Most business activities and investments in Vietnam will be affected by the following taxes/ liabilities:
(1) Corporate income tax (“CIT”)
• The standard CIT rate from 2016 is 20%.
• Tax incentives are granted to new investment projects based on:
(i) Encouraged business lines include infrastructure development, high technology, etc.;
(ii) Encouraged locations include qualifying economic and hightech zones, certain industrial zones and difficult socio-economic areas;
(iii) Large manufacturing projects meeting requirements regarding investment capital, minimum revenue, minimum headcount such as VND6,000 billion or VND12,000 billion.
(2) Transfer pricing: The acceptable methodologies for determining arm’s length pricing are analogous to other countries include: comparable uncontrolled price, resale price, cost plus, profit split and comparable profits methods.
(3) Foreign contractor withholding tax (“FCT”) applies to certain payments to foreign parties including interest, royalties, service fees, lease, insurance, transportation, transfers of securities and goods supplied within Vietnam or associated with services rendered in Vietnam, and certain distribution arrangements. It normally comprises a combination of CIT and VAT (value added tax) at varying rates, but can also include PIT (personal income tax) for payments to foreign individuals.
(4) Value added tax (“VAT”) applies (i) to goods and services used for production, trading and consumption in Vietnam, and (ii) to imported goods.
There are 03 VAT rates as follows:
• The standard rate is 10%;
• 5% is applied to essential goods and services; and
• 0% is applied to exported goods/services.
(5) Special sales tax (“SST”): SST is a form of excise tax that applies to the production or import of certain goods and the provision of certain services. Imported goods (except for various types of petrol) are subject to SST at both the import and selling stages.
(6) Property tax: Foreign investors generally pay rental fees for land use rights. The range of rates is wide depending upon the location, infrastructure and the industrial sector in which the business is operating.
(7) Natural resources tax (“NRT”): NRT is payable by industries exploiting Vietnam’s natural resources, with the tax rate ranging from 1% to 40%.
(8) Import and export duties: Import duty rates are classified into 03 categories: ordinary rates, MFN (most favored nation) rates and FTA (free trade agreement) rates. Vietnam has entered into more than 10 FTAs so the import duty rates have been greatly reduced.
Export duties are charged only on a few items, basically natural resources with rates ranging from 0% to 40%.
(9) Personal income tax (“PIT”): PIT rates depend on residency status and nature of income, with tax residents are taxed on their global source of income, while non-tax residents are taxed only on their Vietnam source income.
Employment income is taxed on a progressive tax rates from 5% – 35% for tax resident, while for non-tax resident, the rate of 20% is applied consistently. Other income is taxed at a variety of different rates from 0.1% – 10%.
(10) Social, health and unemployment insurance contributions: Vietnamese employees are subject to all 03 compulsory government insurances. Foreign employees are currently only subject to health insurance and will be subject to social insurance from January 01, 2018. The insurance premiums will be paid based on the salaries of the employees under the following rates:
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