Tax in Vietnam 2024

There are a number of taxes that foreign business owners in Vietnam should be aware of. Most prominent among them are Vietnam’s Personal Income Tax, Corporate Income Tax, Value Added Tax, and Special Consumption Tax. A basic understanding of these taxes can make dealing with local accountants and tax professionals much easier.

With this in mind, this article runs through what each of these taxes are, what they apply to, and the key elements that apply to foreign business persons.

Vietnam Accounting System

Firstly, it should be clear that Vietnam operates on its own accounting system known as the Vietnam Accounting System or VAS. This is as opposed to the International Financial Reporting Standards or IFRS.

The main difference between these two accounting systems is that IFRS is a principles-based system of accounting whereas VAS demands specific processes and procedures are followed. For example, in Vientam firms need to use  set templates for financial reporting whereas IFRS allows for firms to create their own templates based on their particular needs.

Furthermore, there are a number of IFRS and IAS (International Accounting Stadards) that have no VAS equivalent. For example, ‘financial reporting in hyperinflationary economies’ or ‘disclosure of interests in other entities’.

That said, Vietnam is slowly progressing toward IFRS. In 2020, the Minsitry of Finance issued Decision 345/QD-BT outlining a roadmap to brining local accounting inline with the international system. The two phases of the plan have IFRS voluntary up to 2025 but mandatory thereafter. It’s not clear how likely it is that this deadline will be met.

Chief Accountant in Vietnam

Firms in Vietnam are required to have a Chief Accountant. The Chief Accountant signs a firm’s financial statements and is responsible for liaising with the tax authorities. Note, however, that small firms can generally get away with having an Acting Chief Accountant for the first twelve months while they get someone more permanent sorted.

It may be tempting to try and fulfill the role of Chief Accountant with a foreign tax agent, however, Vietnam tax law can be quite nuanced and complex, and navigating Vietnam’s bureaucracy is much easier with a native Vietnamese speaker. In this light, it is generally better to hire a local. Most market entry consultancies will provide this service for a free. 

Value-Added Tax in Vietnam

Overview

Vietnam’s Value Added Tax or VAT is an indirect tax applied to most goods at the point of purchase in Vietnam. It is outlined in the Law on Value Added Tax which was first passed in 2008 but has been subsequently amended several times. This information is pulled from the aforementioned law and Circular 219 that was issued at the end of 2013.

What does it apply to?

Vietnam’s VAT applies to almost all goods and services bought or sold in Vietnam. 

Tax rate

It is currently set at 10 percent, however, there are some exceptions.

Of note, the VAT is currently, but only temporarily, 8 percent. Reducing the VAT was an initiative taken to stimulate the economy during the COVID-19 pandemic, however, it has been extended repeatedly. As of writing, it was due to end on June 30, 2024, however, there is legislation currently before Vietnam’s National Assembly that would see the reduction extended to the end of the year if approved.

There are also a number of items that are subjected to a VAT of just 5 percent. These items are mostly agricultural. There is a detailed list here: Value Added Tax in Vietnam 2024.

Personal Income Tax in Vietnam

Personal Income Tax in Vietnam–locally known as the PIT–is the tax applied to income earned within Vietnam. It is codified in the Law on Personal Income Tax legislated in 2007. This includes income earned on wages or returns from local investments and depending on the situation possibly income generated overseas.

Who does it apply to?

A tax resident for PIT purposes is a person that has been in Vietnam for 183 days or more in one calendar year; or that has a permanent residence in Vietnam either a property that they own or that the lease with a rental agreement.

This distinction is important in that non-resident taxpayers are subject to a flat 20 percent tax on their wages or salaries whereas resident taxpayers are taxed progressively.

Tax rates

Income tax rates are progressive. The more an employee earns the more tax they pay.

Progressive income tax rates, Vietnam, VND millions

For more details see: Personal Income Tax in Vietnam 2024.

Special Consumption Tax in Vietnam

Vietnam’s Special Consumption Tax–or SCT–though sometimes called an excise tax or Special Sales Tax is an indirect tax on luxury goods or goods that are harmful to people or the environment. For example, cigarettes or alcohol. It is used to regulate the use of these goods and generate revenue for the government.

What does it apply to?

Vietnam’s Special Consumption Tax applies to:

• Cigarettes, cigars and other tobacco products
• Liquor
• Beer
• Cars and trucks
• Motorcycles with a cylinder capacity of over 125 cm3
• Aircraft 
• Yachts
• Gasoline
• Gambling
• Golf, and
• The lottery

Tax rates

The percentage of special consumption tax that applies will depend on the item. For cars the amount is determined by the cylinder size and the fuel source–for example, the SCT on electric vehicles is lower than it is on petrol-powered vehicles. There is a detailed table here: Special Consumption Tax in Vietnam 2024.

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 does it apply to?

Any corporate income earned in Vietnam.

Tax rates

The standard corporate income 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. For details see: Corporate Income Tax in Vietnam 2024.

Capital Gains Tax in Vietnam

Capital gains tax in Vietnam–more commonly referred to by its acronym CGT–is a tax on profits earned from the sale or transfer of assets, such as securities, real estate, or capital in a business. The tax applies to both individuals and corporations, but the rates and methods of calculation vary depending on the type of asset and the entity involved.

Capital gains taxes are outlined in the Law on Personal Income Tax under Section 2, Article 23. They key details are as follows:

What does it apply to?

The CGT is a tax on profits earned from the sale or transfer of assets, such as securities, real estate, or capital in a business.

Tax rates

Broadly speaking, capital gains tax rates are:

For details see: Capital Gains Tax in Vietnam 2024

Foreign Contractor Tax in Vietnam

Foreign Contractor Tax (FCT) is a tax regime in Vietnam that applies to foreign organizations and individuals (referred to as “foreign contractors”) who do not have a permanent establishment in Vietnam but earn income from providing services, supplying goods, or conducting business activities in Vietnam. The FCT combines both Value-Added Tax (VAT) and Corporate Income Tax (CIT) obligations for these foreign entities. The FCT is commonly applied to foreign contractors operating in sectors such as construction, telecommunications, digital services, and e-commerce.

For details see: Foreign Contractor Tax in Vietnam

Natural Resources Tax in Vietnam

Vietnam’s Natural Resources Tax is a form of tax levied on organisations and individuals that exploit natural resources within the country’s territory. This tax applies to resources such as minerals, oil, gas, forest products, aquatic resources, and natural water, among others. The tax rate is based on the type and volume of the resource extracted and varies significantly depending on the resource’s economic value and environmental impact.

For details see: Vietnam’s Natural Resources Tax

What’s next?

There are a number of taxes that foreign firms operating in Vietnam should be aware of. These five impact most firms, however, there are also a number of industry-specific taxes. With this in mind, foreign firms should make sure to get good quality, solid advice from a consummate tax professional when entering the Vietnam market.

It’s also worth noting that tax law can change from time to time and with this in mind foreign firms in Vietnam can best keep abreast of tax developments by subscribing to the-shiv.

Last updated: June 4, 2024: Added sections on VAS and Chief Accountants; September 11, 2024: Added capital gains tax section, FCT.