According to the current regulations of the Law on taxes, foreign investors should understand at least the following taxes during investing and doing business in Vietnam:
Corporate income tax;
Special consumption tax
Technology transfer tax;
Foreign contractor tax; and
Personal income tax.
1. Corporate Income Tax (“CIT”)
CIT is a type of direct tax which is imposed upon income of enterprises after deducting appropriate and legal expenses related to income of object of the tax.
a. Tax rate: According to the law on amending and supplementing some articles of the Law on Corporate Income Tax No. 32/2013/QH13 on 19/06/2013, from 1/1/2014 onwards, tax rate is 22% and applied to all juristic persons, including Foreign investment enterprises, The enterprises whose total annual revenue are not over 20 billion dong will be applied the CIT rate of 20% from 1/7/2013, and from 1/1/2016, the common tax rate is 20%, and the Preferential tax rate is decreased by 17%. Especially, search, exploration and exploitation of oil gas and other rare natural resources is applied the tax rate of 32% – 50% depending on each project, each business premises.
b. Method of tax calculation: Enterprises who are organizations doing its production, business of goods and services with taxable income. Foreign organizations operating its production and business in Vietnam who are not applied the Law on Investment, the Law on Enterprises:
Assessable income is calculated as following:
Taxable income is calculated as following:
For enterprises with fund for science and technology:
Taxable income in the tax assessment period includes: Income from production, business of goods, services, and other income.
Revenue for calculation of taxable income: is the whole money of goods sales, processing and service supply including price support, extra charges and additional charges that enterprises are received, regardless of receiving such money.
2. Value added tax (VAT)
VAT is a type of indirect tax which is imposed upon services and goods. It is called value-added tax because the tax is only imposed upon the additional services and goods during production and delivery to users. Total tax in each main phase is equivalent to assessable amount per selling price to end users. VAT is incurred by end users, production premises and service & goods suppliers are tax payers to the State Budget on behalf of users by adding VAT into selling price and users will pay during buying goods and services.
a. Tax rate: According to the current regulations of the law, there are 4 VAT rates as following:
VAT rate of 0% is applied to the goods and services which are imported, internationally transported, non-taxable goods and services as specified in the article 5, the Law on VAT and the clause 1, article 1 the Law on amending and supplementing some articles of the law on VAT during export;
VAT rate of 5% is applied to the cases as stated in the clause 2, article 8 the Law on VAT, and the clause 3, article 1 of the Law on amending and supplementing some articles of the law on VAT. The rate of 5% is applied to the essential goods and services such as water, fertilizers, pesticides, pharmaceuticals, education & training equipment and tools, toys, scientific and art books, natural agricultural and forestry products, animal feed, services applying science and agriculture, etc;
The standard VAT rate of 10% is applied to almost goods and services such as gasoline, coal, ore and other mining products; business electricity; electronic products, electric machines; chemical products, cosmetics; textiles, fabrics, yarn; sugar, confectionery and non-alcoholic beverages; glass, plastic, rubber, construction materials; construction and installation works, transport and loading/ unloading works; postal and telecommunications services; leased premises, equipment and means of transportation; the legal advisory services; and luxury goods and services such as business in gold, silver and precious stones, hotel, tourism, entertainment, all kinds of lotteries, vessel agents, and others.
b. Method of tax calculation: Payable VAT is calculated by deducting tax or method of direct calculation on VAT.
Method of tax deduction: is applied to all objects of VAT. Particularly:
Payable VAT in this case is calculated as following:
Method of direct calculation on VAT:
3. Special consumption tax (SCT)
Special consumption tax (SCT) is a type of direct tax which is imposed upon some taxable goods and services according to regulations of the law on Special consumption tax. The tax is included in prices of goods and services, and is incurred by users during buying goods and using services.
Bases for tax calculation: Bases for SCT calculation are assessble price of taxable goods and services, and SCT rate. Payable SCT is calculated by multiplying assessable price upon SCT and SCT rate.
For SCT, as on 01/01/2016 when the law on SCT amending and supplementing No. 70/2014/QH13 on 26/11/2014 becomes effect, SCT rate is determined according to the below tariff:
4. Export/Import Tax
Export/ import tax is imposed upon trade and non-trade goods which is exported, imported through Vietnamese borders.
a. Tax rate
(i) Tax rate upon exported goods is detailed to each goods in the Export tariff;
(ii) Tax rates upon imported goods include:
Preferential tax rates are applied to imported goods from countries, group of countries or terrains applying Most Favoured Nation during commercial relationship with Vietnam;
Special Preferential tax rates are applied to imported goods from countries, group of countries or terrains applying special preferences on import tax to Vietnam;
Common Preferential tax rates are applied to imported goods from countries, group of countries or terrains not applying Most Favoured Nation and not applying Special Preferential tax rates regarding import tax to Vietnam. Common tax rate is prescribed to not over 70% of Preferential tax rate upon each goods as stipulated by the Government.
b. Method of tax calculation
Payable export, import tax is calculated by multiplying quantity of actual exported, imported goods as stated in a Customs Declaration, and assessable price and tax rate of each goods as stated in the Tariff in the moment of tax assessment;
In the event that a goods is applied absolute tax, then payable import, export tax will be calculated by multiplying quantity of actual exported, imported goods as stated in a Customs Declaration, and the absolute tax rate per one unit of goods in accordance with regulations in the moment of tax assessment.
5. Foreign Contractor Tax (FCT)
Foreign contractors, subcontractors who are business organizations shall comply with value-added tax (VAT), corporate income tax (CIT) obligations in accordance with the below instruction:
Value-added tax will be paid on the basis of the deduction method, corporate income tax will be paid on the basis of the income and expenses statement, in order to determine taxable income (hereinafter referred to as Declaration method):
a. Applied Objects and conditions:
Foreign contractors, subcontractors who satisfy all the following conditions:
Have permanent residence in Vietnam or are residents in Vietnam;
Term of business operation in Vietnam according to Contracts for contractors, contracts for subcontractors is at least 183 days after the Contracts for contractors, contracts for subcontractors become effective;
Are applying the Vietnamese Accounting System and make procedures of tax registration, is obtained a tax code by taxation agencies.
b, Method of Tax calculation:
(i) To calculate value- added tax (VAT):
In the event that revenue of Contractors is exclusive of payable value- added tax, it is required to convert the value – added tax assessable revene into revenue including value- added tax, particularly:
In the event that foreign contractors who enter into contracts with Vietnamese subcontractors or foreign subcontractors are applying tax payment on the basis of declaration method or foreign subcontractors pay tax according to combined method in order to assign a part of work (items) value to subcontracts, then value- added tax assessable revenue of the foreign subcontracts will not include the value of work which has been completed by the Vietnamese subcontractors or the foreign subcontractors.
In the event that foreign contractors who enter into contracts with suppliers in Vietnam in order to purchase materials, submaterials, supplies, machineries and equipment for the performance of the contracts, goods and services for interal consumption, for consumption of the items not subject to items or work that the foreign contractors perform according to the contracts, then value of such goods and services will not be determined unless value- added tax assessable revenue of the foreign contractors is determined.
In the event that foreign contractors who enter into contracts with foreign subcontractors is applying tax payment on the basis of direct method, then Vietnamese parties will declare VAT payment on behalf of the foreign contractors, foreign subcontractors according to the tax rate (%) for calculating value- added tax per revenue.
With regard to international delivery – receipt – warehousing services from Vietnam to foreign countries (regardless of the sender or the receiver pays service charges), Value- added tax assessable revenue is the whole revenue that the foreign contractors obtain, is exclusive of payable international transfort charge to carriers (air, sea ways).
With regard to international delivery services from Vietnam to foreign countries (regardless of the sender or the receiver pays service charges), Value- added tax assessable revenue is the whole revenue that the foreign contractors obtain.
(ii) Method of Corporate income tax calculation:
In the event that obtained revenue of contractors is exclusive of payable corporate income tax, corporate income tax assessable revenue will be calculated as following:
In the event that foreign contractors who enter into contracts with Vietnamese subcontractors or foreign subcontractors are applying tax payment on the basis of declaration method or foreign subcontractors pay tax according to combined method in order to assign a part of work (items) value to subcontracts, then Corporate income tax assessable revenue of the foreign subcontracts will not include the value of work which has been completed by the Vietnamese subcontractors or the foreign subcontractors
In the event that foreign contractors who enter into contracts with suppliers in Vietnam in order to purchase materials, submaterials, supplies, machineries and equipment for the performance of the contracts, goods and services for interal consumption, for consumption of the items not subject to items or work that the foreign contractors perform according to the contracts, then value of such goods and services will not be determined unless corporate income tax assessable revenue of the foreign contractors is determined.
In the event that foreign contractors who enter into contracts with foreign subcontractors is applying tax payment on the basis of direct method, then Vietnamese parties will declare corporate income tax payment on behalf of the foreign contractors, foreign subcontractors according to the tax rate (%) for calculating corporate income tax per revenue.
With regard to international delivery – receipt – warehousing services from Vietnam to foreign countries (regardless of the sender or the receiver pays service charges), corporate income tax assessable revenue is the whole revenue that the foreign contractors obtain, is exclusive of payable international transfort charge to carriers (air, sea ways).
With regard to international delivery services from Vietnam to foreign countries (regardless of the sender or the receiver pays service charges), corporate income tax assessable revenue is the whole revenue that the foreign contractors obtain.
Rate (%) of Corporate income tax per tax assessable revenue
6. Personal Income Tax (PIT)
Personal income tax (PIT) is a type of direct tax which is imposed upon obtained personal income during a specific period, often a day or each arising time. Because personal income tax is a type of direct tax, tax payers can not transfer the tax obligations to other objects. Objects of personal income tax are residents who obtain income both within and outside the territory of Vietnam.
a. In the event that foreigners who are working in Vietnam and are identified as non-resident individuals:
(i) Indentifying non-resident individuals:
Foreign labourers residing in Vietnam mean the presence of such individuals in the territory of Vietnam during less than 183 days in one calender year or during consecutive 12 months from the first day in Vietnam;
Foreign labourers have no permanent residence in Vietnam, have no temporary residence registration in accordance with the regulations of the Law on residence or have no rental house for living in Vietnam.
(ii) Method of personal income tax calculation:
For non-resident individuals, taxable income refers to the income obtaining in Vietnam, regardless of the place of income payment;
Foreign labourers shall only pay personal income tax for the income which they obtained in Vietnam, and shall not pay the tax for the income which they obtained outside Vietnam in accordance with regulations of the Law on Personal Income Tax;
Personal Income Tax for income from salary, wage of non-resident individuals will be calculated according to the following formula:
b. In the event that foreign people who are working in Vietnam are identified as resident individuals:
(i) Indentifying resident individuals:
For the foreign labourers presenting in the territory of Vietnam during less than 183 days in one calender year or during consecutive 12 months from the first day in Vietnam but having temporary residence in Vietnam according to one of two below cases:
– Having registered temporary residence in accordance with regulations of the law on residence: having registered temporary residence and presented in the Certificate of temporary residence or Certificate of permanent residence issued by competent authorities directly under the Ministry of Public Security;
– Renting a house in Vietnam for staying in accordance with regulations of the Law on Housing, provided that term of contracts for house lease is at least 90 days in the year of tax assessment, particularly:
+ Individuals who have no temporary residence, or have not been issued Certificate of temporary residence or Certificate of permanent residence, but their total number of housing rental days according to contracts for house lease is at least 90 days in the year of tax assessment refers to resident individuals, including those who rent many houses in various locations;
+ Rental houses for staying include hotels, guest houses, pleasure-houses, boarding houses, work places, head offices of companies, etc, regardless of such houses are rented by themselves or are rented by their own employers.
(ii) Method of personal income tax (PIT)
For resident individuals, taxable income means the income arising within and outside the terriory of Vietnam, regardless of where the income is paid.
Resident individuals shall pay personal income tax which is imposed upon the salary or wage arising in Vietnam, including the salary or wage arising in foreign countries.
Personal income tax upon salary or wage of resident individuals will be calculated according to the following scale of progressive tax tariff:
Under the Customs Law No. 54/2014/QH13 dated June 23rd, 2014 effect on January 1st, 2015, the customs declarants, the organizations, individuals whose rights and obligations are related to the import, export; transit of the goods; import, export; transit of the means of transportation are permitted to neither have frauds in customs procedures; nor illegally trade, nor illegally transport the goods via the borders; commercial frauds, tax frauds; protests against the customs officers in implemention of their duties; illegally access; illegally affect, destroy te customs information system; bribe or have other acts for illegal benefits and interests; as follows:
1. Rights and obligations of the customs declarants:
a. The customs declarants’ rights:
To have the information related to the customs declaration in connection to the goods, means of transportation from the customs authorities. To guide to complete the customs procedure and to have the knowledge on the Customs Law and provisions.
To require the customs authorities to pre-identify the code, origin, customs value of the goods before provision of sufficient, exact information to the customs authorities;
To preview the goods, to sample under the supervision of the customs officers before customs declaration to secure exact declaration;
To require the customs authorities to recheck the actually check goods if disagreeing with the customs authorities’ decision if the goods have not been released;
To use the customs documents for release of the goods, transportation and completion of the procedures related to other authorities under laws and regulations.
To claim, denounce the illegal acts to the customs authorities, customs officers;
To require compensation for loss and damage caused by the customs authorities, customs officers under the regulations and the State’s law on compensation libilities.
b. Obligations of the customs declarants who are the goods owner, the carrier:
To declare the customs and to complete the customs procedures under the provisionso fthe Customs Law
To supply the information sufficiently and exactly to the customs authorities to identify the code, origin, customs value for the goods;
To bear responsibilities to the laws for the authentication of the declared contents and submitted documents; for the consistency of the contents, information between the documents filed in the company and in the customs authorities.
To follow the decisions and requirements of the customs authorities, customs officers in completion of customs procedures, supervision and checking of the goods, means of transportation;
To file the customs documents for the goods released in 05 years since registration of the customs return, unless otherwise stipulated by the laws; to file the records, accounting documents and others related to the imported, exported goods cleared in the period stipulated by the laws; to present the documents, to supply the information, related documents upon the customs authorities’ requirements for checking as stipulated in provisions in Articles 32, 79 and 80, the Customs Law 2014;
To arrange the people, means to carry out the works related for the customs officers’ actual tests against the goods, means of transportation;
To pay tax and to complete other financial obligations under the laws and provisions on tax, fee, charges and other regulations of the related laws.
2. Customs procedure
As doing the customs procedure, the customs declarants are responsible for:
Declaring and submitting the customs return; submitting or presenting the documents in the customs records under the provisions in Article 24, the Customs Law;
Leading the goods, means of transport to the stipulated sites for actual tests against the goods and the means of transportation;
Paying tax and completing other financial obligations under the laws and provisions on tax, fee, charges and other regulations of the related laws
3. Document treatment time for customs officers
After the declarants’ completion of requirements on customs procedures, the period for the customs officers to complete the document tests, actual check against the goods, means of transportation is stipulated as follows:
To complete the check of the received documents in at least 02 working hours since sufficient receipt
To complete the actual tests against the goods in at least 08 working hours since the declarants’ presentation of all goods to the customs authorities. If the goods in the list of objects required for specialized tests for quality, health, culture and quarantine of animals and plants, food safety in accordance with the law concerned, the deadline for completing the actual inspection of the goods shall be calculated since receiving the specialized test results as stipulated.
If the shipments are in bulk, with various kinds or requiring complicated tests, the Chief of the Customs Agency shall decide to extend the actual tests against the goods but no more than 02 days.
The means of transport must be tested promply to timely load, unload the goods for import, export purposes, exit or entry of the clients and to secure to follow the provisions of the Law in customs tests and supervision.
Customs agencies have to still carry out customs procedures for goods on holidays, weekends and after the working hours to ensure timely loading and unloading the goods for import, export purposes, exit or entry of the clients, means of transport or on the basis of the proposals of the declarants and of consistency with the actual conditions of customs site.
4. Deadline for customs document submission
The declarants must prepare, submit and present their customs documents to the customs authorities at their headquarter as stipulated in Article 24, the Customs Law.
(i) Deadline for customs document submission is as follows:
For the exported goods, submit the documents after the goods are mobilized at the place noticed by the customs declarant and in at least 04 hours before the exit of the means of transport; for the exported goods via express service, it is at least 02 hours before the exit of the means of transport;
For imported goods, submit the documents before the goods arrive the border port or within 30 days since the goods reach the border gate;
The deadline for customs return submission for the means of transportation is governed by the provisions at Clause 2, Article 69, the Customs Law.
(ii) The customs return is valid in completion of customs procedure within 15 days since registration.
(iii) Deadline for submission of the related documents:
In case of e-return, the custom agencies should check the customs documents, the goods actually, the declarants and the submitted documents related except for those in the national one-door information system;
In case of written customs return, the declarants must submit or present the related documents as registering the customs return.
5. Pre-identification of the number, origin, customs value
If the declarants require the customs agencies predetermining the number, origin, customs value for the goods expected to be exported and imported, the customs declarants shall provide information and documents related, samples of the goods expected to be exported and imported to the customs authorities for such predeterminations.
In case of failure in providing the the goods expected to be exported and imported, the declarants must provide technical documentation related to such goods
The customs agencies shall depend on the provisions of the laws on classification of goods, origin, customs value and the information and related documents provided by the customs declarants to predetermine the number, origin , customs value and send the written notice on the predetermination results to the declarants. Where insufficient basis for predetermination upon the declarants’ requirements, the customs authorities shall inform it to the applicants or require additional information and documents related
If the declarants disagree with the predetermination results, they are entitled to ask the customs authorities to reconsider such predetermination results within 60 days since written notice
The written notice on predetermination results is valid legally for the customs authorities to do the customs procedures as the actually exported, imported goods are suitable to the information, relevant documents, samples of the goods provided by the declarants
6. Customs declaration
(i) The customs declarants must fill in the information criteria sufficiently, accurately, clearly.
(ii) The e-customs returns are done except where the written ones are accepted by the Government’s provisions
(iii) The registered customs returns are valid for customs procedures. The policies on goods management, tax policies for the exports and imports are applied at the time of registration of customs returns unless otherwise stipulated by the laws on export tax, import tax
(iv) As identifying the errors in the customs return, the declarant shall supplement the documents in the following cases:
For the goods in the customs procedures: before the time upon the customs authorities’ notice on direct tests of customs documents;
For the cleared goods: within 60 days since the customs clearance and prior to the customs authorities’ decision on tests, inspection after clearance
customs clearance decisions, inspection, except where additional contents are related to export, import licenses; specialized tests for quality, health, culture and quarantine of animals and plants, food safety
If the declarant has just identified errors in his return after the time limit prescribed in the said point, he may make the supplements and is fined as stipulated by the provisions of the tax law, the law on handling of administration violations
(v) The declarants are entitled to submit the incomplete returns or replacement documents for customs clearance and completing the customs return in the deadline stipulated in the provisions of Article 43 and Article 50 of this Law, one customs return for a or more export(s) and import(s) within a certain time for certain commodities
(vi) The goods in the customs procedures or completed the customs procedures but in the customs supervision, the declarants are entitled to change the form of export and import according to the provisions of the customs legislation
7. Registration of the customs return
The registration method of the customs return is stipulated as follows:
E-customs returns registered by electronic means;
Written customs returns registered in person at the customs authority’s premise;
The customs declaration is registered after the declarations are accepted by the customs authorities. The registration time is indicated on the customs returns.
Where refusal of registration of any customs returns, the customs authorities shall send written or electronic notice on the reason to the declarants for awareness.
8. Release of the goods
(i) Release of the goods means the customs authority’s permits to the exports, imports as meeting the following conditions:
The qualified goods to be exported, imported but unidentified official tax amount to be paid;
The declarants’tax payment or the any credit organization’s guarantee for tax amount on basis of his return and tax calculation;
(ii) Deadline for official tax identification is no more than 30 days since release of the goods, except for the goods to be appraised, in this case, such deadline is since receipt of the appraisal result;
(iii) If the declarant disagrees with such identification of the payable tax amount decided by the customs authority, he is entitled to claim. Claims and claim settlement are carried out under the provisions of the Law on Claims and Complaints.
9. Goods clearance
The goods with emergent clearance requirements, specialized for security and defense purposes, diplomatic bags, consular bags, luggages of the preferential, exempted organizations and individuals under Article 50 and Article 57, the Customs Law
For the goods to be inspected, analyzed and assessed to determine eligibility for exports and imports, the customs authorities only clear the goods after identification of goods exported, imported on basis of tests, analysis, inspection or inspection exemption notice of specialized authorities under laws and regulations.
Where the goods owner is fined for his administrative violations and the exported, imported goods are permitted to be cleared if the fines are paid or being guaranteed by the credit organization for the payable tax amounts to implement the sanctioning decision of the customs authorities or the State’s competent agency
Where the customs declarant has completed the customs procedures but the payable tax amounts are not paid or paid insufficiently in the required deadline, the goods are cleared as being guaranteed by the credit organization for the payable tax amounts or the objects with appliable tax payment deadline stipulated by the tax legislation;
Goods are cleared after completion of the customs procedures;
10. Obligations of the declarants in returns, tax calculation, payment of tax and others
To state, to calculate tax exactly, honestly, sufficiently, timely and to bear responsibilities for tax statement, tax counting.
To pay tax and other payments sufficiently, timely under the laws and provisions on tax, fee, charges and other related regulations and laws;
To comply with the decisions of the customs authorities on tax and other receivables under the regulations of the laws on tax, fees, charges and others related.
11. Customs value
Customs value is used for calculation of import tax, export tax and statistics of imported, exported goods;
Customs value for exported goods is the the selling price of the goods arriving the exporting port, excluding insurance premium and international freight cost;
Customs value of imported goods is the actually paid price as arriving the first importing port in line with the Vietnamese laws and international treaties to which the Socialist Republic of Vietnam is a member
Taxable rate is the exchange rate between Vietnam dong with foreign currency announced by the State Bank of Vietnam at the time of tax calculation. If at the time of tax calculation that State Bank of Vietnam does not publish exchange rates, apply the exchange rate in the latest announcement