1. Income Tax
1.1 Personal Income Tax (PIT)
Any resident who has taxable income arising inside or outside of the Vietnamese territory or a non-resident whose taxable income arises in Vietnam (regardless of where their incomes are paid.), must pay personal income tax. The distinction between resident and non-resident is based on one of the following conditions:
- Not being present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of their presence in Vietnam;
- Not having a place of habitual residence in Vietnam, which is a registered place of permanent residence or a rented house for dwelling in Vietnam under a termed rent contract.
- Resident pays tax rate ranging from 5%-35% for income from salaries, wages (in accordance with the partially progressive tax rates regulations). For business income, the tax rates ranging from 0.5 - 5% depending on the fields of businesses. Non-resident pays constantly tax rate of 20% for income from wages and a tax rate ranging from 1% - 5% for business income depending on specific sectors and applying in single time of arising taxable income.
- For other types of taxable income such as income from investment, capital transfer, income from winning lottery, then resident has to pay tax rate ranging from 0.1% - 20% and non-resident has to tax rate ranging from 0.1% - 10% for single time of arising taxable income.
1.2 Corporate Income Tax (CIT)
All companies are taxed on incomes from producing and trading in goods and services in Vietnam. Foreign economic organizations with permanent or non-resident establishments in Vietnam have income generated from their activities or taxable income arising in Vietnam must pay CIT also.
The common CIT rate is 20% applied to both foreign owned enterprises (FOEs) and Vietnamese companies. However, companies conducting activities of searching, exploration and exploitation of oil, gas and other rare and precious natural resources in Vietnam apply CIT rate ranging from 32 % to 50% depending on each project.
An enterprise will be exempted from CIT for a period of time if having incomes from some of the privileged areas such as agriculture, forestry, technical services serving agriculture.
An enterprise will be entitled to a preferential rate of CIT in case it obtains income from implementing new investment projects in accordance with the investment law, for instance projects in areas with difficult socio-economic conditions, particularly difficult socio-economic conditions, economic zones or high technology zones or income from new investment projects in the following areas such as scientific research, technology development, high technology application.
2. Value Added Tax (VAT)
Goods and services subject to VAT are those used for production, trading and consumption in Vietnam, including those purchased from foreign organizations and individuals, except for goods and services exempt from VAT, e.g. imported or leased drilling rigs, aero planes and ships of a type which cannot be produced in Vietnam, capital assignment, and foreign currency trading.
A domestic business must charge VAT on the value of goods and services supplied.
VAT rate is 0%, 5% or 10% depending on specific products and services. VAT can be determined by way of tax deduction method or direct calculation on value added.
3. Foreign Contractor Tax
The application of foreign contractor tax (FCT) is subject to application of a relevant Double Tax Agreement.
It is taxed on payments, including interest, royalties, services fees, leases, insurance, transportation, transfers of securities, and goods supplied within Vietnam or associated with services rendered in Vietnam, to foreign organizations and individual earning income in Vietnam.
FCT is exempt in cases such as, supply of goods, services performed and consumed outside Vietnam and various other services performed wholly outside Vietnam.
Foreign Contractor Taxes can be computed in one of three ways:
- Paying VAT according to the method of deduction and pay CIT on the basis of declaring revenue and expenses to determine taxable income. Percentage to calculate VAT is from 5% or 10% depending on each business line. The general CIT rate is 20%, enterprises conduct activities of seeking, exploration and exploitation of oil, gas and other rare and precious natural resources in Vietnam, the tax is from 32% to 50% for each project.
- Paying VAT, CIT according to ratio method of calculating on revenue. Percentage for calculating VAT on turnover for business is from 2% -5% depending on business lines and rate of CIT calculated on taxable turnover for business from 0.1 % -10% depending on the business line.
- Paying VAT according to the deduction method, paying CIT is at the rate of calculating on the turnover. Percentage to calculate VAT and CIT is the same with paying VAT according to the method of deduction and pay CIT on the basis of declaring revenue and expenses to determine taxable income.
4. Import and Export Duties
4.1. Export Duties
The tax base for calculating export duties are the Free On Board or Delivered At Frontier price, i.e. the selling price at the port of departure as stated in the contract, excluding shipping and insurance costs.
Export duties are levied only on several goods, basically natural resources e.g. granite, ore, crude oil, forest products or scrap metal, rates range from 0% to 40%.
4.2. Import Duties
Import duties rate includes preferential rates, special preferential rates, and normal rates and are applied as follows:
- Preferential rates apply to imports originated in any country or group of countries or territories that accord Vietnam most-favored nation treatment; goods that are imported from a free trade zone to the domestic market and originating in a country or group of countries or territories that accord Vietnam most-favored nation treatment;
- Special preferential rates apply to imports originated in any country or group of countries or territories that have an agreement on special preferential import duties with Vietnam; goods that are imported from a free trade zone to the domestic market and originating in a country or group of countries or territories that have an agreement on special preferential import duties with Vietnam;
- Ordinary rates apply to remaining imported goods. The ordinary rates are 150% of the preferential rates for the same imported goods.
The taxable value of the imported goods is typically based on the contract price. Where the transaction value is not applied, alternatives for the calculation of the customs value will be used. In addition to the import tax rate, the Special Sales Tax is also applied to some specific goods imported into Vietnam. The VAT shall be applied to all imported goods unless exemption from VAT under the VAT law.
5. Other Tax
Any individuals or organizations of economic sectors, regardless of economic sectors, business lines, forms of exploitation, regular or non-regular activities of exploiting and using natural resources from the ground, on the ground, on the water are compulsory to paid severance tax.
The taxable object is the value of exploited resources such as natural minerals, non-metallic minerals, crude oil and water. The amount of natural resource tax to be paid is based on the taxable resource output multiplied by the taxable price and the tax rate.
Environmental Protection Tax
Environmental protection tax is applied to 8 main groups of goods when using them deemed detrimental to the environment, including Gasoline, oil, grease, greasy; Coal; HCFC solution; Plastic bags; Herbicide (limited use type); termite (limited use); Preserving forest products (limited use); Warehouse disinfectant (limited use).
Environmental taxes can be divided into two ones:
- Direct tax is aimed at assessing the amount of hazardous waste with the environment caused by production establishments.
- Indirect Tax is aimed at value of goods causing environmental pollution.
The amount of environmental protection tax is based on the number units of taxable goods multiplied by the absolute tax rate sets on a unit of goods.
Special Consumption Tax (SCT)
Special consumption tax payers are organizations and individuals that produce and / or import goods and / or provide services subject to special consumption tax.
Goods and services are subject to special consumption tax are as follows:
- Commodities: Cigarettes, cigars and other tobacco products used for smoking, inhaling, chewing, smelling, sucking; Alcohol; Beer; Cars of under 24 seats, including cars with both passenger and cargo transports of two or more rows of seats, with a fixed partition design between the passenger and cargo holds; Two-wheel motorcycles, three-wheel motorcycles with cylinder having capacity of over 125cm3; Aircraft, yachts; Petrol types; Air conditioning with capacity of 90,000 BTU or less; Playing cards; Votive, code.
- Services: Discotheque business; Business massage (massage), karaoke; Casino business (casino); Prize-winning video games include games with jackpots, slot machines and similar machines; Betting business; Golf business (golf) includes selling membership cards, golf tickets; Lottery business.
The special consumption tax rate ranging from 7% to 150% for specific type of goods and services as indicated in below table: