Vietnam to Cut Income Tax By 30% for Small Business

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By Lorenzo Martelli

Nov. 16 – On November 4, 2011 the government enacted Decree 101/2011/ND-CP presenting tax incentives to help enterprises and individuals survive in the current high level of inflation in Vietnam.

According to Decree 101, corporate income tax payable by small-and-medium-sized enterprises will decline by 30 percent this year. Firms in line for tax reductions include those operating in the forestry, agricultural, textile, fisheries, leather, garment, footwear and electronic part production sectors and those contributing to socio-economic development.

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The reduction will not be applied to income tax from business sectors related to the lottery, real estate, finance, securities, banking, insurance, goods production and service trading. Moreover, tax exemptions will not be applied to first-class and special-class businesses belonging to economic groups and corporations, and parent company subsidiaries in which parent companies are not SMEs in size and hold over 50 percent of subsidiaries’ equity capital.

Additionally, tax cuts will be also applied to individual incomes.

Value added tax (VAT) and personal income tax (PIT) payments will be halved from July 1 to December 31, 2011 for households and individuals providing accommodation and catering services to students, shift-workers (excluding those employed in transport and aviation) and baby-sitters. To be eligible for the 50 percent tax reduction, households and individuals must keep costs of rent, baby-sitting and food stable at the same level as those in December 2010.

Finally, Decree 101 provides PIT exemptions from August 1 to December 31, 2011 on dividends gained from securities or stock purchases (excluding dividends from joint stock banks, investment funds and credit organizations).

PIT reductions are available for individuals with an income level included in level 1 PIT partial progressive tariff payment as regulated in the PIT law. Therefore, exemptions are applied to individuals whose average monthly income is up to VND5,000,000 (US$241).

The decree will come into effect on December 20, 2011.

Dezan Shira & Associates is boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in Vietnam. To contact the firm, please email, visit, or download the firm’s brochure here.

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