Corporate Income Tax in Vietnam

An introduction to CIT in Vietnam

The standard CIT rate for enterprises in Vietnam, whether local or foreign enterprise is 20 percent.

There are numerous incentives and policies that may lower this amount for foreign investors and some local businesses, as is discussed in our tax incentives guide. This section focuses on 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 that 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.

Which types of enterprises are subject to CIT?

The types of enterprises that are subject to CIT in Vietnam include local and foreign businesses that 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 contracts. 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 establishments 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 the 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 services 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 guides 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, and 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.

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 that 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 income 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 include income from activities of production and/or business outside Vietnam.

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 their 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 taxes 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.