Vietnam Tax Quick Guide 2017 Domicile Corporate Services is a leading provider of professional compliance support, accounting, tax, payroll, outsourcing and advisory services in Vietnam. We assist foreign invested and locally owned companies maintain the highest level of professional standards through proactive compliance and reporting assistance. Domicile Corporate Services Ho Chi Minh City: Level 9, Abacus Tower 58 Nguyen Dinh Chieu, District 1, Ho Chi Minh City, Vietnam Hanoi: Level 13, Hanoi Tower, 49 Hai Ba Trung, Hoan Kiem District, Hanoi, Vietnam Phone: (08) 6291 5779 Email: info@domicilecs.com www.domicilecs.com
CORPORATE TAXATION Corporate Income Tax Rate The standard CIT rate for companies in Vietnam is 20%. CORPORATE INCOME TAX ( CIT ) Reduced CIT rates can apply to specified sectors or companies operating in designated zones which are afforded tax incentives. Increased CIT rates can apply to companies operating in selected resource sectors. Tax Year The standard Tax Year for corporate taxpayers is a Calendar Year (1 January to 31 December), unless otherwise changed with the authorities. Basic Criteria for Deductible Expenses (i) Expenses are incurred in relation to business activities as permitted with the company s business license; (ii) Supported by appropriate invoices or relevant documents; and (iii) Expenses of VND 20 million and above must settled by non-cash payment (i.e. bank transfer). FOREIGN CONTRACTOR WITHHOLDING TAX ( FCWT ) Foreign business organizations, with or without a Permanent Establishment ( PE ) in Vietnam, that: (i) undertake business in Vietnam, or (ii) have income derived from Vietnam from contracts entered into with Vietnam parties will be subject to CIT and VAT applied on payments. Combined, these are referred to as Foreign Contractor Withholding Tax. Business Lines Distribution and supply of goods, raw materials, supplies, machinery and equipment associated with services in Vietnam (including supply of goods in the form of on-the-spot import and export) Deemed CIT rate (%) Deemed VAT rate (%) 1% Exempt Services 5% 5% Leasing of aircraft, aircraft engines, aircraft spare parts and sea going vessels 2% Exempt Leasing of machinery and equipment 5% 5% Restaurant, Hotel and Casino Management Services 10% 5% Construction and installation included in the supply of raw materials or machinery and equipment 2% 3% Construction and installation without the supply of raw materials or machinery and equipment 2% 5% Other production or business activities and transportation (including air and sea transport) 2% 3% Assignment [transfer] of securities, certificates of deposits, offshore reinsurance and commission for reinsurance 0.1% Exempt Loan interest 5% Exempt Royalties 10% Exempt Note: - At Official Letter level, the Tax Department confirms the applicable tax rate for payment for the right to use a trademark (which is distinguished from royalties, franchising, other services) are 10% CIT rate on taxable income and 5% VAT rate for the Direct method and/or 10% VAT rate for the Credit method - Vietnam has signed more than 70 Double Tax Agreements ( DTA ) with countries and territories, accompanied with other additional protocols and rulings. The CIT/PIT portion in FCWT may be affected by a relevant DTA. - VAT rates may be reduced in specific scenarios, such as for international transportation which is exempt from VAT.
CORPORATE TAXATION (cont.) Action Comments Deadline FILING REQUIREMENTS Quarterly CIT Declaration/Payments Annual CIT Finalization Lodgement of Financial Statements FCWT Payment and Lodgement Provisional Quarterly CIT payments are made based on estimates. Total payment during the Tax Year should be no less than 80% of the total annual CIT liability. Statutory requirement. Outstanding tax payables must be remitted at the time of lodgement. Foreign Invested Companies must lodge Audited Financial Statements. Unaudited Financial Statements are sufficient for most other taxpayers (other than public companies). Each payment to a Foreign Contractor must be registered with the tax authorities, and tax remitted to authorities by the paying party. 30th day of the month following the end of the Quarter. 90 days after the end of the Tax Year. Part of Annual CIT Finalization requirement. Within 10 days of each payment. VALUE ADDED TAX ( VAT ) Goods and services (including goods and services purchased from foreign sources) used for the purposes of production, trading and consumption in Vietnam are subject to Value Added Tax. There are two methods available for taxpayers. Where companies do not register for the Credit Method, the Direct Method will initially apply. CREDIT METHOD Conditions Maintain VAS accounting records, invoices & supporting documents in line with prevailing regulations; Total annual revenue exceeds VND 1 billion; Register to declare and pay VAT using Credit Method. Items Exported goods & services; international transportation. Essential goods & services; Specific types of goods and services as regulated. Standard rate for goods & services Certain goods & services as prescribed VAT Payable (Refundable) = Output VAT - Input VAT Tax Rate (%) 0% 5% 10% Exempt DIRECT METHOD Conditions Total annual revenue is less than VND 1 billion; or Business household and individuals; or Specified cases regulated by laws Items Distribution or supply of goods Tax Rate (%) 1% Services/construction excluding supply of raw materials 5% Production, transportation or services, construction including supply of raw materials 3% Other business activities VAT payable = Turnover x Tax Rate 2% Output VAT: Taxable revenue value (net of tax) multiplied by applicable VAT rates Input VAT: Total value of VAT invoices received that satisfy prescribed criteria. FILING REQUIREMENTS Action Required Conditions Deadline Initial registration for VAT credit method Newly established enterprises For enterprises wish to apply VAT credit method Monthly declaration For enterprises with prior year annual revenue is from VND 50 billion and more Quarterly declaration Newly established enterprise For enterprises with prior year annual revenue is less than VND 50 billion Within 30 days from the date of receiving Enterprise Registration Certificate 20th day of the following month 30th day of the month following the end of the Quarter Annual finalization N/A No requirement
PERSONAL TAXATION TAX RESIDENCY An individual will be a Tax Resident where they: a) Reside in Vietnam for more than 183 days or more (i) in a calendar year; or (ii) within 12 consecutive months from the first day of arrival or b) Have a permanent residence in Vietnam (including where they have an address recorded in a temporary or permanent residence card); or TAX RESIDENT NON-TAX RESIDENT Individuals that do not meet the criteria of being Tax Resident are regarded as Non-Tax Resident in Vietnam. Note: A Residence Certificate is the basis for proving that someone is Tax Resident in another country. Where the individual belongs to a country or territory which has tax treaty with Vietnam and does not issue residence certificates, a copy of passports to prove the time of residence is required c) Lease a house/office/hotel for a term of 183 days or more in Vietnam within the tax assessment period. Note: If an individual has a regular residence in Vietnam, but actually stay less than 183 days in tax year and cannot prove that he/she is the tax resident in another country, he/she will still be treated as Tax Resident in Vietnam Tax Residents are subject to tax in Vietnam on world-wide income. Non-Tax Residents are subject to tax in Vietnam on Vietnam sourced income. TAX RATES Tax Resident Monthly Income (VND) Personal Income Tax Rate (%) Up to 5,00,000 5% Over 5,000,000 to 10,000,000 10% Over 10,000,000 to 18,000,000 15% Over 18,000,000 to 32,000,000 20% Over 32,000,000 to 52,000,000 25% Over 52,000,000 to 80,000,000 30% Over 80,000,000 35% Compulsory Contributions (deductions) from Gross Salaries Social Insurance ( SI ) 8% Personal Relief Health Insurance ( HI ) Unemployment Insurance ( UI ) 1.5% 1% Reductions to Monthly Income for Individuals Dependent Relief (*) VND 9,000,000 / month VND 3,600,000 / month for each dependent * Children, parents, spouses, grandparents, relatives etc. that meet required conditions Note: Foreign employees are not subject to Social Insurance or Unemployment Insurance Non-Tax Resident Subject to tax on Vietnam sourced income only. Flat Personal Income Tax Rate on employment income of 20% Certain PIT exemptions under Tax Treaties may apply.
PERSONAL TAXATION (cont.) Other Income Type of Income Tax Resident Non-Tax Resident Business Income 0.5% - 5% (based on the type of business income) 1% - 5% (based on the type of business income) Dividends 5% 5% Sales of shares 0.1% on sales proceeds 0.1% on sales proceeds Capital/stock assignment 20% of the net gain 0.1% on sales proceeds Sales of real estate 2% on sales proceeds 2% on sales proceeds Incomes from franchising/ royalties Incomes from inheritance/ gifts/prices winning 5% on amount exceeding VND 10 million 5% on amount exceeding VND 10 million 10% on amount exceeding VND 10 million 10% on amount exceeding VND 10 million FILING REQUIREMENTS Dependent Registration Action Party in Charge Deadline Employer & Employee From the date employee wishes to claim the dependent reduction Monthly Declaration Employer 20th day of following month Quarterly Declaration Employer 30th day of the following quarter Annual Finalization Employer & Employee 90th day after the end of the Calendar Year FOR FURTHER INFORMATION CONTACT: Matthew Lourey, Managing Partner email: matthew@domicilecs.com Phan Thi Thu Thuy, Manager email: thuy.phan@domicilecs.com This publication is general in nature and should not be relied upon without first seeking specific advice. No liability is taken for the content of this publication, nor any responsibility for any actions taken based upon the content. Ho Chi Minh City: Level 9, Abacus Tower 58 Nguyen Dinh Chieu, District 1, Ho Chi Minh City, Vietnam Hanoi: Level 13, Hanoi Tower, 49 Hai Ba Trung, Hoan Kiem District, Hanoi, Vietnam Phone: (08) 6291 5779 Email: info@domicilecs.com www.domicilecs.com Copyright (c) 2016 Domicile Consulting & Service Company Limited, All rights reserved.