TAXATION IN VIETNAM
1. Corporate Income Tax (CIT) is levied at a rate of 20 percent on locally sourced profits of companies operating within the country. CIT is payable annually.
2. Value Added Tax is the most important indirect tax applied in Vietnam. It is applied at one of three rates (0, 5, and 10 percent) to the good or service in question. Most goods within the country, however, are taxed at 10 percent.
3. Personal Income Tax is applied on a graduated scale depending on the income of the individual in question. Senior managers are likely to be taxed at 35 percent, which is Vietnam’s top tax rate, while laborers will likely be taxed at 5 to 10 percent, depending on their salary.
TAX INCENTIVES
1. Vietnam’s Law on Investment specifies three forms of incentives that are available to companies operating within the country. The following incentives are listed under Section 1, Article 15.1:
2. Application of a lower rate of corporate income tax for a certain period of time or throughout the project execution;
3. Exemption or reduction of import tax on goods imported as fixed assets on raw materials, supplies, and parts used for the project;
4. An exemption, reduction of land rents and land levy.
5. Preferential rates -The different preferential rates include:
i. 10 percent for the lifetime of the entire project;
ii. 10 percent for 15 years from the first year of income generation;
iii. 17 percent for the lifetime of the entire project;
iv. 17 percent for 10 years from the first year of income generation.
6. Tax holidays
i. Tax exemption for 4 years, 50 percent reduction of payable tax amounts for 9 subsequent years;
ii. Tax exemption for 4 years, 50 percent reduction of payable tax amounts for 5 subsequent years;
iii. Tax exemption for 2 years, 50 percent reduction of payable tax amount for 4 subsequent years.
INCENTIVES IN DISADVANTAGED LOCATIONS
1. The Vietnamese government provides location-based incentives for regions based on the levels of development and investment. The government provides these incentives as a means of attracting capital and improving development in these areas. The areas that the government selects for incentives are consistently located near Vietnam’s borders with China and Laos as well as the southern Mekong region.
2. Vietnam provides two tiers of incentives to investment projects depending on the level of development and needs in the area. Foreign investors can currently choose between locations that are “disadvantaged” and those that are “extremely disadvantaged.” Investments in both locations benefit from preferential corporate income tax as well as tax holidays with the level of incentive directly tied to the level of disadvantage within these regions.
INCENTIVES FOR PRIORITIZED INDUSTRIES
1. Vietnamese policy in recent years has broadly promoted projects in high tech industries, large capital, or labor-intensive investments, and projects that are expected to have a tangible impact on social conditions, such as education or healthcare.
INCENTIVES IN ECONOMIC ZONES
1. These zones provide increased access to infrastructure, pools of talent, and networks of suppliers. Foreign investors in these zones also benefit from tax incentives extended by the Vietnamese government.
(Source: vietnam-briefing, emerhub)
