Tax

Foreign Invested Enterprise and Vietnamese Enterprise are registered to establish and operate under Vietnamese laws. Therefore, both Foreign Invested Enterprise and Vietnamese Enterprise must fully and accurately fulfill their tax obligations according to the law, and there is no distinction in tax obligations between them. However, the annual financial reports of a Foreign Invested Enterprise must be audited by an independent auditor authorized to operate in Vietnam.[1]

[1] Point b, Clause 1, Article 37 Law on Independent Audit 2011 and Article 15 Decree 17/2012/ND-CP

The Foreign Invested Enterprise is obliged to comply with basic taxes such as License Fee, Corporate Income Tax, Value Added Tax. In addition, for specific business activities, a Foreign Invested Enterprise may be subject to Excise Tax, Export Tax, Import Tax, etc.

In case the Foreign Invested Enterprise pays wages to the Employee, it is obliged to declare and pay Personal Income Tax on behalf of the Employee monthly, quarterly, or every time it appears.

Types of tax reports and their deadline for submission are as follows:

No. Application form                                             Duration 
Report Monthly Quarterly Annually
1 License Fee [1] 30/01
2 Value Added Tax [2] The 20th of the next month.

Applying to enterprises with their revenue in the previous year are over 50 billion VND.

 The 30th or 31st of the first month of the following quarter. Applying to enterprises with their revenue in the previous year are 50 billion VND or less, and new enterprises.
3 Personal Income Tax [3] (PIT) The 20th of next month. Applying to the Enterprises paying income arising PIT deducted in this month from 50 million VND or more. The 30th or 31st of the first month of the following quarter. Applying to enterprises that are not subject to monthly reporting. Tax finalization no later than the last day of the 4th month from the end of the year for personal records that directly finalize tax.

In case, the Employee authorizes the Enterprise to finalize PIT, the deadline is the last day of the 3rd month from the end of the year or fiscal year.
4 Corporate Income Tax (CIT) Temporarily calculate and pay CIT in Quarter. Tax finalization by the last day of the 3rd month from the end of the year or fiscal year.
5 Report the status of using invoices [4] The 20th of next month.

Applying to the Enterprises using self-printed or pre-printed invoices, commits violations and are not allow to use self-printed or pre-printed invoices; the Enterprises are in the category of high tax risk and are eligible to purchase invoices from the tax authority.

 The 30th of the first month of the following quarter.

Applying to enterprises selling goods and providing services (except for those who are issued the invoices by the tax authority and who are subject to monthly reports).
6 Financial Report[5] The deadline for submitting annual financial reports is 90 days from the end of the annual accounting period.

[1] For License Fee, the deadline for declaration and payment has been set on January 30 after the year of establishment or commencement of production and operation (Clause 1, Article 10 Decree 126/2020/ND-CP). The regulation: Excise Tax had to be made no later than the last day of the month of starting operation (Clause 1, Article 5 Decree 139/2016/ND-CP) was replaced.

[2] Point a, Clause 1, Article 8 and point a, Clause 1, Article 9 Decree 126/2020/ND-CP

[3] Point a, Clause 1, Article 8 and point b, Clause 1, Article 9 Decree 126/2020/ND-CP

[4] Điều 27 Thông tư 39/2014/TT-BTC

[5] Point a, Clause 2, Article 109 Circular 200/2014/TT-BTC

In order to attract Foreign Investors to invest in Vietnam, investment incentive policies in general and tax incentives in particular are constantly being updated gradually, creating favorable conditions for Foreign Investors in many different investment fields. Taxes having incentives are corporate income tax, import tax, and some other taxes. In detail:

CIT incentives[1]: Enterprises, including Foreign Invested Enterprises and Vietnamese enterprises, that meet the conditions for applying CIT incentives will enjoy a lower tax rate than the normal tax rate, for part or full the duration of the investment project; tax exemption, tax reduction, and other incentives in accordance with the law on corporate income tax. Eg:

  • Incentive tax rate of 10%[2]: Applied within 15 years from the first year of having taxable income from investment projects, for new enterprises from investment projects in geographical areas with especially difficult socio-economic conditions, economic areas, high-tech areas, new enterprises from investment projects in the field of high technology, scientific research, and technology development, investment in developing the especially important infrastructure of the State, software production, etc. or applied during the operation period for the Enterprises in the sectors of education – training, vocational training, health, culture, sports, and the environment, etc.
  • CIT exemption[3]: Tax exemption for 4 years, 50% reduction of payable tax for the next 9 years for CIT from implementing new investment projects to enjoy 10% tax incentives in the 15 years mentioned above.

However, for a Foreign Invested Enterprises to enjoy tax incentives, it must complete all procedures for investment registration, tax registration, etc. in accordance with the law.

In addition, Foreign Invested Enterprises are also exempt from import tax on goods imported to create fixed assets, raw materials, supplies, and components for the implementation of investment projects. Simultaneously, exemption and reduction of land rent, land use charge, and land use tax.

[1] Point a, Clause 1, Article 15 Law on Investment 2020

[2] Clause 1, Article 19 Circular No. 78/2014/TT-BTC amended in Circular No. 96/2015/TT-BTC

[3] Clause 1, Article 20 Circular No. 78/2014/TT-BTC amended in Circular No. 96/2015/TT-BTC

In order to enjoy incentives, a Foreign Invested Enterprises must meet the conditions prescribed by law[1]. Specifically, implementing investment projects in Vietnam in the industries being eligible for investment incentives, in the areas being suitable for investment incentives; Investment projects in areas with difficult socio-economic conditions or areas with especially difficult socio-economic conditions; Investment projects with a capital scale of 6,000 billion VND or more, disbursed at least 6,000 billion VND within 3 years from the date of the decision on investment policies, for projects that do not have to carry out procedures for granting Investment Registration Certificate IRC, or having a total revenue of at least 10,000 billion VND per year within 03 years at the latest from the year of having revenue or employing more than 3,000 regular employees on average annually according to the labor law no later than 03 years from the year of revenue; Investment projects on construction of social housing; investment projects in rural areas employing 500 regular employees on average annually or more in accordance with the labor law (excluding part-time workers and employees with labor contracts less than 12 months); Investment projects employing at least 30% of the annual average regular employees who are disabled according to Law on People with disabilities and labor law; High-tech enterprises, science and technology enterprises, science and technology organizations enterprises; Innovative start-up investment projects, innovation centers, research and development centers, etc.

In addition, when meeting all conditions to enjoy investment incentives for foreign investment projects in Vietnam according to the provisions of law, based on the written approval of investment policy (if any), Investment Registration Certificate (if any), other relevant regulations, Foreign Invested Enterprise shall themselves determine their investment incentives and carries out procedures for enjoying investment incentives at tax authorities, financial authorities, customs offices, and other competent authorities corresponding to each type of investment incentive[2]. E.g.:

  • For investment projects subject to the issuance of an Investment Registration Certificate or a decision on investment policies, the Foreign Invested Enterprise shall base on the contents of investment incentives specified in the Investment Registration Certificate or decision on investment policies to enjoy investment incentives. The basis for applying investment incentives to science and technology enterprises is the certificate of science and technology enterprise; for agricultural enterprises applying high technology is the Certificate of agricultural enterprise applying high technology; for high-tech application projects, the certificate of high-tech application projects; for supporting industry projects, it is the Certificate of Incentives for the production of supporting industry products; for projects with technology transfer on the list of technologies encouraged for transfer, it is the Certificate of technology transfer enabled for transfer according to the Prime Minister’s regulations.
  • For projects in which Foreign Investors do not fall into the above cases, the Foreign Invested Enterprise shall base on the beneficiaries of investment incentives to themselves determine their investment incentives and carry out the procedures for enjoying investment incentives at the agency applying investment incentives

[1] Clause 2, Article 15 Law on Investment 2020 and Article 19 Decree 31/2021/ND-CP

[2] Article 17 Law on Investment 2020 and Article 23 Decree 31/2021/ND-CP

When transferring capital/shares, Foreign Investors who are organizations or individuals will have to fulfill different tax obligations:

  • Corporate Income Tax:

For a Foreign Investor being an organization that is obliged to pay foreign contractor tax on income arising from the transfer of capital/shares in a Foreign Invested Enterprises[1], the applicable tax rate is 20%, the tax calculation method is as follows[2]:

CIT = (Transfer price – Purchase price of the transferred capital – Transfer cost) x Tax rate 20%

Note: If the transfer contract does not stipulate the transfer price or the tax authority has a basis for determining the transfer price is not suitable according to the market price, the tax authority has the right to inspect and fix the transfer price. The basis for setting the transfer price is based on the investigation documents of the tax authority or the capital transfer price of other cases at the same time, the same economic organization, or similar transfer contracts at the same time.

Deadline for CIT declaration[3]: Foreign Investors make tax declarations for each time they are incurred. Organizations and individuals receiving transfer capital are responsible for determining, declaring, deducing, and paying on behalf of Foreign Investors. In case the receiving party is also a foreign organization that does not operate under the Law on Investment or the Law on Enterprises, the Foreign Invested Enterprises established under the law of Vietnam where the foreign organization invests its capital is responsible for declaring and paying CIT derived from capital transfer activities on behalf of foreign investors.

The deadline for declaring tax is the 10th (tenth) day from the date the competent authority approves the capital transfer or the 10th (tenth) day from the date the parties agree to transfer the capital in case the capital transfer does not need approval[4].

  • Personal Income Tax:

For Foreign Investors who are individuals, when transferring capital/shares in a Foreign Invested Enterprises, personal income tax must be paid[5], specifically:

(i) In case of transfer of capital in a limited company:

If the Foreign Investor is a resident individual, the applicable tax rate is 20%, the tax calculation is as follows[6]:

PIT = (Transfer price – Purchase price of the transferred capital – Transfer cost) x Tax rate 20%

(ii) If the Foreign Investor is a non-resident individual, the tax calculation is as follows[7]:

PIT = Transfer price (excluding any cost) x Tax rate 0,1%

Note: If the sale and purchase contract does not stipulate the transfer price or the tax authority has a basis to determine that the transfer price is not suitable according to the market price, the tax authority has the right to fix the transfer price in accordance with the law on tax administration[8].

Deadline for PIT declaration[9]: Foreign investors are residents who transfer capital and declare tax on each transfer, regardless of whether or not income is generated. Foreign investors being non-resident individuals and earning income from the transfer of capital in Vietnam are not required to declare tax directly to the tax authority, but the organization and individual receiving assignment shall deduct tax and declare tax. The deadline for submitting tax declaration dossiers is the 10th (tenth) day from the effective date of the capital sale and purchase contract.

In addition, if the Foreign Invested Enterprises implement the procedure for changing the list of shareholders in the case of capital transfer without documents proving that the foreign investor transferring capital has fulfilled its tax obligations, The Foreign Invested Enterprise is responsible for declaring and paying taxes on behalf of this Foreign Investor[10].

(iii) In case of transfer of shares in a joint-stock company/stocks according to the law on securities, collectively referred to as transfer of securities.

If the Foreign Investor is a resident individual, the applicable tax rate is 0.1% and the tax calculation is as follows:[11]

PIT = Securities transfer price each time x Tax rate 0,1%

If the Foreign Investor is a non-resident individual, the tax calculation is as follows[12]:

PIT = Transfer price (excluding any cost) x Tax rate 0,1%

Deadline for PIT declaration[13]: Foreign investors who transfer securities declare tax according to each time they are incurred. The deadline for declaring tax is the 10th (tenth) day from the effective date of the securities sale and purchase contract. In case the Foreign Invested Enterprise pays tax on behalf of an individual, the time to submit the tax declaration dossiers is before the procedures for changing the list of shareholders as prescribed by law.

In addition, if the Foreign Invested Enterprise carries out the procedures for changing the list of shareholders in case of securities transfer without documents proving that the foreign investor transferring securities has fulfilled its tax obligations, The Foreign Invested Enterprise is responsible for declaring and paying taxes on behalf of this Foreign Investor.[14]

[1] Clause 2 Article 2 Circular 78/2014/TT-BTC

[2] Clause 1 Article 3, Clause 1 Article 11 and Point a Clause 2 Article 14 Circular 78/2014/TT-BTC

[3] Clause 2, point b, clause 7, Article 16 Circular No. 151/2014/TT-BTC, point c, Clause 2, Article 14 Circular 78/2014/TT-BTC

[4] Point b, Clause 7, Article 16 Circular 151/2014/TT-BTC

[5] Article 1, Clause 4, Article 2 Circular 111/2013/TT-BTC and Article 4 Circular 25/2018/TT-BTC

[6] Clause 1, Article 11 Circular No. 111/2013/TT-BTC

[7] Article 20 Circular No. 111/2013/TT-BTC

[8] Point a.1) Clause 1 Article 11 Circular 111/2013/TT-BTC

[9] Clause 4, Article 26 Circular 111/2013/TT-BTC

[10] Point c, Clause 4, Article 26 Circular 111/2013/TT-BTC

[11] Article 16 Circular 92/2015/TT-BTC

[12] Article 20 Circular No. 111/2013/TT-BTC

[13] Clause 5, Article 26 Circular 111/2013/TT-BTC and Clause 6, Article 21 Circular 92/2015/TT-BTC

[14] Point d Clause 5 Article 26 Circular 111/2013/TT-BTC and Point a.4) Clause 6 Article 21 Circular 92/2015/TT-BTC

When there is a real estate transfer, the Foreign Invested Enterprises must declare and pay CIT each time it is incurred (in case the Enterprise does not have a real estate business function)[1]. The deadline for submitting tax declaration dossiers is the 10th (tenth) day from the date of arising tax obligations[2]. CIT is calculated as follows[3]:

CIT = (Revenue from real estate transfer) – Purchase price of real estate – Transfer cost – Loss of real estate transfer in previous years (if any)) x Tax rate 20%

Note: In case the price of transferring land-use rights under the real estate sale and purchase contract is lower than the land price on the land price list set by the Provincial People’s Committee at the time of signing the contract, it shall be calculated according to the land price set by the Provincial People’s Committee at the time of signing the real estate sale and purchase contract.

In addition, the transfer of land use rights is not subject to VAT[4]. However, when performing real estate transfer activities, including house and land use rights, the land price will be deducted when calculating VAT[5], the VAT rate for the rest when calculating VAT is 10% for normal goods and services that are subject to VAT, 0%, 5%. VAT is calculated as follows[6]:

VAT = (Transfer price – Deducted land price) x Tax rate

[1] Clause 2 and Point b, Clause 4, Article 16 Circular No. 151/2014/TT-BTC

[2] Clause 3 Article 10 Circular No. 156/2013/TT-BTC

[3] Clause 1, Clause 2, Article 17 Circular 78/2014/TT-BTC

[4] Clause 6, Article 4 Circular 219/2013/TT-BTC

[5] Article 6 and Clause 10, Article 7 Circular 219/2013/TT-BTC

[6] Article 11 Circular 219/2013/TT-BTC

Foreign investors being individuals, have an obligation to pay PIT when they have income from real estate transfer transactions, except for the cases where they are exempt from PIT as prescribed in Article 3 Circular 111/2013/ TT-BTC[1].

(i) In case the Foreign Investor is a resident individual, Personal income tax is calculated as follows:[2]

PIT = Transfer price x Tax rate 2%

Note: In case of transfer of real estate as joint ownership, the tax liability of each taxpayer is determined separately according to the percentage of real estate ownership. The basis for determining the ownership ratio is a legal document such as an initial capital contribution agreement, a will or a court’s decision on division, etc. If there is no legal document, the tax liability of each taxpayer is determined according to the average rate.[3]

(ii) Where the Foreign Investor is a non-resident individual. Personal income tax is calculated as follows:[4]

PIT = Transfer price (excluding any cost) x Tax rate 2%

Deadline for PIT declaration:[5]

  • If the transfer contract does not agree that the buyer is the taxpayer on behalf of the seller, the tax declaration shall be submitted no later than the 10th (tenth) day from the effective date of the transfer contract in accordance with the provisions of law.
  • If the transfer contract has an agreement stating that the buyer is the taxpayer on behalf of the seller, the tax declaration shall be submitted no later than the time of carrying out registration of real estate ownership and use rights. In case an individual receives the transfer of a house or future construction work, the time for ownership is the time when the individual submits a tax declaration to the tax agency.

[1] Article 1 and Clause 5 Article 2 Circular 111/2013/TT-BTC

[2] Article 12 Circular No. 111/2013/TT-BTC amended by Article 17 Circular 92/2015/TT-BTC

[3] Point b, Clause 4, Article 17 Circular 92/2015/TT-BTC

[4] Article 21 Circular No. 111/2013/TT-BTC

[5] Clause 5, Article 21 Circular 92/2015/TT-BTC