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Corporate Income Tax in Vietnam

An introduction to CIT in Vietnam

The standard CIT rate for enterprises in Vietnam, whether local or a foreign enterprise is 20 percent. There are numerous incentives and policies which may lower this amount for foreign investors and some local businesses, as is discussed in our tax incentives guide. This section focuses upon the framework and mechanisms for how Corporate Income Tax is applied in Vietnam.

In Vietnam, Corporate Income Tax (CIT) is paid by business entities in all economic sectors, including professional organizations, all foreign corporations with production and trading activities in Vietnam, and others.

Here are a few key points about CIT in Vietnam:

  • CIT is a ‘direct tax’ that is levied on the profits earned by companies or organizations. Generally, ‘profits earned’ refers to a company’s gross revenue minus its expenses;
  • CIT is paid quarterly;
  • Enterprises are required to make provisional CIT payment each quarter, within 30 days of the previous quarter, based on estimates of business outcomes from previous years. 
  • At the time of final tax payment, if the total amount paid accounts for less than 80 percent of the finalization amount, the shortfall which exceeds 20 percent is subject to late payment interest. The interest is calculated from the date after the deadline for the fourth-quarter tax payment to the date on which the tax deficit is fully paid.

Did You Know
Individuals and families conducting business are also subject to personal income tax (PIT).

Which types of enterprises are subject to CIT?

The types of enterprises that are subject to CIT in Vietnam include local and foreign businesses which are established under Vietnam’s Law on Enterprises.

Law on Investment, Law on Credit Institutions, Law on Securities, and Commercial Law, including joint-stock companies, limited liability companies, partnerships, and business cooperation contract. These enterprises will pay tax on taxable incomes generated in and outside Vietnam.

Vietnam defines the types of enterprises subject to CIT in Decree No. 218/2013/ND-CP.

Enterprises established under foreign laws with or without a Vietnam-based permanent establishment

Enterprises without Vietnam-based permanent establishment only need to pay tax on tax incomes directly generated in Vietnam. However, Enterprises with Vietnam-based permanent establishments must pay tax on taxable incomes generated both in Vietnam, as well as on taxable incomes generated outside Vietnam but which are related to business operations of the establishment.

Types and natures of permanent establishments

Below are the forms of Vietnam-based permanent establishments through which foreign enterprises carry out some or all business operations and manufacture:

  • Branches, representative offices, factories, workshops, means of transportation, oil fields, or other natural resources extraction sites in Vietnam;
  • Construction sites;
  • Service providing centers, including consulting services through employees or organizations;
  • Agents of foreign enterprises; and
  • Representatives in Vietnam who have the authority to sign contracts under the name of foreign companies or representatives who are responsible for providing goods and service regularly in Vietnam.

Corporate Income Tax rates

The standard CIT rate for local and foreign enterprises in Vietnam is 20 percent, unless it meets one of the following criteria:

  • The enterprise may be eligible for a lower tax incentive CIT rate (see link), or
  • The enterprise conducts business that applies to higher exception rates (see below).

Exceptions to the standard CIT rate: 

  • Companies involved in seeking, exploring, and exploiting petroleum and gas deposits in Vietnam are subject to a CIT rate of 32 to 50 percent;
  • Companies involved in seeking, exploring, and exploiting rare minerals, such as silver, gold, and gemstones are subject to a CIT rate of 40 or 50 percent;
  • Decree No. 218/2013/ND-CP provides guidance on the CIT rate for a third type of enterprise based on the location, conditions for extraction, and types of mineral reserves. For platinum, gold, silver, tin, wolfram mines, the CIT rate is 50 percent, but for mines with an assigned area of at least 70 percent with difficult socio-economic conditions mentioned in the list of areas entitled to tax incentives, the CIT rate for enterprises will be 40 percent.

Did You Know?
For small and medium-sized enterprises (SMEs), defined in Vietnam as a company with a total annual turnover not exceeding VND 20 billion (US$860,000), the CIT rate is 20 percent. Eligibility for this SME tax rate is judged by the turnover of the preceding year.

When multiple tax rates may apply

It is common for most businesses to be subject to a single CIT rate. However, it is possible that an enterprise would be subject to different tax rates if it conducts various business activities which are subject to different CIT rates. In such a situation, an enterprise calculates their CIT by adding the income derived from each differently taxed activity, multiplied by the applicable tax rates for each corresponding activity, as a sum.

Tax incentive CIT rates

Many foreign-invested and local companies may also qualify for the many types of tax incentives available in Vietnam, which include tax holiday reduced rates of 17 percent for many foreign-invested project criteria, or as low as 10 percent CIT in unique situations.

Determining taxable corporate income

‘Taxable Income’ is defined to include income from common sources such as production, trading of goods, and provision of services. Taxable income also includes other incomes sources, including:

  • Income from capital transfer and real estate transfer;
  • Income from ownership of or rights to use assets;
  • Income from assignment, leasing out, and liquidation of assets;
  • Interest on deposits, loans, or income from the sale of foreign currency;
  • Recoveries from contingency reserves;
  • Recoveries from bad debts, which were written-off;
  • Income from debts payable to unidentifiable creditors;
  • Income from business unreported in previous years; and
  • Other incomes including income from activities of production and/or business outside Vietnam.

Did You Know?
Income from real estate transfer must be separately accounted for when declaring and paying CIT and cannot be deducted against incomes or losses from other production and business activities.

CIT exemptions  

Certain incomes are exempt from CIT, such as those earned from scientific research and technological development contracts.

Carrying over net losses

Business establishments that do not profit within the fiscal year after tax finalization, are entitled to carry forward those losses against its future years’ taxable incomes. Losses may be carried over for a maximum period of five years.

Losses cannot be carried backward to previous tax years under any circumstances.

Jurisdiction of tax payments

Enterprises must pay tax in the localities where they are headquartered. For an enterprise that has a dependent cost accounting production establishment (including a processing and assembly establishment) operating in a province or city other than where it is headquartered, the tax amount shall be calculated and paid in both the locality where the enterprise is headquartered and the locality where its production establishment is based.

The amount of CIT payable to the province or city where a dependent cost accounting production establishment is based is the payable CIT amount in a period multiplied by the ratio between expenses incurred by the production establishment and the total expenses incurred by the enterprise.

FAQ: Corporate Income Tax in Vietnam

What is the corporate income tax rate in Vietnam?

The standard CIT rate for all enterprises in Vietnam, both local and foreign is 20 percent.

Other exceptions include:

  • Companies involved in seeking, exploring, and exploiting petroleum and gas deposits in Vietnam are subject to a CIT rate of 32 to 50 percent;
  • Companies involved in seeking, exploring, and exploiting rare minerals, such as silver, gold, and gemstones are subject to a CIT rate of 40 or 50 percent.

Decree No. 218/2013/ND-CP provides guidance on the CIT rate for the third type of enterprises based on the location, conditions for extraction, and mineral reserves.

Who is subject to corporate income tax in Vietnam?

Taxpayers include business entities in all economic sectors, professional organizations, and foreign corporations with production and trading activities in Vietnam.

Local and foreign businesses established under Vietnam’s Law on Enterprises, Law on Investment, Law on Credit Institutions, Law on Securities, and Commercial Law in the forms of joint-stock companies, limited liability companies, partnerships, and business cooperation contract. These enterprises will pay tax on taxable incomes generated in and outside Vietnam are liable to pay CIT.

Further, enterprises established under foreign laws with or without a Vietnam-based permanent establishment are also subject to income tax in Vietnam. Enterprises with Vietnam-based permanent establishments will pay tax on taxable incomes generated in Vietnam and taxable incomes generated outside Vietnam that are related to business operations of the establishment. On the other hand, enterprises without Vietnam-based permanent establishment only need to pay tax on tax incomes generated in Vietnam.

How often does an enterprise need to pay CIT?

Enterprises are also required to make provisional CIT remittance on a quarterly basis (the 30th day of the following quarter at the latest) based on the estimated quarterly business results. Annual CIT returns are required to be filed 90 days from the end of the fiscal year. However, it is recommended that enterprises should have a clear financial forecast so that the CIT liability for the whole financial year can be explicitly estimated.

According to the new law on tax administration, if the total amount of provisional quarterly CIT paid in the first three quarters of a financial year accounts for less than 75 percent of the final CIT liability for the year, the shortfall will be subject to late payment interest penalty, which is counted from the payment due date of the third quarter’s provisional CIT liability.

What incomes are exempt from corporate income tax in Vietnam?

Certain incomes are exempt from CIT, such as those earned from scientific research and technological development contracts during the trial production period, and from technical service contracts directly serving agricultural production.

The CIT Law also allows enterprises to set aside a maximum of 10 percent of their annual taxable incomes for research and development. Enterprises with 50 percent of charter capital held by the State must ensure the minimum rate of deduction of fund prescribed by the Law on Science and Technology. Within five years, if the research and development fund is not used, is used for incorrect purposes, or less than 70 percent of the fund is used, then the company will have to refund the CIT exemptions on the fund plus interest.

Does CIT affect profit repatriation?

Yes.

In order to repatriate profits, a company must ensure that it has completed the declaration of CIT of the relevant financial year and issued audited financial statements. The company must then report its intention to repatriate its profits to the tax bureau. If, within seven days, there is no notice from the tax bureau, the profits may be remitted out.

Companies can expect it to be between the middle to the end of April before they are able to remit their profits out of the country. However, profit repatriation will not be allowed if the financial statements of the company show an accumulated loss.

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