Vietnam’s economy has shown strong growth momentum and remarkable resilience in the past few years. Despite the challenges of global economic uncertainty and the COVID-19 pandemic, Vietnam has maintained a solid economic performance. In 2023, Vietnam’s GDP growth rate reached about 5.05%, which is lower than the government’s target of 6.5%, but still impressive in the context of the global economic slowdown. Foreign direct investment (FDI) continues to flow in, with manufacturing and exports performing particularly well, and the digital economy and service industry also showing rapid development. However, Vietnam’s economy still faces challenges such as inflationary pressure and global demand fluctuations, which require prudent macroeconomic management.

In this economic context, tax policy plays a vital role in Vietnam’s national development. First, tax is the main source of government revenue, providing financial support for public spending and infrastructure construction. Second, tax policy is an important tool for the government to regulate the economy, guiding investment through various preferential measures and promoting the development of specific industries or regions. In addition, tax policy also plays a role in income redistribution and promoting social equity. In recent years, the Vietnamese government has actively supported enterprises to cope with economic challenges through tax policies, and has also been continuously improving the tax system to adapt to the new trends of economic globalization and digitalization.

As Vietnam’s economy continues to develop and become more internationalized, tax policies face new opportunities and challenges. On the one hand, it is necessary to maintain sufficient tax revenue to support national development; on the other hand, it is necessary to attract investment and promote innovation through reasonable tax policies. In this context, in-depth analysis of the annual changes and future trends in Vietnam’s tax policies is of great significance for companies to formulate strategies and the government to formulate policies. This article will discuss in detail the policy changes in 2023, the expected adjustments in 2024, and the policy trends in the next few years, providing readers with comprehensive and in-depth insights.

Review of major tax policy changes in 2023

In 2023, Vietnam’s tax policy has undergone a series of important changes involving multiple tax categories. These changes are aimed at adapting to the needs of economic development, improving tax efficiency, and responding to global economic challenges.

In terms of corporate income tax, the Vietnamese government continues to implement policies to support the development of small and medium-sized enterprises. Small and medium-sized enterprises with annual revenue not exceeding 200 billion VND enjoy a preferential tax rate of 15%, which is significantly lower than the standard 20% tax rate. In addition, high-tech enterprises and enterprises engaged in social projects continue to enjoy a preferential tax rate of 10%. It is worth noting that the government has strengthened supervision of transfer pricing of multinational companies, requiring more detailed contemporaneous information and country reports.

The adjustment of personal income tax policy mainly focuses on increasing personal tax exemption and deduction standards. The basic personal tax exemption has been increased from 11 million VND/month to 13.2 million VND/month, and the deduction for dependents has also been increased accordingly. In addition, for foreign senior talents, the government has introduced more attractive tax policies, including tax exemptions in certain cases and simplified tax declaration procedures.

In terms of value-added tax, in order to stimulate economic recovery, the government continued the value-added tax reduction policy for some industries in 2023. The value-added tax rate for certain goods and services was temporarily reduced from 10% to 8%. At the same time, the government strengthened the promotion and management of electronic invoices, requiring more companies to adopt electronic invoice systems.

In the area of ​​special consumption taxes, the government adjusted the tax rates on certain goods. Notably, the special consumption tax rate on electric vehicles was reduced to encourage the use of clean energy vehicles. At the same time, higher special consumption taxes were imposed on high-sugar beverages and certain products that are considered harmful to health.

In terms of other taxes, the adjustment of environmental protection tax has attracted widespread attention. The government has increased the environmental protection tax rate for plastic products and certain chemicals, while giving tax incentives to companies that use environmentally friendly materials. In addition, the non-agricultural land use tax has also been adjusted to better reflect the value of land and promote the efficient use of land.

In general, the changes in Vietnam’s tax policy in 2023 reflect the government’s efforts to find a balance between promoting economic growth, supporting key industries, protecting the environment and optimizing the tax structure. These changes have brought opportunities and challenges to enterprises, which require enterprises to pay close attention and adjust their tax strategies in a timely manner.

Expected tax policy adjustments in 2024

The Vietnamese government is actively adjusting its tax policies to adapt to the changing economic environment and promote national development. The 2024 tax policy adjustments include both clear changes that have been announced and some proposals under discussion. These adjustments are aimed at optimizing the tax structure, improving tax collection and management efficiency, and supporting the development of key industries.

1. Announced Policy Changes

For 2024, the Vietnamese government has announced several important tax policy changes. First, in terms of corporate income tax, preferential policies for small and medium-sized enterprises will continue to be implemented, and the tax rate will remain at 15%-17%. Secondly, in terms of value-added tax, the value-added tax exemption policy for some goods and services previously implemented in response to the COVID-19 pandemic will be gradually withdrawn and returned to normal tax rates. In addition, the tax exemption amount for personal income tax will be slightly increased to cope with inflation.

In terms of special industries, environmental protection taxes will be adjusted, especially the tax rates on plastic products and certain chemicals will be increased to promote the development of environmental protection industries. At the same time, the tax preferential policies for high-tech enterprises will be further refined, including extending the tax exemption period and increasing the additional deduction ratio for R&D expenses.

2. Policy proposals under discussion

In addition to the announced changes, there are several important tax policy proposals under discussion. The first is the improvement of digital economy tax policies. Vietnam is considering introducing specific tax provisions for cross-border digital services to cope with the growing digital economy. Secondly, the adjustment of real estate taxes is being discussed, including the possible introduction of a property vacancy tax and adjustment of land use tax rates to promote the healthy development of the real estate market.

Another hot topic is the introduction of carbon tax. Vietnam is studying carbon tax policy to promote the transition to a low-carbon economy. In addition, there are proposals to simplify the tax declaration procedures for small and medium-sized enterprises, aiming to reduce the burden on enterprises and improve tax compliance.

In the field of international taxation, Vietnam is considering further improving transfer pricing regulations and may introduce mandatory country-by-country reporting requirements to keep pace with the global trend of tax transparency. At the same time, discussions are also underway to expand the tax treaty network, especially to sign new agreements with emerging economies.

These policy changes and proposals reflect the continuous optimization and internationalization trend of Vietnam’s tax system. Enterprises need to pay close attention to these changes and adjust their business strategies and tax planning in a timely manner. At the same time, these policies also provide new opportunities for foreign investors, especially in the fields of high-tech and environmental protection industries.

Adjustment of tax policies for key industries

The Vietnamese government guides and supports the development of key industries through tax policy adjustments. The policy changes in 2024 reflect the focus and direction of the national development strategy. This section will analyze in detail the tax policy adjustments for four key industries: high-tech industry, renewable energy, digital economy and real estate.

The high-tech industry continues to receive strong support from the Vietnamese government. The new policy further reduces the corporate income tax rate for high-tech enterprises from the previous 10% to 8%, and the applicable period is extended to 15 years. At the same time, the additional deduction rate for R&D expenses has been increased to 300%, aiming to stimulate companies to increase R&D investment. In addition, the personal income tax preferential policies for high-tech talents have also been expanded, including measures such as partial income tax exemption and tax rate concessions.

The tax policy adjustment in the renewable energy sector reflects Vietnam’s determination to transform to a green economy. The corporate income tax incentive for solar and wind power projects is extended to the first 10 years of project operation, and the tax rate remains at a low level of 10%. The new policy also introduces import tax exemptions for green technology equipment and accelerated depreciation policies for renewable energy-related fixed assets. These measures are aimed at attracting more investment and accelerating Vietnam’s energy structure transformation.

As an emerging sector, the digital economy has received special attention. Vietnam has introduced specific tax regulations for cross-border digital services for the first time, requiring overseas digital service providers to register and pay taxes in Vietnam. At the same time, for local digital innovation companies, the government provides a corporate income tax exemption period of up to 3 years, followed by a 50% tax reduction for the next 5 years. E-commerce platforms are also included in the scope of tax management and are required to provide information to the tax authorities on transactions on the platform.

The tax policy adjustment for the real estate industry is aimed at stabilizing the market and promoting sustainable development. The government has increased the tax rate on idle land and speculative real estate transactions, while providing deed tax exemptions for first-time homebuyers. To encourage developers to invest in affordable housing projects, related projects enjoy corporate income tax benefits and land use tax exemptions. In addition, the new policy requires stricter tax timing for pre-sale income of real estate developers.

These policy adjustments reflect the Vietnamese government’s efforts to promote economic transformation, attract high-quality investment, support innovation and development, and maintain social equity. Enterprises should pay close attention to these changes, assess their impact on business strategies and financial planning, and make timely adjustments to fully utilize the opportunities brought by the new policies.

Development of International Tax Policy

Vietnam’s policy developments in the field of international taxation reflect its determination to integrate into the global economy. In 2024, Vietnam has made significant progress in transfer pricing rules, tax treaty network and addressing base erosion and profit shifting (BEPS).

In terms of transfer pricing rule updates, Vietnam’s tax authorities have strengthened supervision of related-party transactions of multinational companies. The new regulations require companies to provide more detailed contemporaneous information, including master files, local files and country reports. In particular, for multinational companies with annual revenue exceeding 18 trillion VND, country reports must be prepared. In addition, Vietnam has introduced major revisions to the advance pricing arrangement (APA) system, simplifying the application process and encouraging more companies to participate in order to increase tax certainty.

In terms of tax treaty network expansion, Vietnam continues to actively negotiate and update bilateral tax treaties with other countries. In 2024, Vietnam signed tax treaties with several new trading partners and revised some existing agreements to adapt to the new international tax environment. These efforts are aimed at reducing double taxation and promoting cross-border investment and trade.

Measures to address BEPS are an important part of Vietnam’s international tax policy. Vietnam has taken steps to implement the OECD’s BEPS Action Plan, including introducing controlled foreign companies (CFC) rules, limiting interest deductions, and preventing treaty abuse. Of particular note, Vietnam is considering implementing a global minimum tax system (Pillar Two), which could have a significant impact on multinational companies operating in Vietnam.

These developments indicate that Vietnam is actively adjusting its international tax policies to adapt to changes in the global tax environment. It is critical for multinational companies with operations in Vietnam to pay close attention to these changes and adjust their tax strategies accordingly. Companies need to reassess their transfer pricing policies, make full use of updated tax treaties, and ensure compliance with new anti-avoidance regulations. At the same time, companies should also consider new opportunities that these changes may bring, such as using APAs to increase tax certainty.

Improvements in Tax Administration and Collection Measures

In recent years, the Vietnamese government has been committed to modernizing its tax administration and collection systems to improve efficiency, reduce fraud, and provide better services to taxpayers. In 2024, this trend continued to strengthen, mainly in the three areas of electronicization, risk management, and taxpayer services.

The full implementation of electronic invoices and electronic tax systems is one of the most significant changes in 2024. Vietnam has completed the nationwide promotion of electronic invoices, and all enterprises are now required to use the electronic invoice system. This move not only greatly improves the efficiency of invoice management, but also provides tax authorities with the possibility of real-time data analysis. At the same time, the functions of the electronic tax system have been further improved, and taxpayers can now complete most tax operations online, including declaration, payment and refund application.

In terms of tax audits and risk management, Vietnam’s tax authorities have adopted a more precise and data-driven approach. Through big data analysis and artificial intelligence technology, tax authorities are able to more effectively identify high-risk taxpayers and suspicious transactions. In 2024, we saw an increase in special audits targeting specific industries and cross-border transactions. At the same time, tax authorities have also strengthened supervision of e-commerce and the digital economy to meet the challenges posed by emerging business models.

In terms of taxpayer services, Vietnam’s tax authorities have taken a number of measures to optimize service quality. This includes launching a more user-friendly online service platform, providing multilingual support, and expanding the scope of self-service. Of particular note, the tax authorities have increased the coverage of advance ruling services to provide taxpayers with more certainty on complex tax issues. In addition, dedicated service windows for small and medium-sized enterprises have also been strengthened to provide more customized support and guidance.

These improvements reflect the Vietnamese government’s determination to build a modern tax system. Although these changes may increase the adaptation costs of enterprises in the short term, they will help create a more fair, transparent and efficient tax environment in the long run. Enterprises should actively adapt to these changes and make full use of new systems and services to optimize their tax management.

Analysis of tax incentives

Vietnam’s tax incentives are an important tool for attracting investment and promoting the development of specific regions and industries. In 2024, Vietnam continued to implement and optimize a series of tax incentives, mainly focusing on regional incentives, industrial incentives and support for small and medium-sized enterprises.

Regional preferential policies are mainly targeted at economically underdeveloped areas and industrial parks. The Vietnamese government continues to provide incentives for investment projects located in socio-economically difficult areas, including lower corporate income tax rates and longer tax exemption periods. For example, projects invested in extremely difficult areas can enjoy a preferential tax rate of 10% for a period of 15 years. In addition, some newly established economic zones and high-tech parks have also received special tax incentives to attract high-quality investment.

Industrial preferential policies focus on supporting high-tech industries, environmental protection industries and strategic emerging industries. In 2024, Vietnam further improved the recognition standards for high-tech enterprises, providing more favorable tax rates and longer preferential periods for qualified enterprises. Renewable energy projects also received additional tax support, including accelerated depreciation and import tax exemptions. It is worth noting that Vietnam has begun to provide special benefits to innovative enterprises in the digital economy to promote digital transformation.

The support measures for SMEs are a highlight of the tax policy in 2024. Recognizing the importance of SMEs in the national economy, the Vietnamese government has introduced a series of targeted measures. This includes reducing the corporate income tax rate for SMEs, simplifying the tax filing procedures, and providing special tax exemptions for small and micro enterprises investing for the first time. In addition, in order to support the technological innovation of SMEs, the proportion of additional deductions for R&D expenses has also been increased.

These preferential policies reflect the strategic intention of the Vietnamese government to balance regional development, promote industrial upgrading and support small and medium-sized enterprises. However, enterprises need to pay attention to the specific applicable conditions and compliance requirements of the policies when enjoying these preferential policies. At the same time, with the changes in the international tax environment, some preferential policies may face adjustments. Enterprises should pay close attention to policy trends and consider long-term tax planning strategies.

Future Trend Forecast

The future development trend of Vietnam’s tax policy will continue to reflect the country’s economic development strategy and changes in the global tax environment. Here are three major trends to watch:

The development of digital taxation is one of the important directions of Vietnam’s tax policy in the future. With the rapid growth of the digital economy in Vietnam, the government is actively exploring effective ways to tax cross-border digital services and e-commerce. Vietnam is expected to refer to the OECD’s digital economy taxation recommendations and introduce new tax rules for large multinational technology companies. This may include specific taxes on digital services or require foreign digital service providers to register and pay taxes in Vietnam. In addition, Vietnam may strengthen tax supervision on cryptocurrency and digital asset transactions.

The potential introduction of environmental taxes is another trend worth watching. As Vietnam places more emphasis on sustainable development, the introduction of environmental taxes is possible. This could include taxes on carbon emissions, plastic usage, or other environmentally harmful behaviors. The introduction of environmental taxes will not only help increase tax revenue, but also encourage companies to adopt more environmentally friendly production methods. However, the government is likely to take a gradual approach in implementation to balance the needs of environmental protection and economic development.

The deepening of international tax cooperation is the third important trend in Vietnam’s tax policy development. Vietnam is actively participating in global tax reforms, including the implementation of the BEPS (Base Erosion and Profit Shifting) Action Plan. It is expected that Vietnam will continue to expand its tax treaty network while updating existing treaties to adapt to new international tax standards. In addition, Vietnam is likely to strengthen the exchange of tax information with other countries and improve the transparency of cross-border transactions. This will help combat international tax evasion while creating a more level playing field for multinational companies.

These trends will have a profound impact on companies operating in Vietnam. Companies need to pay close attention to policy changes and adjust their business strategies and tax planning in a timely manner. At the same time, these changes may also bring new opportunities for companies that meet the sustainable development goals and digital transformation.

Impact and Suggestions on Enterprises

Changes in Vietnam’s tax policies have had a profound impact on corporate operations and strategic planning. This section will explore the changes in compliance costs, tax planning opportunities, and risk management strategies brought about by these changes, and provide practical advice for companies.

In terms of changes in compliance costs, the full implementation of electronic invoices and digital tax systems may increase companies’ technology investment in the early stages, but in the long run it will significantly improve tax management efficiency. Companies need to invest in relevant software and personnel training to adapt to new compliance requirements. At the same time, the mandatory requirements for transfer pricing documents and country-by-country reporting also increase the compliance burden of multinational companies. However, these investments will help improve the overall financial transparency and management level of companies.

In terms of tax planning opportunities, the new tax incentives have created multiple opportunities for enterprises. High-tech enterprises and renewable energy projects can enjoy more favorable tax rates and tax exemption periods. Enterprises should carefully evaluate their own business to see if they meet these preferential conditions. In addition, Vietnam’s expanding tax treaty network provides more planning space for cross-border investment, and enterprises can optimize the overall tax burden through reasonable structural design.

Risk management strategies are becoming increasingly important. With the increase in tax audits and information exchange, companies need to manage tax risks more carefully. It is necessary to establish a sound internal control system, conduct regular tax health checks, and respond to policy changes in a timely manner. For complex tax issues, it is becoming increasingly important to seek advice from professional consultants. Companies should also pay attention to changes in international tax rules, especially the impact of the implementation of the BEPS Action Plan on cross-border operations.

In general, the changes in Vietnam’s tax environment bring both challenges and opportunities. Enterprises need to take a proactive attitude, continuously optimize tax management practices, and incorporate tax considerations into overall business strategies. Through reasonable planning and effective risk management, enterprises can maintain their competitive advantage and achieve sustainable development in the ever-changing tax environment.

Conclusion

In 2024, Vietnam’s tax policy continued to be dynamic and progressive, reflecting the country’s strategic adjustments in its economic development and internationalization process. Through this year’s policy changes, we can clearly see Vietnam’s efforts to balance economic growth, social equity and international competitiveness.

The tax policy adjustments mainly focus on promoting high-tech industries, supporting the development of the digital economy, strengthening international tax cooperation, and optimizing tax management. These changes not only reflect Vietnam’s emphasis on optimizing its domestic economic structure, but also show its determination to actively integrate into the global economic system.

It is particularly noteworthy that Vietnam’s measures in taxing the digital economy, building an environmental protection tax system, and responding to international tax challenges (such as the BEPS Action Plan) indicate that its tax system is moving towards a more modern and international direction. This has brought new challenges and created new opportunities for multinational companies.

For enterprises, adapting to these policy changes requires a more proactive tax management strategy. Enterprises not only need to ensure compliance, but also make full use of the benefits and opportunities provided by the new policies to optimize the tax structure. At the same time, strengthening risk management and improving tax transparency will become the top priorities of corporate tax work.

Looking ahead, Vietnam’s tax policy is expected to continue to develop in a more refined, digital and international direction. Enterprises should pay close attention to policy trends and prepare in advance to cope with possible changes. At the same time, actively participating in policy discussions and providing feedback to the government is also an important strategy for enterprises to maintain their competitiveness in this rapidly changing environment.

In general, the changes in Vietnam’s tax policy in 2024 have brought new challenges and opportunities to businesses operating in Vietnam. By deeply understanding these changes and trends, companies can better navigate this complex tax environment and achieve sustainable development. The evolution of Vietnam’s tax policy not only reflects the trajectory of its economic development, but also provides important clues for us to understand the future development direction of this rapidly rising Southeast Asian country.