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Vietnam

General Information

Country Name: Socialist Republic of Vietnam
Currency: Vietnamese Dong (VND)
Primary Tax Authority: General Department of Taxation (GDT)

Key Legislation

  • Constitution of Vietnam: Provides the framework for the tax system and economic policies.
  • Law on Tax Administration: Governs tax administration and compliance requirements.
  • Law on Corporate Income Tax (CIT): Regulates corporate income tax.
  • Law on Personal Income Tax (PIT): Governs personal income tax.
  • Law on Value Added Tax (VAT): Establishes the VAT system.
  • Customs Law: Covers customs duties and related procedures.

Fiscal Authority Allocation

Vietnam operates a centralized tax system, with the General Department of Taxation (GDT) handling most tax collection and enforcement. Local authorities have limited powers, primarily related to local taxes and fees.

Taxes Collected by Central Authorities:

  • Personal income tax (PIT)
  • Corporate income tax (CIT)
  • Value-added tax (VAT)
  • Customs duties
  • Special consumption tax

Taxes Collected by Local Authorities:

  • Property tax
  • Land use rights tax
  • Local fees and charges

Revenue Sharing Mechanisms:

Local governments receive transfers from the central government based on formulas and negotiations, but the primary tax revenues are collected centrally.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 20% for most companies. Reduced rates of 10% or 17% apply to certain industries and investment zones.
  • Special Economic Zones (SEZs): Companies in SEZs may benefit from a reduced CIT rate of 10% and additional incentives.
  • Incentives and Exemptions: Investment in high-tech industries and infrastructure may qualify for tax holidays or exemptions.
  • Loss Carryforwards: Tax losses can be carried forward for up to 5 years. Carrybacks are not allowed.

Value-Added Tax (VAT)

  • Standard VAT Rate: 10% applies to most goods and services.
  • Reduced VAT Rates: 5% for essential goods and services such as food, medicine, and transportation.
  • Exemptions: Healthcare, education, and certain agricultural products are exempt from VAT.
  • Refunds: VAT refunds are available for exporters and certain eligible businesses.

Personal Income Tax (PIT)

  • Progressive Tax Rates: Rates range from 5% to 35%, depending on income levels.
  • Tax-Free Threshold: Income up to VND 11 million per month is tax-free.
  • Allowances: Various personal allowances and deductions are available, including for dependents and specific expenses.
  • Dividends: 5% withholding tax on dividends paid to residents and non-residents.
  • Capital Gains: Capital gains from the sale of securities are taxed at 0.1% of the transaction value.

Additional Mandatory Contributions

Social Security Contributions:

  • Total Contribution Rate: Approximately 22.5% of gross salary.
  • Employer Contribution: 17.5% for social insurance, health insurance, and unemployment insurance.
  • Employee Contribution: 10% for social insurance and 1.5% for health insurance. Unemployment insurance contributions are borne by the employer.

Contribution Thresholds:

Contributions are subject to a ceiling, which is adjusted annually. For 2024, the ceiling for social insurance contributions is VND 29 million per month.

Tax Deductibility:

Social security contributions are deductible for income tax purposes.

Withholding Taxes

  • Dividends: 5% withholding tax on dividends paid to both residents and non-residents.
  • Interest: 5% withholding tax on interest payments.
  • Royalties: 10% withholding tax on royalties paid to non-residents.
  • Service Fees: Payments for services provided by non-residents are subject to a 5% withholding tax.

Transfer Pricing Rules

Vietnam follows OECD guidelines for transfer pricing. The arm’s length principle applies, and companies must maintain documentation to support related-party transactions.

Special Tax Regimes

  • Export Processing Zones (EPZs): Companies in EPZs benefit from reduced CIT rates, tax holidays, and exemptions from import duties.
  • High-Tech Zones: Investments in high-tech zones enjoy a reduced CIT rate of 10% and other incentives.
  • Infrastructure Investments: Significant infrastructure projects may receive tax holidays and exemptions.

Other Taxes

  • Special Consumption Tax: Applied to luxury goods such as alcohol, tobacco, and automobiles at rates varying by product.
  • Property Tax: Levied on property owners based on the value of the property.
  • Land Use Rights Tax: Applied to the use of land, with rates varying by location and type of land use.
  • Customs Duties: Levied on imports, with rates varying depending on the product category.

Double Taxation Agreements (DTAs)

Vietnam has signed 80 DTAs to avoid double taxation and provide reduced withholding tax rates on cross-border payments of dividends, interest, and royalties.

Compliance and Reporting

  • Corporate Tax Filing Deadline: Corporate tax returns must be filed annually within 90 days of the end of the fiscal year.
  • VAT Filing: VAT returns are filed monthly or quarterly depending on the size of the business.
  • Personal Income Tax Filing: PIT returns are due annually by March 31 of the following year.
  • Penalties for Non-Compliance: Penalties for late filing or underpayment of taxes include fines and interest on unpaid amounts.

Recent Developments

  • Digital Tax Administration: The Vietnamese government is enhancing digital tax administration systems to streamline tax filing and compliance.
  • Tax Incentives for Green Investments: New tax incentives are introduced to promote investments in renewable energy and green technologies.
  • Revisions to Transfer Pricing Rules: Updates to transfer pricing regulations align with international standards and aim to increase transparency and compliance.

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