Taxation of businesses under the Law on Foreign Investment
Corporate income tax (CIT)
Tax residency is established with the issuance of an investment licence or approval of the business co-operation contract by the Ministry of Planning and Investment or other authorised bodies.
Tax year and timing of tax payments
A company's tax year corresponds with its financial year. Provisional corporate income tax is paid every three months based on a provisional annual corporate income tax return submitted at the beginning of each year. Companies must submit to the local tax authorities their audited financial statements and annual tax finalisation within 90 days of the end of the tax year. Any outstanding tax liabilities must be settled 10 days later.
JVs, FOEs and foreign parties to BCCs are subject to a standard corporate income tax rate of 25%. This rate may be temporarily reduced by tax holidays and tax reductions. Tax holidays and tax reductions may be granted in the following situations:
Service enterprises operating in industrial zones
Production projects other than those mentioned in Categories 2 and 3.
Projects falling into the list of projects where investment is encouraged
Investment in regions with difficult social economic conditions
Service enterprises in export processing zones
Industrial zone enterprises exporting over 50% of products
Projects committing to the non-refundable transfer of assets to the State of Vietnam upon expiry of the operating term.
Projects satisfying two of the conditions under Category 2
Projects falling into the list of projects where investment is especially encouraged
Investment in regions with especially difficult socio-economic conditions which are included in the list of geographical regions where investment is encouraged
Enterprises developing infrastructure for industrial zones, export processing zones, and high-tech zones
Export processing enterprises
Investments in healthcare and treatment, education and training, and scientific research.
Investments in software industry 3
||4 years 2
|50% tax reduction
||50% tax reduction
||50% tax reduction
||4 years 2
|20% tax rate
||10 years 1
||15% tax rate
||12 years 1
||10% tax rate
||15 years 1
A tax holiday of up to eight years may be obtained for the following projects:
- BOT, BTO and BT enterprises located in geographic regions included on the list of regions where investment is encouraged
- High-tech industrial enterprises
- Enterprises providing advanced technology services in high-tech zones
- Forestry and infrastructure projects in regions with especially difficult socio-economic conditions
- Large projects that have a significant impact on the economy and society, which are included on the list of projects where investment is especially encouraged.
Overseas Vietnamese investing in Vietnam under the Law on Foreign Investment are entitled to a 20% reduction in Corporate Income Tax compared with projects of the same type, except where the project is already entitled to a tax rate of 10%.
Calculation of taxable income
The taxable income of JVs, FOEs and foreign parties to business co-operation contracts is the difference between taxable revenues and deductible expenditure during the tax year. Revenue comprises of revenues from the sale of products, the provision of services and all other revenues generated from any economic activity of the enterprise.
Deductible expenditure may include:
- depreciation of fixed assets used in business operations according to rates provided by the Ministry of Finance
- raw materials and energy required for the manufacture of products or for the provision of services
- wages, salaries, allowances and shift meals paid to employees
- scientific and technical research, innovations, environmental protection, training and healthcare
- services purchased from other parties, including utilities, professional fees, insurance, repairs, land and fixed asset rentals, technical documentation, technology transfers, intellectual property rights, and management fees
- social insurance fund contributions