1.Corporate Income Tax (CIT)

Tax objects:

All enterprises, both local and foreign, that generate income in Vietnam, whether operating in Vietnam through a legal entity or a permanent establishment, are subject to corporate income tax.

Detailed description:

Standard tax rate: The taxable income of a company is usually taxed at a standard rate of 20%. This rate applies to companies in most industries and is the main criterion for measuring the tax burden of a company.

Scope of application: Corporate income tax applies to all taxable income of a company in a tax year. This includes profits earned by a company from sales, services, investments and other sources of income.

Special Industry Tax Rates: Higher tax rates ranging from 32% to 50% apply to companies involved in highly profitable industries such as oil, gas, and rare minerals. These high tax rates are intended to reflect the high-profit nature of these industries and the scarcity of resources.

Preferential tax rates: The government encourages the development of high-tech enterprises and provides preferential tax rates for this purpose. Qualified high-tech enterprises can enjoy preferential tax rates of 10% to 15%. These enterprises usually need to meet certain technological innovation, R&D investment and output standards.

Loss carry forward: If an enterprise incurs a loss in a tax year, it can carry the loss forward to the subsequent year to offset the taxable income. Losses can be carried forward for up to 5 years. The carried-forward losses can directly reduce the taxable income in the future years, thereby reducing the tax burden of the enterprise.

Prepayment and final settlement: Corporate income tax must be prepaid quarterly, and part of the tax must be prepaid each quarter based on the estimated taxable income. At the end of the year, the company must make an annual final settlement, recalculate the annual tax burden based on the actual taxable income, and make a final settlement. If the actual tax burden for the whole year exceeds the prepaid tax, the company must pay the tax; otherwise, it can apply for a tax refund.

2. Personal Income Tax (PIT)

Tax objects:

All individuals working in Vietnam, including Vietnamese residents and non-residents, are subject to personal income tax. The tax is not limited to Vietnamese individuals, but also includes foreign individuals working or generating income in Vietnam.

Detailed description:

Resident tax rate: Individuals who are considered residents, that is, individuals who have resided in Vietnam for more than 183 consecutive or cumulative days, are subject to progressive tax rates. The tax rate is divided into multiple levels based on income, ranging from 5% to 35%. The specific applicable tax rate will be calculated based on the individual’s taxable income. The higher the income, the higher the applicable tax rate.

Non-resident tax rate: Non-resident individuals, i.e. individuals who have resided in Vietnam for less than 183 days and do not have a permanent residence in Vietnam, are subject to a flat tax rate of 20%. This rate is applied to all taxable income without the need for progressive tax rate calculation.

Taxable income range: The taxable income range of personal income tax is wide, including wages and salaries, business income, investment income and other income forms. Any income obtained through labor, investment or business activities must be included in the scope of personal income tax.

Special income tax rates: Certain types of income, such as capital gains and royalties, are usually subject to separate tax rates. Capital gains refer to income obtained from the transfer of capital assets, while royalties refer to income obtained from granting others the right to use intellectual property, technology or franchise rights. For these types of income, Vietnam’s tax law sets special tax rates, which need to be determined based on actual circumstances.

Withholding obligation: Individuals working in Vietnam usually have their personal income tax withheld by their employers. This means that employers are required to deduct the personal income tax payable from employees’ wages in advance when paying wages and pay it to the tax authorities on their behalf. This system simplifies the tax process for individuals and ensures that taxes are paid on time.

3. Value Added Tax (VAT)

Tax objects:

All businesses and individuals selling goods and providing services in Vietnam are subject to VAT. VAT applies to all aspects of goods and services, including production, distribution and retail.

Detailed description:

Standard rate: Vietnam’s standard VAT rate is 10%. This rate applies to most goods and services and is an additional tax that businesses need to charge consumers when selling goods or providing services.

Preferential tax rates: Vietnam provides preferential tax rates for certain specific goods and services, with a tax rate of 0% or 5%. The 0% tax rate usually applies to export goods and certain international transportation services, encouraging foreign trade while avoiding double taxation. The 5% preferential tax rate applies to certain basic necessities and services, such as medical equipment, educational services, agricultural products, etc., aiming to reduce the tax burden in the basic livelihood sector.

Duty-free goods and services: Some goods and services are exempt from VAT in Vietnam, such as unprocessed agricultural products, medical services, educational services, insurance services, and some financial services. These duty-free items are mainly concentrated in areas related to social livelihood, and the government supports the development of basic industries and public services through duty-free policies.

Filing and Payment: Enterprises need to file and pay VAT to the tax authorities on a monthly or quarterly basis. The choice of filing period usually depends on the size of the enterprise and its annual turnover. Small and medium-sized enterprises generally file quarterly, while large enterprises need to file monthly. When filing, the enterprise needs to list in detail the taxable income and the corresponding input tax (i.e. the VAT paid by the enterprise when purchasing goods or services). The final tax paid is the difference between the taxable income tax and the input tax.

4. Special Consumption Tax (SCT)

Tax objects:

Special consumption taxes apply to enterprises and individuals that produce or import specific goods, as well as enterprises and individuals that provide specific services. These goods and services usually include high-consumption goods that have a significant impact on health or society, such as tobacco, alcohol, and cars, as well as certain luxury or entertainment services, such as gambling and golf.

Detailed description:

Tax rate range: The rates of special consumption taxes vary depending on the type of goods and services, ranging from 10% to 150%. For example, tobacco and alcohol products are usually subject to higher tax rates to control their consumption and increase state fiscal revenue. The tax rates for cars also vary depending on factors such as engine displacement, with larger displacements usually subject to higher tax rates.

Order of taxation: Special excise taxes are levied before VAT. This means that when calculating VAT, special excise taxes are already included in the selling price of goods or services. Therefore, special excise taxes take precedence over VAT in the tax chain, affecting the final selling price and tax burden.

Policy Purpose: The main purpose of special consumption taxes is to regulate the consumption of specific goods and services. By imposing higher taxes on these high-consumption or potentially negatively impactful goods and services, the government aims to reduce market demand and promote public health and social stability. For example, high taxes on health-damaging products such as tobacco and alcohol are intended to reduce smoking and drinking, while taxes on high-emission cars are intended to promote the use of environmentally friendly vehicles.

Scope of collection: In addition to common high-consumption goods such as tobacco, alcohol, and cars, the special consumption tax also covers some special services, such as casino operations, lotteries, dance halls, karaoke, and golf. These services are regarded as luxury or hedonistic consumption and are therefore included in the scope of collection of the special consumption tax.

5. Import and Export Duties

Tax objects:

All enterprises and individuals engaged in import and export business, including importing goods into the Vietnamese market or exporting Vietnamese goods to foreign markets, are required to pay import and export tariffs.

Detailed description:

Tax rate changes: The import and export tariff rates vary depending on the type of goods. The specific tax rate is usually set based on the type of goods, use, degree of processing and other relevant factors. The classification details of goods and the corresponding tariff rates are detailed in Vietnam’s import and export tariff catalogue. Enterprises need to refer to the catalogue to determine the taxes to be paid when importing or exporting goods.

Free Trade Agreement Preferences: Vietnam actively participates in multiple free trade agreements (FTAs), such as the ASEAN Free Trade Area Agreement (AFTA), the Trans-Pacific Partnership Agreement (CPTPP), the EU-Vietnam Free Trade Agreement (EVFTA), etc. These agreements usually provide preferential tariff treatment for goods between member countries. Through these agreements, eligible goods may enjoy lower or even zero tariffs, thereby reducing import costs or improving export competitiveness.

Import tax exemption: To promote the development of domestic industries, the Vietnamese government provides import tax exemption policies for certain key raw materials, equipment, machinery and goods used for production. These policies are aimed at reducing the production costs of enterprises and improving the overall competitiveness of Vietnam’s manufacturing industry. The scope of exemption usually covers machinery and equipment required for industrial production, high-tech products and specific raw materials required for industries encouraged by the state.

Export tariffs: Although most export commodities are exempt from export tariffs, certain natural resources and raw materials, such as minerals, timber, coal, etc., are usually subject to export tariffs. The purpose of levying export tariffs is to control the export of resource-based products, protect domestic resources, ensure supply to the domestic market, and avoid environmental problems caused by over-exploitation of natural resources.

6. Natural Resource Tax

Tax objects:

The natural resource tax applies to all companies that engage in the extraction of natural resources. These companies obtain resources through mining, logging, fishing, etc., and therefore need to pay the natural resource tax.

Detailed description:

Tax rate range: The tax rate of natural resource tax varies depending on the resource type and mining conditions, ranging from 1% to 35%. The difficulty of mining, market value and environmental impact of different resources are important factors in determining the tax rate. For example, rare minerals or high-value resources such as oil and natural gas are usually subject to higher tax rates, while general forest products or marine products may be subject to lower tax rates. The specific tax rate is usually adjusted regularly by the government based on the resource type, origin and market conditions.

Scope of application: Natural resource taxes apply to the extraction of various natural resources, including oil, natural gas, minerals, forest products, seafood, etc. The extraction of oil and natural gas is generally subject to higher tax burdens, not only because of their higher market value, but also because of their greater potential impact on the environment. The extraction of mineral resources is also included in the scope of natural resource taxation, while the extraction of forest products and seafood is taxed according to the renewability of resources and environmental protection requirements.

Policy purpose: The establishment of natural resource tax is aimed at promoting the rational use of natural resources and preventing over-exploitation and waste of resources. By levying taxes on mining activities, the government can increase the cost of resource utilization and make companies pay more attention to the sustainable management of resources. At the same time, the collected taxes provide an important source of fiscal revenue for the government. These funds are usually used to support projects such as environmental protection, resource management and infrastructure construction, thereby ensuring that resource development has a positive impact on society and the environment.

7. Property Tax

Tax objects:

Real estate tax applies to all land users and property owners, including individuals and businesses. Whether it is self-owned residential, commercial real estate, or leased land, the corresponding real estate tax must be paid according to the law.

Detailed description:

Non-agricultural land use tax: Currently, Vietnam imposes a use tax on non-agricultural land at a rate of 0.03% to 0.15%, depending on the purpose, location and size of the land. For commercial properties or land used for other non-agricultural purposes, higher rates are usually applicable, while residential land may be subject to lower rates.

Tax rate determination: The purpose and area of ​​land are key factors in determining the tax rate. For example, land used for commercial development usually applies a higher tax rate due to its higher economic returns, while land used for public services or residential purposes is subject to a relatively lower tax rate. In addition, the larger the land area, the higher the tax amount. This tax rate structure is intended to regulate the efficiency of land resource use through tax means and encourage the rational use of land.

Tax-free land: Certain land for specific purposes may enjoy tax exemptions, such as agricultural land. In order to support agricultural development and food production, the Vietnamese government usually implements tax incentives or tax exemptions for land used for agricultural production. This policy aims to reduce the burden on farmers, ensure national food security, and promote sustainable agricultural development.

Current status of property tax: Currently, Vietnam has not fully implemented property tax, that is, the policy of taxing houses themselves is still under discussion. Nevertheless, the government has begun to study and consider introducing property tax to regulate the real estate market and increase fiscal revenue. In the future, property tax may be levied based on the market value, use and economic conditions of the house, and the specific implementation time and details will be determined according to the legislative process.

8. Environmental Protection Tax

Tax objects:

Environmental protection tax is applicable to enterprises and individuals that produce or import products that have potential impact on the environment. This tax is aimed at products that may pollute or damage the environment during use, production or consumption.

Detailed description:

Main taxed products: Environmental protection tax is mainly applied to products such as oil, coal, plastic products, chemicals, etc. These products will produce greenhouse gases, pollutants or other harmful substances during combustion, use or disposal, causing pollution to the air, water and soil. Therefore, the government imposes environmental protection tax on these products to reduce their use and production and promote the implementation of environmental protection measures.

Tax calculation: Unlike other taxes, environmental protection taxes are usually calculated in absolute amounts, i.e., levied on the quantity of each unit of product. For example, petroleum products may be taxed a certain amount per liter, while coal is taxed per ton. This calculation method ensures the transparency and ease of operation of the tax, while also directly reflecting the environmental cost of the product.

Policy purpose: Environmental protection tax aims to encourage enterprises and consumers to switch to more environmentally friendly alternatives by increasing the cost of polluting products, reducing their use and production. Tax proceeds are usually used to support environmental protection projects, develop renewable energy, improve environmental quality and other fields to promote sustainable development of society. This policy tool not only has an economic impact on enterprises and individuals, but also promotes the improvement of environmental awareness at the social level.