There are a number of taxes that foreign business owners in Vietnam should be aware of. One of these taxes is Vietnam’s corporate income tax which is particularly important for foreign firms looking to manufacture in Vietnam. With this in mind, this article runs through what this tax is, what it applies, and the key elements that apply to foreign business persons.
What is Corporate Income Tax in Vietnam?
Vietnam’s Corporate Income Tax–or CIT–is the tax applied to the profits of corporations operating in Vietnam. The details of this tax are outlined in the Law on Corporate Income Tax approved in January of 2023.
What is the CIT rate in Vietnam?
The standard tax rate in Vietnam is 20 percent per Article 10 of the Law on Corporate Income Tax, however, there are exceptions.
Firstly, the corporate income tax rate applicable to petroleum operations can range from 25 percent to 50 percent which will depend on what is negotiated when the project is approved. Similarly, the exploration and extraction of other natural resources can attract CIT rates of anywhere between 32 and 50 percent. This is set on a case-by-case basis.
Also of note, however, is that tax incentives in the form of a reduction in the corporate income tax rate for new businesses, are also common and can reduce a firm’s income tax liability considerably.
Corporate Income Tax Incentives in Vietnam
Foreign-invested manufacturing enterprises in Vietnam have historically been able to receive a number of corporate income tax incentives. The extent of these incentives largely varies depending on several criteria, however, most manufacturing firms generally qualify for a 10 percent CIT rate for the first 15 years.
That said, many foreign firms also often qualify for a 50 percent CIT reduction for the first four years which can be extended up to 9 years in some circumstances.
Furthermore, it is not unusual for individual provinces to provide their own tax incentives as well and the national government often affords foreign firms additional tax discounts on an ad-hoc basis.
Top-up Tax
All of that said, in 2023, Resolution 107 was passed by Vietnam’s National Assembly in response to the OECD’s Global Minimum Tax initiative. This will see multinationals paying less than 15 percent tax, required to make up the difference in Vietnam. This is only a relatively new development and will likely have a substantial impact on the tax incentives outlined above. That said, the government has said that it intends to use the additional tax revenue to provide foreign firms with other benefits. As of December 2023, it was unclear what those alternative benefits might be.
When is corporate income tax paid?
The corporate income tax year follows the calendar year. A corporate income tax return needs to be filed no later than 90 days after the last day of the calendar year.
Corporate income tax is, however, often required to be paid quarterly.
What’s next?
Firstly, Vietnam’s Corporate Income Tax is just one of several taxes in Vietnam foreign firms should be aware of. Other important taxes in Vietnam include Vietnam’s Value-added Tax, Capital Gains Tax, Special Consumption Tax, Foreign Contractor Tax in Vietnam, and Personal Income Tax. By familiarising themselves with these taxes it may foreign firms to avoid running afoul of Vietnam’s tax department.
The introduction of the Global Minimum Tax may have thrown a spanner in the works in terms of CIT breaks. That said, a new incentives scheme for foreign firms is in the works that will aim to substitute said tax breaks. This process, however, could be quite long with a number of drafts and feedback periods likely. With this in mind, firms considering starting a company in Vietnam can best keep abreast of the latest CIT developments by subscribing to the-shiv.
Last updated
June 8, 2024: Rewrote Corporate Income Tax Incentives in Vietnam for clarity, added a few more specifics.