Vietnam has seen heated debate over taxes recently. With public expenditure rising more quickly than GDP growth, the Ministry of Finance has come under some pressure to raise tax revenues.
But its proposal last year to raise the value added tax (VAT) from 10 per cent to 12 per cent from 2019 met with strong opposition. In January 2018, the government said it would make this hike a little more gradual, raising it to 11 per cent from 2019 and then to 12 per cent by 2020.
By May however, the Finance Minister said that it would not raise the VAT after all, keeping it at 10 per cent. This was after the government had proposed a property tax in April.
Here are the key tax rates:
Corporate Tax: 20% standard rate
Vietnam imposes a standard corporate tax rate of 20 per cent on a company’s profits, including the profits of its affiliates and branches. Taxable revenue includes income from the sale of goods, provision of services, leasing or sale of assets, joint venture operations and more.
A company is generally considered to be resident if it is incorporated in Vietnam. Residents are taxed on worldwide income, while non-residents are taxed only on Vietnamese-source income.
Enterprises operating in the oil and gas, and natural resources sectors are levied higher tax rates, ranging from 32 per cent to 50 per cent, depending on particular projects.
Incentives for investment
The government offers preferential corporate income tax rates to encourage investment in specific projects or sectors.
A 10 per cent rate for enterprises in sectors including education and training, occupational training, healthcare, culture, sports, environment, social housing, forestry, agriculture, fishing, salt production and publishing. This is subject to conditions.
A 10 per cent rate for a 15-year period may be offered for projects including:
- New investment projects in economic zones, high-tech zones and locations with challenging socio-economic conditions
- New investment projects engaged in research and technological development, cultivation of high-tech enterprises, investment in key infrastructure projects such as water plants, power plants, bridges, railways, airports, seaports and others
- Large scale manufacturing projects, with investment capital of more than 12 trillion Vietnamese dong
A 17 per cent rate for a 10-year period may be offered for projects including:
- New investment projects based in areas with difficult socio-economic conditions.
- New investment projects engaged in producing high-qualified steel or energy-saving products, manufacturing machinery and equipment for agriculture, forestry, aquaculture, salt production, irrigation equipment and so on.
Other tax exemptions and reductions are offered on certain conditions too, such as a tax holiday of up to four years and a 50 per cent tax reduction for up to nine subsequent years.
Indirect Tax: 10% VAT
Vietnam currently levies a standard value added tax (VAT) of 10 per cent on most common goods and services, and a special sales tax of 5 per cent to 150 per cent on certain types of goods and services.
Reduced rates of 5 per cent and 0 per cent VAT apply to specific categories of goods, such as medical equipment and instruments, fresh foodstuffs and scientific and technical services (5 per cent), and the exports of goods and services (0 per cent).
Dividends: No tax is imposed generally on dividends remitted overseas. But if they are paid to an individual, a 5 per cent withholding tax is levied.
Interest: Interest paid to a non-resident is subject to a 5 per cent withholding tax.
Royalties: Royalties paid to a non-resident are subject to a 10 per cent withholding tax.
Personal Tax: 35% top marginal rate
Vietnam’s personal income tax rates follow a progressive schedule that ranges from 5 to 35 per cent, depending on the individual’s yearly income. The top marginal rate of 35 per cent applies to chargeable income above 960 million Vietnamese dong.
Vietnamese residents are taxed on their worldwide income, while non-residents are taxed only on Vietnam-sourced income. An individual is considered resident if he spends 183 days or more within a 12-month period in Vietnam, maintains a residence in Vietnam, or has leased a residence in Vietnam for 183 days or more within a tax year and can prove residence elsewhere.
What’s taxable under the personal income tax regime? All employment income, including employment benefits in both cash and kind. Dividends, interest (except interest on bank deposits, life insurance and government bonds), capital gains from securities trading, and various other types of income such as that from franchising, inheritance and prizes are also taxable.
Need more information?
Official: General Department of Taxation
Deloitte: Vietnam Tax Highlights 2018
EY: Vietnam Tax Guide
KPMG: Vietnam Tax Profile (Updated June 2015)
PwC: Vietnam Tax Summary
Here are our other TAX GUIDES: