The taxation structure is one of the most alluring attractions for international investors to open enterprises in this country. Vietnam has some of the lowest corporate taxes in the world, making it one of the finest countries to start a business from a taxation perspective, according to recent surveys. The business duty is not the only tax levied in Vietnam, though. The residents must pay Vietnamese (PIT) on all of their worldwide taxable income, regardless of where it is received or paid. Employer-provided income is taxed at a progressive rate. There are several different rates at which non-employment income is taxed. On income earned as a result of working in this country or income related to Vietnam during the calendar year, non-residents are subject to PIT at a flat rate, as well as at various rates on their non-employment income. However, this will need to be taken into account in light of any potential double taxation agreements’ (DTAs’) restrictions.
The principal levies in Vietnam
The primary and most significant taxes imposed on people and businesses in this country are:
- The value-added tax.
- The corporate income duty.
- The individual income duty.
Additional taxes are levied on both individuals and businesses, such as withholding taxes on dividends, interest, and royalties payments. It should be noted that different withholding duty rates apply to different incomes because Vietnam has signed double levy treaties that specify different rates to be applied to these incomes.
Vietnamese tax rates
As was stated at the outset, Vietnam has some of the lowest duty rates in the entire globe. In Vietnam, both businesses and people are subject to the following duty rates:
- The maximum rate for personal income duty is 35%, with a variable rate starting at 5%.
- The corporation levy rate is 20 percent.
- The standard rate of value-added tax is 10%.
Foreign investors should be aware that Vietnam has no concept of duty residence about businesses.
Additional fees in Vietnam
A foreign contractor duty, which is made up of corporate and value-added taxes, will be levied on foreign investors and people who operate through firms, respectively, and who reside and work there. Companies that operate in specific Vietnamese industries or that are registered in the nation’s special economic zones can take advantage of lower duty rates, specific restrictions apply to duty exemptions and deductions.
Tax year
The fiscal year runs from January 1st to December 31st. However, businesses have the option to choose a different strategy. In some cases, the duty(financial) year was the alternate year that expires on the earlier of March 31st, June 30th, or September 30th.
Tax losses
After the loss-producing year, losses may be carried forward continuously for a total of five years. Losses cannot be carried back, therefore neither consolidated duty relief nor shared losses are concepts.
Dividends
Once their annual duty (financial) finalization is complete, foreign investors can send their gains abroad. Before any dividends are declared, all cumulative losses must be fully recovered. Before deciding to send dividends abroad, the authorities must be notified at least 7 working days in advance. Dividends issued to corporate shareholders are exempt from withholding levies, whereas dividends paid to individual shareholders are subject to a 5% withholding tax.
Tax determinations
Quarterly, provisional CIT must be calculated and submitted no later than the final day of the following:
- A month after the quarter’s finish.
- By the last day of the third month following the end of the fiscal year.
The tax on capital assignment profits
Capital assignments profit tax (CAPT), although not a distinct tax, levies a 20% tax on gains on sales of interests or holdings in non-public enterprises. The gain is calculated as the sales proceeds over the cost and any transfer costs. Residents are additionally liable to a 20% capital gains tax on transfers of securities, including bonds and shares of joint stock corporations, while non-resident (foreign) taxpayers are also subject to a presumed capital gains tax of 0.1% of the entire sales proceeds on securities.
