Finance, Tax and Accounting

Introduction to Double Taxation Avoidance in Vietnam

May 16 – With regard to international trade, the various countries’ tax systems oftentimes put global investors in the unfavorable position of having to face redundant taxes on their income —i.e., double taxes . For example, a company may be subject to taxes in its country of residence and also in the countries where it raises income through foreign investments for the provision of goods and services.

It is therefore extremely worthwhile for foreign investors to be aware of the existing Double Taxation Avoidance Agreements (DTAAs) between Vietnam and various foreign countries, as well as how these agreements are applied. These treaties effectively eliminate double taxation through identifying exemptions or reducing the amount of taxes payable in Vietnam.

For access to a resource library of Vietnam’s current trade agreements, including DTAAs and bilateral investment treaties, please see here. Continue reading →

Vietnam to Create National Asset Management Company

May. 2 -The Vietnamese government is set to approve a decree that will officially establish a national asset management company to help with the resolution of bad debts in the country. The company has already received the Politburo’s in-principle approval.

The central bank has submitted its detailed plans for the company, which will be called the Vietnam Asset Management Company (VAMC). It is yet to specify when the company will be established.

The state-run VAMC, under the State Bank of Vietnam’s (SBV) management, will help banks and enterprises deal with their bad debts. The VAMC will play an important role in controlling bad debts – which are the main culprit for the banking system’s weak liquidity. Continue reading →

Posted in Finance, Tax and Accounting, Legal and Regulatory | Tagged Debt, Vietnam | Leave a comment

Tax Update: Vietnam Gov’t Approves Amendments to CIT Law

Apr. 17 – In an effort to boost investment in Vietnamese businesses and to support struggling enterprises, Vietnamese lawmakers have approved the Government’s proposal to reduce the current general corporate income tax (CIT) rate from 25 percent to 23 percent. In addition, CIT rates were set at a rate of 20 percent for small and medium enterprises (SMEs), while businesses that operate in the social housing sector will only be taxed at a rate of 10 percent. SMEs are defined as enterprises that employ fewer than 200 full-time employees with annual revenues of less than VND 20 billion (approximately US$1 million). Continue reading →

Posted in Business, Finance, Tax and Accounting, Regulatory Update | Tagged Corporate Income Tax, Vietnam Tax | Leave a comment

How Foreign Contractors are Taxed in Vietnam

Mar. 22 – Foreign contractors are subject to taxes on payments for work done in Vietnam based on the contracts signed between them and a Vietnamese partner(s) in the form of the foreign contractor tax (FCT), value added tax (VAT) and corporate income tax (CIT). CIT-liable income is determined on the basis of declaring total turnover and expenses.

Foreign contractors are subject to the above-listed taxes for services rendered in Vietnam, not including the pure supply of goods, services performed and consumed outside Vietnam and other services performed wholly outside of the country. In short, foreigner contractors are not subject to the above-mentioned taxes for payments for overseas services as well as for services performed and consumed outside of Vietnam. Continue reading →

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Vietnam Central Bank to Inject Capital Into Banking System

Mar. 18 – The Central Bank of Vietnam plans to infuse an additional VND30 trillion into Vietnam’s banking system in order to make further soft loans available for home-buyers. This move hopes to revive the struggling property market and resolve bad debt.

The central bank issued a circular late last week in which it clarified that banks will be providing loans at 6 percent a year to low-income home buyers, state employees and the military for at least 10 years, and to low-price property developers for five years. The circular also added that soft loans would be reserved for low-price property projects.

This plan is to take effect starting April 15, 2013. Continue reading →

Posted in Business, Finance, Tax and Accounting, Legal and Regulatory, Real Estate | Tagged Housing, Vietnam Central Bank, Vietnam Housing | Leave a comment

Vietnam Government Encourages Supporting Industries

By Nguyen Huyen My

Mar. 7 – In 2010 and 2011, the Vietnamese Government issued a number of policies to encourage supporting industries, especially those connected to the high-tech sectors (Prime Minister’s Decision No 12/2011/QD-TTg).

Supporting industries play a key role in promoting the development of Vietnam’s main industries. Furthermore, the potential to develop Vietnam’s service industries is great as it has abundant a labor supply and a strong capacity to absorb and incorporate new technologies.

Strengthening service industries will also reduce the number of imports of any necessary industry products (Vietnam’s imports have outnumbered its exports in recent years, which has been a major factor in Vietnam’s current trade imbalance).

Specifically, the Government aims to develop the following supporting industries: Continue reading →

Posted in Business, Finance, Tax and Accounting, Legal and Regulatory, Manufacturing | Leave a comment

Inflationary Pressure Continues to Build in Vietnam

Feb. 14 – Data from the General Statistics Office of Vietnam has shown that inflation has accelerated from 6.81 percent in December up to 7.07 percent in January, while consumer prices gained 1.25 percent in January (the sharpest monthly gain in four months).

Furthermore, the price of health care and pharmaceuticals surged 55.6 percent, education jumped by 17.3 percent, clothing and footwear prices rose by 8.36 percent and housing and construction costs increased by 7.73 percent since last year.

Minister Vu Duc Dam attributed the rise in consumer prices to the increase of healthcare costs and a supply shortage and rising demand due to the Lunar New Year holiday. Furthermore, Minister Vu Duc Dam explained that the recent prolonged cold weather had damaged farmers’ harvests, which accordingly caused the rising price of commodities. Continue reading →

Posted in Finance, Tax and Accounting | Tagged Inflation, Vietnam Inflation | Leave a comment

Update: Personal Income Tax Finalization for Foreigners in Vietnam

Feb. 7 – On January 15, the Vietnam General Department of Taxation issued Official Letter 187/TCT-TNCN (OL187) to provide guidance on the finalization of personal income taxes (PIT). Some of the key updates can be found below.

183 Day Rule
Foreigners who work in Vietnam do not have to pay PIT if they spend fewer than 183 days in Vietnam in their first calendar year. If they return and live a total of 183 or more days in Vietnam, then they will be subject to PIT starting from 1 January (not the date of their arrival). Continue reading →

Posted in Finance, Tax and Accounting | Tagged Vietnam Personal Income Tax, Vietnam Tax | Leave a comment

Vietnam Airlines IPO Set for Late 2013

Feb. 4 – According to the Vietnamese government, and in line with its state-owned enterprise (SOE) restructuring plans, national carrier Vietnam Airlines is set to list its shares in its first initial public offering (IPO) towards the end of 2013. The move will see the government’s stake in the airline drop to 70 percent, and is expected to raise about US$200 million.

The restructuring will also see the airline divest all of its non-core business investments by 2015 in order to concentrate on aviation and the transportation sector. These investments include holdings in banking, telecommunications and the postal service. Continue reading →

Posted in Finance, Tax and Accounting | Tagged Initial Public Offering, Vietnam Airline, Vietnam State-Owned Enterprises | Leave a comment

Vietnam Reduces Corporate Income Tax to 23 Percent

Jan. 29 – The Vietnamese Ministry of Finance finished drafting its Corporate Income Tax Law last week in a plan to cut current rates from 25 percent down to 23 percent.

Corporate income tax (CIT) rates have been adjusted several times over the past nine years: the 2003 CIT law of 2004 decreased rates from 32 percent to 28 percent, and the 2008 law further decreased them from 28 percent to 25 percent. The Ministry of Finance plans to lower the rate even further to 20 percent by 2020.

The Vietnam Tax Consultancy Association (VTCA), however, alleges that it would be more reasonable for the CIT rate to be reduced to 22 percent. The VTCA, despite agreeing with the planned 20 percent tax rate by 2020, believes that corporate income taxes should be lowered immediately so as to encourage businesses to expand their investments and to scale up production. Continue reading →