Corporate Income Tax in Vietnam
Oct. 31 – Vietnam’s Corporate Income Tax (CIT) Law was approved by the National Assembly in 2008 and came into effect in 2009. CIT is a direct tax levied on the profits (gross revenue minus expenses) earned by companies or organizations.
The standard CIT rate is 25 percent for both domestic and foreign-invested enterprises in most industries. All income arising inside Vietnam is subject to CIT, no matter whether a foreign enterprise has a Vietnam-based subsidiary or whether that subsidiary is considered a Permanent Establishment (PE).
When calculating CIT, FIEs can deduct most expenses paid for production and business activities if supported by adequate lawful invoices and documents. Business establishments that suffer losses after tax finalization are entitled to carry forward those losses to future taxable income for a maximum period of five years.
An enterprise that conducts multiple business activities that are subject to different tax rates should calculate the income for each activity separately, multiplying income from each activity by the corresponding tax rate.
Corporate income tax incentives apply to investment projects in specific sectors and areas with difficult socioeconomic conditions, as well as those in high-tech zones and economic zones.
For example, preferential tax policies in 2012 include a 30 percent reduction in the enterprise income tax payable for the following enterprises:
- Small and medium-sized enterprises (SMEs), excluding SMEs undertaking business in lottery, real estate, securities, finance, banking, insurance or goods production, or providing services subject to special consumption tax
- First-class enterprises, special-class enterprises belonging to economic corporations and general companies
- Labor-intensive enterprises that produce, process and treat: agricultural products, forestry products, aquaculture products, textiles and garments, leather and footwear, and electronic components
- Enterprises building socio-economic infrastructural constructions
In addition to tax incentives, tax reductions may be available for enterprises engaging in manufacturing, construction and transportation activities which employ numerous female staff or ethnic minorities.
Portions of this article were taken from Asia Briefing’s guide “An Introduction to Doing Business in Vietnam.” This new 32-page report touches on everything you need to know about doing business in Vietnam, and is now available as a complimentary PDF download on the Asia Briefing Bookstore!
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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Managing Partner, China, Vietnam & Italy
Hoang Thu Huyen
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