May 17 – Starting June 7, authorities are increasing the tax applicable for foreign investors doing business or earning income in Vietnam on interest earned from bonds – not including government bonds and certificates of deposit to 10 percent.

Currently, interest from bonds held by foreign investors are charged a lower effective tax rate of 0.1 percent multiplied by the face value of the bond plus interest. The new Circular 64/2010/TT-BTC clarifies regulations on tax costs for foreign businesses in the country. The circular states that the transfer of bonds and CDs will be treated the same as transfer of securities, with a tax rate of 0.1 percent of the total transfer’s value.

This will exponentially hike prices for Vietnam’s bond market for foreign investors. “Ordinarily, the principal and interest from bonds will be two times higher than the principal. Therefore, the tax rate of 10 percent on interest will be 50 times higher than the old rate of 0.1 percent on the principal and interest,” Hoang Gia Hiep, deputy general director of Vinashin Finance Company, told Vietnam Net Bridge.