Tax Guide Vietnam

Overview

Vietnam is located in the Southeast Asia surrounded by China on its north side, while Laos and Cambodia situated on the west. On the east, it is accessible via the East Sea. The country has a total area of 331,689 square kilometers. The country is in a great position for economic growth and development, trade and tourism. The official currency of the Vietnam is dong (VND) and their national and official language is Vietnamese. The modern day Vietname came in to being in 1954 when the Geneva Accord ended the French colonial rule shich had been instated in 1858. Vietnam has since been following the economic reforms under “Doi Moi” (renovation) having a centrally planned economy. The country moved on to have a market economy in 1975 and ever since then, the country has marked quite some progress economically becoming one of the fastest growing economies in the world. During 2016-2020, Vietnam maintained a GDP growth rate of 5.8%. In 2020, when the world was still going through a pandemic, Vietnam managed to have a 2.6% GDP growth rate being one of the very few countries who managed to maintain a positive GDP growth. 

Taxation on Corporate Income (CIT)

Corporate taxes in Vietnam are imposed on a national level whereby the standard tax rate for corporations is 20%. But there are certain exemptions to this tax rate based on the type of industry the corporation belongs to such as those corporations which belong to the oil and gas industry have to pay 32% to 50% corporate income tax based on the location of the project and specific project conditions. However, the corporations involved in mineral mining, exploration and exploitation such as that of gold, silver and gemstones are subject to the Corporate income tax of 40% or 50% depending on the location of such a project.

In order to support businesses and organizations during the covid-19 pandemic, the government of Vietnam allowed a tax reduction of 30% in 2020 under decree 114/2020, which became effective on 3^rd August 2020, whereby any organization having a total revenue not exceeding VND 200 billion could avail this reduction in the CIT. 

The idea of tax residency does not apply to corporations as the Vietnamese government taxes any organizations established under the laws of Vietnam. All such organizations are subject to CIT and must be taxed on their worldwide income whereby there is a 20% tax on any foreign incomes earned by these organizations and further the government does not allow any provisions for tax incentive on such incomes.

All organizations must calculate the taxable profit which can be calculated by summing up all the incomes both foreign and national and then deducting any expenses incurred and further adding other assessable income.

The annual CIT returns prepared by the taxpayers include a section for making adjustments to accounting profit to calculate the taxable profit. 

Local income taxes

Vietnamese government has not levied any state or local level income taxes on its residents.

Taxation on Personal Income

The residents of Vietnamese are taxed on their incomes (also known as personal income tax or PIT) earned anywhere in the world, regardless of where it might have been paid to the individuals or received by them. The tax rates however are different for employment income and non-employment income. The employment income in this case is taxes on a progressive tax rate basis while the non-employment income would be taxed based on a number of different tax rates.

The non-residents of Vietnam are however taxed based on a flat rate on their incomes that might be Vietnam related or arise as a result of working in Vietnam in a particular tax year. In this case too, the non-employment incomes would be taxed based on varying different tax rates. However, it is important to mention here that the provisions of Double Taxation Agreement (DTA) might be applicable where relevant.

Following are the Personal Income Tax rates for the residents and non-residents for employment incomes and non-employment income:

For employment income

The residents are supposed to pay a progressive tax of up to 35% for employment income

A non-resident has to pay a flat tax rate of 20% for employment income

For non-employment income:

For individuals earning VND 100 million and below will be exempt from personal income taxes.

For residents with business income, tax rates range from 0.5% to 5% based on type of business income
For non-residents with business income, tax rates range from 1% to 5% based on type of business income.

Income from inheritances/gifts/winning prizes (excluding income from casino winning prizes) is subject to 10% tax for residents and non-residents both.