Foreign Invested Company and Vietnamese Company are both registered enterprises and operate under the laws of Vietnam. Therefore, both the Foreign Invested Company and the Vietnamese Company must fulfill their tax obligations accurately in accordance with the law, with no difference in tax obligations between the Companies. However, the Foreign Invested Company annual financial statements must be audited by an independent auditor authorized to operate in Vietnam.
In order to be entitled to the incentives, the Foreign Invested Company must meet the conditions prescribed by law. Specifically, implementing investment projects in Vietnam in industries and areas with difficult socio-economic conditions or areas with extremely difficult socio-economic conditions. Investment projects capitalized at VND 6,000 billion or more, with a minimum disbursement of VND 6,000 billion within 3 years from the date on which investment policy is issued for projects that are not required an Investment Registration Certificate. Investment projects in a rural area that employs 500 employee or more. High-tech Companies, Science and technology Companies, science and technology Organizations.
In addition, when qualified for investment tax incentives for foreign investment projects in Vietnam in accordance with the law, the Foreign Invested Company is required to comply with the following procedures to be applied tax incentives:
- For an investment project which required an Investment Registration Certificate or investment policy decision, the Foreign Invested Company shall base on the investment incentives specified in the Investment Registration Certificate or the investment policy decision before applying investment incentives. The basis for applying investment incentives to a science and technology company is the Certificate of a science and technology enterprise.
- For projects that not required to apply for an Investment Registration Certificate, the Foreign Invested Company shall base on the subject of investment incentives to determine investment incentives and procedures for enjoying investment incentives at the competent authority in applying investment incentives.
The types of tax reports and reporting terms are as follows:
|1||License Tax||Jan 30th|
|2||Value Added Tax||20th next month. Applied to Company has income in previous year over VND 50 billion.||30nd or 31st of the first month of next quarter. Applied to Company has income in previous year lower VND 50 billion and new established Company.|
|3||Personal Income Taxi||20th next month. Applied to the Company paying income with the deductible Personal Income Tax amount in the month from VND 50 million or more.||30nd or 31st of the first month of next quarter. Applied to the Company that is not subject to monthly reporting.|
|4||Company Income Tax||Temporarily calculate and pay Company Income Tax in the quarter.||Finalize within 03 months from the end of the fiscal year.|
|5||Report on the use of invoices||20th next month. Applied to the Company that uses self-printed or pre-printed invoices with acts of violation not to use self-printed or ordered invoices, Company is subject to high tax risks and is eligible to buy invoices from tax authorities.||30nd or 31st of the first month of next quarter. Applied to the Company selling goods and services (except for those who are issued invoices by tax authorities and those who report monthly).|
Company Income Tax, Personal Income Tax finalization
|30th or 31st of last month of the quater of the following year|
When transferring capital/shares, the Foreign Investor being an organization or individual will have to fulfill different tax obligations:
For Foreign Investors who are organizations that are obliged to pay Contractor tax on income arising from the transfer of capital/shares in Foreign Invested Company. For Foreign Investor being an individual, when transferring capital/shares in a Foreign Invested Company, PIT must be paid.
The Foreign Investors shall declare and pay taxes corresponding to and depending on the value of capital/shares transfer.
In order to attract Foreign Investors to invest in Vietnam, investment incentives in general and tax incentives in particular are constantly being updated from time to time, creating favorable conditions for Foreign Investors with different investment fields. Preferential taxes include Company Income Tax, Value Added Tax, Import Tax, and some others.
For example, for the CIT incentive, Companies, including Foreign Invested Company and Vietnamese Company, that meet the conditions for CIT incentives will be entitled to a lower tax rate. Usually, for a limited time or the entire implementation period of an investment project. Even CIT exemption or reduction is reduced to 10% for newly established Companies from investment projects in areas with extremely difficult socio-economic conditions, economic zones, hi-tech zones, newly established Company from investment projects in the fields of high technology, scientific research and technology development, investment in infrastructure development of special importance of the State, production software products or the Company operates in the fields of education – training, vocational training, health, culture, sports and environment, within 15 years from the first year of having taxable income from the project invest. However, in order for a Foreign Invested Company to be entitled to tax incentives, it must comply with all the procedures for investment registration, tax registration, … in accordance with the law.
In addition, Foreign Invested Companies are also exempt from import tax on imported goods to create fixed assets, raw materials, supplies and components to carry out investment projects. At the same time, exemption or reduction of land rent, land use fee, land use tax.
Foreign Invested Companies are obliged to comply with all basic taxes such as License Tax, Company Income Tax, Value Added Tax. In addition, for specific business activities, Foreign Invested Companies may be subject to Excise Tax, Export Tax, Import Tax, …
In case the Foreign Invested Company pays the salary to the Employee, it is obliged to declare and pay Personal Income Tax (PIT) on behalf of the Employee on a monthly, quarterly or each time basis.
The Law on Corporate Income Tax clearly provides that taxed income in a tax period is determined by the taxable income minus tax-exempt incomes and losses from previous years. Taxable income is turnover minus deductible expenses for production and business activities. The income from the transfer of real estate, investment projects, the right to participate in investment projects, the right to explore, extract and process minerals shall be determined separately for tax declaration and payment.
Therefore, the increase of capital of the foreign-invested company does not generate taxable income. The Foreign Invested Company will not have any Corporate Income Tax obligation but only be obligated to carry out several procedures of enterprise and investment registration at competent authorities.