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Vietnam has a standard CIT rate of 28% applicable to both domestic and foreign investment entity with effective from 1 st January 2004.
Preferential CIT rates of 10%, 15% and 20% are available for investments in certain types of industries or designated locations encouraged by the local Government. Tax relief is also available for CIT exemption and reduction.
Trading losses can be carried forward for five years subject to registration with the tax authorities. Carrying back of trading losses is not permitted.
Income gained from the transfer of shares or capital contributed to a foreign-invested enterprise that is going to be dissolved shall be corporate income taxable at the rate of 28%. A tax reduction may be applied when the capital is transferred to a legal entity established in Vietnam.
VAT applies to goods and services consumed in Vietnam. The standard VAT rate is 10% and a lower rate of 5% is applicable to provision of essential goods and services. For exported goods and services, the VAT rate applies is O%.
All companies are “Deduction Method” VAT payers which require issuing of VAT invoices, charge out VAT to customers and claim input VAT on VAT returns. For foreign entities which do not establish legal entities in Vietnam, they may use the “Direct Method” to calculate VAT at a deemed rate on gross turnover.
Withholding tax is applicable to interest, royalties, licence fees and income derived from Vietnam. VAT and CIT will be withheld for foreign companies without legal entities in Vietnam.
There is generally a withholding tax of 10% of PIT on payments to individuals who are not employees.
Import duty rates are subject to type of goods imported and the special tariffs status of importing countries. There are three categories of import duty rates: ordinary rates, preferential rates and special preferential rates.
Export duty rates are ranged from 0% to 45% and are applicable to a few items as the local Government encourages export of goods.
PIT is applicable to both tax residents and non-tax residents of Vietnam. A foreigner residing more than 183 days in Vietnam will be considered a tax resident unless subject to a DTA. A tax resident will be subject to PIT of a progressive rate of maximum 40%.
For non-tax resident, the PIT will be calculated at a rate of 25% on income sources within Vietnam.
Vietnam has entered into forty five DTAs with other countries and forty four of them are now effective to protect foreign entity for being subject to CIT in Vietnam.
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