT on goods or services sold as stated
in the VAT invoice.
Input VAT shall be:
- VAT amount as recorded in all VAT invoices for the purchase of goods or services;
- VAT amount stated on receipts for VAT payment on imported goods;
- VAT amount stated on receipts for VAT payment on behalf of foreign
contractors.
In order to claim deductible input VAT, taxpayers must obtain the following
documents for each type of goods/services purchased:
GOODS/SERVICES PAYMENTS ON
IMPORTED
LOCALLY BEHALF OF FOREIGN
GOODS
PURCHASED CONTRACTORS
VAT invoice
VAT payment receipt
(*) Non-cash payment voucher
Customs returns
(*) Non-cash payment vouchers are only required for payments of VND 20 million or more (inclusive of VAT).
41In case the credit method is applied, taxpayers should note the following principles
regarding credits:
VAT OUTPUT CORRESPONDING INPUT
Non-taxable Nil Not eligible for credit
Declaration not required Nil May be credited
Taxable (0%) Nil May be credited
Taxable (5%, 10%) Yes May be credited
If goods/services/fixed assets are used for the production/trading of both taxable
good/services and non-taxable goods/services, then only the input VAT of
goods/services/fixed assets used for the production/trading of taxable goods
may be used for credit.
Taxpayers must separate the credit-eligible input VAT from non-credit-eligible
inputs. Otherwise, the input VAT shall be credited based on the ratio of the
revenue of goods/services subject to VAT and not required for VAT declaration
to the total revenue from sales of goods/services.
DIRECT METHOD
The direct method is adopted in the following cases:
• Enterprises with annual revenue subject to VAT of less than VND 1 billion
unless they voluntarily register for credit method;
• Enterprises not maintaining proper books of accounts and foreign
organizations/ individuals carrying out business activities not regulated under
the Law on Investment;
• Business individuals and households;
• Enterprises engaging in trading in gold, silver and precious stones.
VAT calculation under direct method:
VAT PAYABLE REVENUE VAT RATE
OF WHICH, THE • 1% Distribution; supply of goods
APPLICABLE VAT RATES • 5% Services; construction excluding supply of materials
SHALL BE: • 3% Manufacturing; transportation; services attached to the supply
of goods; construction, including supply of materials
• 2% Other cases
42 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
For those enterprises engaging in the business of gold, silver and precious
stones, VAT payable shall be calculated as 10% of the added value. The value
added of gold, silver, and precious stones equals their selling price minus their
purchase price which are recorded by proper VAT invoices or payment receipts/
vouchers.
TAX DECLARATION AND PAYMENT
Monthly VAT declaration shall be applied in most cases and is to be filed by the
20th day of the following month.
Quarterly VAT declaration is applicable to taxpayers with total turnover from
sales of goods/ services of the preceding year not exceeding VND 50 billion. The
deadline for quarterly VAT filing is by the 30th of the following quarter.
Where the taxpayer are eligible for quarterly VAT declaration wish to instead file
VAT monthly, they shall submit a notification to tax authorities not later than the
deadline for VAT declaration in the first month of the tax year.
VAT finalization is not required.
TAX REFUND
From 1 July 2016, taxpayers can only claim VAT refund from tax authorities in
the following common cases:
• New projects of taxpayers who adopt the VAT-deduction method that are in the
pre-operation investment period, and with a total accumulated input VAT
exceeding VND 300 million (some exceptions may apply);
f
local sales) with an amount exceeding VND 300 million (but capped at 10% of export
revenue), except:
goods imported then re-exported;
Customs Law.
From 1 February 2018 146/2017/ND-CP in addition
to the above, business establishments importing and then exporting goods into
VAT exceeding VND 300 million are re-allowed to enjoy VAT refund.
E-Invoice
Currently, taxpayers can choose between paper invoices or e-invoices.
However, e-invoices must be used for all enterprises from 01 November 2020.
43FOREIGN CONTRACTOR WITHHOLDING TAX (FCWT)
TAXPAYERS
FCWT is applicable to foreign organizations/individuals who conduct
business or earn income in Vietnam on the basis of a contract/agreement
with (i) a Vietnamese party (as a main foreign contractor); or (ii) another
foreign contractor to implement part of the contractual scope of works (as a
foreign sub-contractor). FCWT is a tax collection mechanism that normally
comprises both CIT and VAT, but may also include PIT for payments to foreign
individuals.
SCOPE OF APPLICATION
SUBJECT TO FCWT NOT SUBJECT TO FCWT
Services provided or consumed Services provided and consumed
Services
inside Vietnam outside Vietnam
Supply of goods accompanied by Supply of goods not accompanied by
services services and the delivery point
Goods
Supply of goods in which the delivery is overseas or outside border gate of
point is inside Vietnam Vietnam
Construction & installation
Interest
Royalties
Others Trademarks
Penalty/compensation
Income from transportation activities
Security transfer
IMPORTANT NOTE
There is no dividend withholding tax in Vietnam on corporate shareholders.
TAX DECLARATION
There are three methods for FCWT declaration including: (i) Deemed method; (ii)
Hybrid method; and (iii) Declaration method.
While the Deemed method can be applied by foreign contractors without any
specific conditions (and is the most common method, which can be applied), the
Hybrid method and Declaration method require foreign contractors to satisfy the
44 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
following conditions:
• Maintaining a contract duration of 183 days or more;
• Applying the Vietnamese Accounting System.
NO. CRITERIA DEEMED METHOD DECLARATION METHOD HYBRID METHOD
1 Filing • Vietnamese Party • Foreign Contractor • Foreign Contractor
responsibility
2 Compliance
timeline
VAT declaration • 10 days from • Monthly • Monthly
payment date; or
• Monthly
CIT declaration • 10 days from • Quarterly • 10 days from
payment date; or payment date; or
• Monthly • Monthly
Finalization • 45 days from • 90 days from the end of • 45 days from
contract termination contract termination
date • 45 days from contract date, applied for CIT
termination date
3 Tax calculation
VAT • VAT = Taxable • VAT = Output VAT – • VAT = Output VAT –
income x deemed Input VAT Input VAT
rate
CIT • CIT = Taxable • CIT = Taxable income x • CIT = Taxable
income x deemed CIT rate income x deemed
rate rate
4 Auditing • No • Not compulsory • Not compulsory
• Tax liability would
Revenue/ • No detailed requirements to
5 be withheld before
requirement
remittance
before remittance
45TAX RATES
In case of the deemed method, the following rates shall be applied for some
notable cases:
ACTIVITIES VAT RATE CIT RATE
Supply of goods in Vietnam or Exempt 1%
associated with services
rendered in Vietnam (including
in-country export- import,
distribution of goods in Vietnam
or delivery of goods where the
seller bears risk relating to the
goods in Vietnam)
Services 5% 5%
Supply of goods attached to services where the value is separated:
Goods portion Exempt (for goods) 1% (for goods)
Services portion 5% (for services) 5% (for services)
Supply of goods and some 3% 2%
services where value is not
separated (*)
Construction 3% or 5% 2%
Loan interest Exempt 5%
Income from royalties Risk of being taxed at 5% 10%
Other cases where value is not Highest rate applicable Highest rate applicable
separated
46 Doing business in Vietnam 2020. Investing in Vietnam, Engaging the worldD TAXATION AND CUSTOMS
DOUBLE TAXATION AVOIDANCE
AGREEMENT
Vietnam has a solid tax treaty language and notarized, along with
network, with most treaties following various Vietnamese Government
the OECD - model treaty. Treaties forms. In the case the statutory
generally provide for relief from deadline above is missed, taxpayers
double taxation on all types of can still retain their right to claim tax
income, limit the taxation by one treaty benefits as long as the notification
country of companies’ residents in the is submitted within 3 year from the
other and protect companies’ tax payment due date.
residents in one country from The documentation can be submitted
discriminatory taxation in the other. before the payment is made and
Vietnam’s treaties generally contain Vietnamese tax is withheld, or
OECD-compliant exchange of alternatively, after tax has been
information provisions. withheld, in which case, the applicant
Tax relief under Double Taxation would be seeking a tax refund.
Avoidance Agreement (DTA) As of August 2019, Vietnam has signed
application is not automatically DTA agreements with 80 countries and
granted. Instead, foreign taxpayers territories around the world. The table
are required to submit certain below contains the withholding tax
notification dossiers to Vietnamese rates that apply to dividend, interest
tax authorities within 15 days prior to and royalty payments by Vietnamese
the tax payment deadline. companies to non-residents under
Notification dossiers normally include
tax residence confirmation, which
a number of countries.
must be translated into the Vietnamese
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