With the advancement of the “Belt and Road Initiative” and the Regional Comprehensive Economic Partnership (RCEP), Chinese enterprises are accelerating their “going global” strategy. As Vietnam becomes an important investment destination in Southeast Asia, understanding and mastering the tax differences between China and Vietnam, as well as the corresponding compliance requirements, is particularly important. This article will conduct an in-depth analysis from ten aspects, including China-Vietnam tax policy comparison, various tax incentive measures, customs valuation, tax audit focus, and practical case analysis, to provide detailed and valuable tax service knowledge for multinational enterprises, helping them achieve greater success in the Vietnamese market.

China-Vietnam Tax System Comparison Analysis

Corporate Income Tax

1.Tax Rate Comparison

China: According to Article 4 of the Enterprise Income Tax Law of the People’s Republic of China, the corporate income tax rate is 25%. However, China also provides preferential tax rates for different types of enterprises:

• Small and micro-profitable enterprises: According to the Announcement No. 12 of 2021 by the Ministry of Finance and the State Taxation Administration, for small and micro-profitable enterprises with annual taxable income not exceeding 1 million yuan, the taxable income is reduced by 12.5% and taxed at a rate of 20%.
• High-tech enterprises: According to Article 28 of the Enterprise Income Tax Law, high-tech enterprises that need key support from the state are subject to a reduced tax rate of 15%.

Vietnam: Vietnam’s Enterprise Income Tax Law, revised in June 2020, stipulates that the standard corporate income tax rate is 20%. At the same time, Vietnam also provides various preferential tax rates:

• For enterprises investing in economically disadvantaged areas, a preferential tax rate of 17% can be enjoyed.
• High-tech enterprises can enjoy a preferential tax rate of 10% for 15 years.
• For small and micro enterprises with annual revenue not exceeding 20 billion VND (approximately 870,000 USD), a preferential tax rate of 17% applies.

2.Calculation of Taxable Income

China: According to Article 5 of the Enterprise Income Tax Law, taxable income = total revenue – non-taxable income – tax-exempt income – various deductions – allowed compensation for previous years’ losses. The main deductible items include:

• Reasonable expenses related to obtaining income.
• Charitable donations, but not exceeding 12% of the total annual profit.
• Advertising expenses and business promotion expenses, generally not exceeding 15% of the current year’s sales (operating) revenue.

Vietnam: Vietnam’s method of calculating taxable income is similar to China’s, but there are differences in specific regulations:

• According to Circular No. 78/2014/TT-BTC, taxable income = total revenue – tax-exempt income – deductible expenses + other taxable income.

Main deductible items include:

• Actual expenses related to production and business activities.
• Employee welfare expenses, not exceeding one month’s total salary of actual wages paid.
• Advertising and promotion expenses are generally fully deductible, but there are limits for certain specific industries.

3.Loss Carry-forward

China: Article 18 of the Enterprise Income Tax Law stipulates that losses incurred by enterprises in a tax year are allowed to be carried forward to subsequent years to offset income, but the carry-forward period shall not exceed 5 years.

Vietnam: Vietnam’s loss carry-forward policy is more lenient. According to Circular No. 78/2014/TT-BTC, enterprise losses can be continuously carried forward to offset future taxable income, with a maximum carry-forward period of 5 years. It’s worth noting that Vietnam allows loss offsetting between different projects within the same company.

4. Withholding Income Tax

China: According to Article 37 of the Enterprise Income Tax Law, non-resident enterprises deriving dividends, interest, rentals, royalties, and other income from sources within China shall pay withholding income tax at a rate of 10%. However, preferential rates can be enjoyed based on tax treaties.

Vietnam: Vietnam’s withholding income tax policy for non-resident enterprises is as follows: Dividends: 0%, Interest: 5%, Royalties: 10%.

Of course, these rates may be reduced due to bilateral tax treaties. For example, according to the China-Vietnam tax treaty, the withholding tax rate for royalties can be reduced to 10%.

5.Transfer Pricing

China: China’s transfer pricing regulations are mainly reflected in the “Administrative Measures for Special Tax Investigations, Adjustments and Mutual Agreement Procedures” (State Taxation Administration Announcement 2017 No. 6). Key points include:

• Preparation and submission of contemporaneous documentation.
• Filing of annual related party transaction reporting forms.
• Standards for enterprises subject to contemporaneous documentation: annual related party transaction amount exceeding 200 million RMB.

Vietnam: Vietnam’s transfer pricing regulations are mainly reflected in Decree No. 20/2017/ND-CP, with main contents including:

• Introduction of safe harbor rules: If an enterprise’s annual revenue is less than 50 billion VND and the total amount of related party transactions does not exceed 30 billion VND, it may be exempt from preparing transfer pricing documentation.
• Introduction of the “substance over form” principle.
• Requirements for preparing contemporaneous documentation and country-by-country reports.
• Stipulation of five factors for comparability analysis.

Through comparison, it can be seen that although the corporate income tax systems of China and Vietnam have many similarities, there are still significant differences in specific implementation details. When Chinese enterprises invest in Vietnam, they need to pay special attention to the following points:

• Fully utilize Vietnam’s tax incentive policies, especially for high-tech enterprises.
• Pay attention to Vietnam’s more lenient loss carry-forward policy and reasonably arrange enterprise operations.
• Closely monitor changes in Vietnam’s transfer pricing regulations to ensure compliance with related party transactions.
• Utilize the China-Vietnam tax treaty to reasonably reduce the burden of withholding income tax.

Enterprises should formulate reasonable tax planning schemes based on their own situations, maximizing tax benefits on the premise of legal compliance. At the same time, they should also closely monitor the latest changes in the tax policies of both countries and adjust strategies in a timely manner to cope with the complex and changing international tax environment.

Value Added Tax (VAT)

1. Tax Rate Structure

China: According to the Interim Regulations of the People’s Republic of China on Value Added Tax, China implements a three-tier VAT rate system: 13% (applicable to most goods and services), 9% (applicable to some necessities, agricultural products, etc.), 6% (applicable to modern service industries, etc.). In addition, there are 0% tax rate and tax exemption policies applicable to specific situations.

Vietnam: Vietnam’s VAT rate structure is relatively simple. According to the VAT Law No. 13/2008/QH12: 10% (standard rate, applicable to most goods and services), 5% (applicable to water supply, medical equipment, educational supplies, etc.), 0% (applicable to export goods and services). In addition, Vietnam also has tax exemption policies applicable to specific industries and goods.

2. Taxpayers

China: According to Article 1 of the Interim Regulations on Value Added Tax, units and individuals engaged in the sale of goods or provision of processing, repair and replacement services, and import of goods within the territory of China are taxpayers of value-added tax.

Vietnam: According to Vietnam’s VAT Law, organizations and individuals (including foreign organizations and individuals) engaged in the production and trading of goods and services are VAT taxpayers, except for small-scale taxpayers with annual revenue below 100 million VND.

3. Input Tax Credit

China: China implements a relatively comprehensive input tax credit system. According to Announcement No. 39 of 2019 by the Ministry of Finance and the State Taxation Administration, starting from April 1, 2019, the scope of deductible input tax has been further expanded to include input tax for domestic passenger transportation services.

Vietnam: Vietnam’s input tax credit system is relatively strict. According to Circular No. 219/2013/TT-BTC:

• Purchases over 20 million VND must be made through bank transfers.
• Certain specific expenses, such as employee welfare costs, are not allowed for input tax credit.

4.Invoice Management

China: China is promoting an electronic invoice system. According to Announcement No. 13 of 2020 by the State Taxation Administration, the electronic invoice management system has been fully implemented since December 21, 2020.

Vietnam: Vietnam has fully implemented an electronic invoice system since July 1, 2022, according to Decree No. 123/2020/ND-CP. This policy aims to improve tax management efficiency and reduce tax evasion.

Personal Income Tax (PIT)

1. Tax Rate Structure

China: According to the Individual Income Tax Law of the People’s Republic of China, China adopts a 7-level progressive tax rate system, ranging from 3% to 45%:

• 3%: For the part not exceeding 36,000 yuan
• 10%: For the part exceeding 36,000 yuan up to 144,000 yuan
• 20%: For the part exceeding 144,000 yuan up to 300,000 yuan
• 25%: For the part exceeding 300,000 yuan up to 420,000 yuan
• 30%: For the part exceeding 420,000 yuan up to 660,000 yuan
• 35%: For the part exceeding 660,000 yuan up to 960,000 yuan
• 45%: For the part exceeding 960,000 yuan

Vietnam: Vietnam’s personal income tax also adopts a progressive tax rate system. According to the Personal Income Tax Law No. 65/2013/QH13, it is divided into 7 levels:

• 5%: Annual income not exceeding 60 million VND
• 10%: 60 million to 120 million VND
• 15%: 120 million to 216 million VND
• 20%: 216 million to 384 million VND
• 25%: 384 million to 624 million VND
• 30%: 624 million to 960 million VND
• 35%: Exceeding 960 million VND

2. Determination of Tax Residency

China: According to Article 1 of the Individual Income Tax Law, individuals who have a domicile in China, or individuals who do not have a domicile but have resided in China for a total of 183 days or more in a tax year, are considered resident individuals. Resident individuals are subject to individual income tax on their income derived from sources within and outside China.

Vietnam: Vietnam’s criteria for determining tax residency are similar but more detailed. According to Law No. 65/2013/QH13, an individual is considered a tax resident if they meet any of the following conditions:

• Renting a residence in Vietnam for 90 days or more.
• Staying in Vietnam for 183 days or more (within a consecutive 12-month period).
• Having a regular residence in Vietnam.

3. Pre-tax Deduction Items

China: China’s Individual Income Tax Law stipulates several special additional deductions, including: children’s education, continuing education, major medical expenses, housing loan interest or housing rent, elderly care. In addition, there are deductions for social insurance contributions such as basic pension insurance, basic medical insurance, and unemployment insurance.

Vietnam: Vietnam’s pre-tax deduction items are relatively simple:

• Personal exemption: 11 million VND per month.
• Dependent exemption: 4.4 million VND per month for each dependent.
• Mandatory contributions to social insurance, health insurance, and unemployment insurance.
• Certain charitable donations.

4. Filing Method

China: China implements an annual settlement and payment system. According to Article 11 of the Individual Income Tax Law, resident individuals who obtain comprehensive income should file tax returns between March 1 and June 30 of the following year after obtaining the income.

Vietnam: Vietnam’s personal income tax filing is relatively flexible. According to Law No. 65/2013/QH13:

• Annual settlement should be completed within 90 days after the end of the year.
• Employers withhold and pay taxes on a monthly or quarterly basis.
• Individuals can choose to file quarterly or annually.

Through comparison, it can be seen that while China and Vietnam have some similarities in their value-added tax and personal income tax systems, there are significant differences in specific implementation details. For Chinese companies investing or working in Vietnam, the following points need special attention:

• Vietnam’s VAT rate structure is relatively simple, but the regulations for input tax credit are stricter. Enterprises need to improve internal management to ensure compliance.
• Vietnam’s personal income tax rates are relatively low, but there are fewer pre-tax deduction items, which may increase the actual tax burden for high-income groups.
• Vietnam is promoting an electronic invoice system, and enterprises need to update their financial systems in a timely manner to adapt to the new policy.
• When dispatching personnel, it is necessary to fully consider the tax residency determination criteria of both countries and reasonably arrange working time to optimize personal income tax burden.
• Enterprises should closely monitor changes in Vietnam’s tax policies, especially new regulations related to the digital economy, to cope with the constantly evolving international tax environment.

Enterprises and individuals should formulate reasonable tax planning schemes based on their own situations to optimize tax burdens while ensuring compliance. At the same time, it is advisable to engage professionals familiar with the tax laws of both countries to ensure tax compliance and maximize tax benefits.

Comparative Analysis of Tax Incentive Policies for Foreign-Invested Enterprises in China and Vietnam

Tax incentive policies have a significant impact on the investment decisions of multinational companies. The following will focus on comparing and analyzing the tax incentive policies for foreign-invested enterprises in China and Vietnam, especially the preferential measures for high-tech enterprises and economic zones.

High-Tech Enterprise Preferential Policies

1. China’s High-Tech Enterprise Incentives

According to the Enterprise Income Tax Law of the People’s Republic of China and its implementation regulations, as well as the “Administrative Measures for the Recognition of High and New Technology Enterprises” (Guo Ke Fa Huo [2016] No. 32) jointly issued by the Ministry of Science and Technology, Ministry of Finance, and State Taxation Administration, China provides the following incentives for high-tech enterprises:

• Accelerated depreciation of fixed assets: Accelerated depreciation is allowed for instruments and equipment used for R&D.
• Tax rate preference: A reduced corporate income tax rate of 15%.
• R&D expense super deduction: For R&D expenses incurred by enterprises in R&D activities, if they have not formed intangible assets and are included in the current profit and loss, they can be deducted at 75% of the actual amount incurred in addition to the actual deduction; if intangible assets are formed, they can be amortized at 175% of the cost of intangible assets before tax.

2. Vietnam’s High-Tech Enterprise Incentives

Vietnam’s preferential policies for high-tech enterprises are mainly reflected in the revised Investment Law of 2014 and the Enterprise Income Tax Law revised in 2020:

• Land rent reduction: High-tech enterprises can enjoy land rent reduction for up to 15 years.
• Tax rate preference: High-tech enterprises can enjoy a preferential tax rate of 10% for 15 years. For particularly significant high-tech projects, it can be extended to 30 years.
• Tax exemption and reduction: Corporate income tax exemption for 4 years from the first profitable year, followed by a 50% reduction for the next 9 years.
• Import tax exemption: Import of equipment, raw materials, etc., for R&D purposes can be exempt from import tax.

Economic Zone Preferential Policies

1. China’s Economic Zone Incentives

China’s special economic zones include Shenzhen, Zhuhai, Shantou, Xiamen, Hainan, etc. According to documents such as the “Opinions of the State Council on Supporting Shenzhen in Building a Pilot Demonstration Area of Socialism with Chinese Characteristics” (Guo Fa [2019] No. 18), the main preferential policies include:

• Corporate income tax incentives: High-tech enterprises established in special zones that need key support from the state are subject to a reduced corporate income tax rate of 15%.
• Personal income tax incentives: For overseas high-end talents and urgently needed talents working in the Greater Bay Area, the part of their personal income tax burden exceeding 15% isexempted.
• Capital account liberalization: Pilot programs for free flow of cross-border capital are implemented in special zones.
• Land policy: Priority is given to land use for major projects in special zones.

2. Vietnam’s Economic Zone Incentives

Vietnam’s special economic zones mainly include economic zones, export processing zones, and high-tech zones. According to the Investment Law revised in 2020 and related decrees, the main preferential policies include:

• Corporate income tax incentives: For projects in economic zones, a preferential tax rate of 10% can be enjoyed for 15 years; for particularly significant projects, it can be extended to 30 years. Tax exemption for the first 4 years, followed by a 50% reduction for the next 9 years.

• Import tax and VAT incentives: Import goods for fixed asset formation are exempt from import tax. For enterprises located in non-tariff zones, import of raw materials for export production is exempt from import tax and VAT.

• Land rent reduction: Land rent reduction for up to 15 years can be enjoyed.
• Simplified administrative procedures: Economic zone management committees can directly approve most investment projects, simplifying administrative procedures.

China-Vietnam Policy Comparison Analysis

Tax Rate Incentive Strength: China offers a preferential tax rate of 15% for high-tech enterprises, while Vietnam offers 10%, indicating Vietnam’s incentive is stronger. Vietnam’s incentive period can reach up to 30 years, far exceeding China’s policy.

Tax Exemption Period: Vietnam provides a “4-year exemption and 9-year half reduction” policy, while China currently does not have a universal tax exemption policy for high-tech enterprises. Vietnam’s policy is more favorable for start-up enterprises, significantly reducing the initial tax burden.

R&D Support: China supports enterprise R&D through R&D expense super deduction and accelerated depreciation of fixed assets. Vietnam mainly supports R&D activities through import tax exemptions.

Economic Zone Policies: China’s economic zone policies focus more on institutional innovation and comprehensive reform. Vietnam’s economic zone policies emphasize more on direct incentives such as tax and land.

Personal Income Tax Incentives: China’s implementation of personal income tax incentives for overseas high-end talents in the Greater Bay Area reflects the emphasis on talent. Vietnam currently does not have special personal income tax incentive policies for economic zones.

Q1: What implications does this have for enterprises in terms of decision-making?

A1: In terms of policy selection, enterprises need to choose the most suitable investment location and policy combination based on their own situation. For example, R&D-intensive enterprises might be more suitable to choose China, while labor-intensive manufacturing might be more suitable to choose Vietnam.

In long-term planning, considering the long-term nature of Vietnam’s incentive policies, enterprises need to have a long-term vision when making investment decisions and formulate long-term development strategies.

In compliance awareness, although both countries provide incentive policies, enterprises still need to pay attention to compliant operations to avoid losing preferential qualifications due to violations.

In policy tracking, the incentive policies of both countries are constantly adjusting, and enterprises need to continuously monitor policy changes and adjust strategies in a timely manner.

In comprehensive consideration, in addition to tax incentives, factors such as labor costs, market potential, and industrial chain support should also be considered to make comprehensive investment decisions.

Comparative Analysis of Transfer Pricing Regulations between China and Vietnam

Multinational enterprises face increasing challenges in the field of international taxation, with transfer pricing issues being particularly prominent. The following will focus on analyzing Vietnam’s transfer pricing regulations, including related party transaction reporting and contemporaneous documentation requirements, and compare them with relevant Chinese regulations.

Overview of Vietnam’s Transfer Pricing Regulations

Vietnam’s transfer pricing regulations are mainly based on the following legal documents:

1. Decree No. 20/2017/ND-CP (issued on February 24, 2017).
2. Circular No. 41/2017/TT-BTC (issued on April 28, 2017).
3. Decree No. 18/2021/ND-CP (issued on March 11, 2021, amending Decree No. 20/2017/ND-CP).

These regulations comprehensively elaborate on Vietnam’s transfer pricing policies, including definitions of related parties, transfer pricing methods, documentation requirements, etc.

Related Party Transaction Reporting Requirements

1. Vietnam’s Requirements

According to Decree No. 20/2017/ND-CP and Circular No. 41/2017/TT-BTC:

• Reporting time: Taxpayers must submit related party transaction declaration forms (Form 01) at the same time as the annual corporate income tax declaration.
• Reporting content: Related party information, types and amounts of related party transactions, adopted transfer pricing methods, profit level indicators.
• Exemption conditions: Enterprises with annual revenue below 50 billion VND (about 2.2 million USD) and total related party transactions not exceeding 30 billion VND (about 1.3 million USD) may be exempt from preparing transfer pricing documentation, but still need to submit related party transaction declaration forms.

2. China’s Requirements

According to Announcement No. 42 of 2016 by the State Taxation Administration:

• Reporting time: To be conducted simultaneously with the annual corporate income tax declaration.
• Reporting content: Annual related business transaction reporting forms, country-by-country reports (if applicable).
• Exemption conditions: Enterprises that only have domestic related party transactions may be exempt from preparing contemporaneous documentation, but still need to fill in the annual related business transaction reporting forms.

Contemporaneous Documentation Requirements

1. Vietnam’s Requirements

Vietnam’s contemporaneous documentation requirements are divided into three levels: master file, local file, and country-by-country report:

• Master file: Describes the global business situation of the multinational enterprise group.
• Local file: Detailed description of the local enterprise’s related party transactions.
• Country-by-country report: Applicable to multinational enterprise groups with ultimate parent company annual revenue exceeding 18 trillion VND (about 785 million USD).

Specific requirements:

• Preparation time: Contemporaneous documentation should be completed within 90 days after the end of the fiscal year.
• Submission time: To be submitted within 15 working days upon request by tax authorities.
• Language: Can be prepared in Vietnamese or English, but if English is used, a Vietnamese translation must be provided within 15 working days upon request by tax authorities.

2.China’s Requirements

According to Announcement No. 42 of 2016 by the State Taxation Administration:

• Master file: Describes the overall situation of the multinational enterprise group.
• Local file: Detailed description of the enterprise’s related party transactions.
• Special issue file: Documentation for special issues such as cost sharing agreements and thin capitalization.
• Country-by-country report: Applicable to multinational enterprise groups with consolidated revenue exceeding 5.5 billion RMB in the previous accounting year of the ultimate parent company.

Specific requirements:

• Preparation time: The master file should be completed within 12 months after the end of the fiscal year of the ultimate holding company of the group; local files and special issue files should be completed by June 30 of the year following the occurrence of related party transactions.
• Submission time: To be provided within 30 days upon request by tax authorities.
• Language: Must be in Chinese.

Transfer Pricing Methods

1. Methods Recognized by Vietnam

Vietnam’s regulations recognize the five basic methods in the OECD Transfer Pricing Guidelines: Comparable Uncontrolled Price Method (CUP), Resale Price Method (RPM), Cost Plus Method (CPM), Transactional Net Margin Method (TNMM), Profit Split Method (PSM).

2. Methods Recognized by China

China also recognizes the above five methods and adds in the “Administrative Measures for Special Tax Investigations, Adjustments and Mutual Agreement Procedures” (State Taxation Administration Announcement 2017 No. 6): Other methods that comply with the arm’s length principle.

It is worth noting that China especially emphasizes the “value contribution” principle, requiring full consideration of the enterprise’s contribution to value creation when allocating profits.

Main Differences Analysis

Reporting threshold: Vietnam sets clear revenue and related party transaction amount thresholds. China does not set specific amount thresholds but provides exemptions for enterprises that only have domestic related party transactions.

Contemporaneous documentation preparation time: Vietnam requires completion within 90 days after the end of the fiscal year. China has different requirements for different types of documents, with the latest not exceeding June 30 of the following year.

Submission time: Vietnam requires submission within 15 working days. China provides a 30-day submission period. Language requirements: Vietnam allows the use of English but requires Vietnamese translation. China strictly requires the use of Chinese. Special issue file: China requires the preparation of special issue files. Vietnam does not have similar explicit requirements. Transfer pricing methods: The methods recognized by both countries are basically the same. China especially emphasizes the “value contribution” principle.

Implications for Enterprises

Compliance awareness: Both Vietnam and China are strengthening transfer pricing supervision, and enterprises need to enhance compliance awareness and establish sound internal control systems.

Documentation preparation: Considering the differences in documentation requirements between the two countries, multinational enterprises need to develop a unified documentation preparation strategy that can adapt to local requirements.

Language consideration: In Vietnam, documents can be prepared in English first, but time should be reserved for Vietnamese translation. Method selection: Although the methods recognized by both countries are similar, the preferences and practices of local tax authorities should be considered in specific applications.

Value chain analysis: Especially in China, enterprises need to fully analyze and document their contributions in the value chain. Proactive communication: Considering the emphasis on transfer pricing investigations by tax authorities in both countries, enterprises may consider proactive communication with tax authorities and apply for Advance Pricing Arrangements (APA) when necessary.

Summary: Although the transfer pricing regulations of Vietnam and China are consistent with the OECD Guidelines in the overall framework, there are still many differences in specific requirements. When operating in both countries, multinational enterprises need to fully understand and comply with these regulations and establish a sound transfer pricing management system. At the same time, with the changes in the global tax environment, especially the advancement of BEPS 2.0, the transfer pricing regulations of both countries may face further adjustments. Enterprises need to closely monitor policy trends and adjust strategies in a timely manner to cope with the increasingly complex international tax environment.

In-Depth Analysis and Practical Application of China-Vietnam Tax Treaty

To avoid double taxation and promote bilateral investment and trade between China and Vietnam, the two countries have signed a tax treaty. The following will analyze in depth the main provisions of the China-Vietnam tax treaty and explain how to reasonably use treaty benefits to avoid double taxation.

Overview of China-Vietnam Tax Treaty

China and Vietnam signed the “Agreement between the Government of the People’s Republic of China and the Government of the Socialist Republic of Vietnam for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income” (hereinafter referred to as the “China-Vietnam Tax Treaty”) on May 17, 1995, which came into effect on October 18, 1996. The main purposes of the treaty include:

• Avoiding double taxation
• Preventing tax discrimination
• Eliminating tax barriers and promoting economic and trade exchanges
• Strengthening tax cooperation and preventing tax evasion

Analysis of Main Provisions

1. Resident (Article 4)

• Definition: A person who, under the laws of the resident state, is liable to tax therein by reason of his domicile, residence, place of head office or any other criterion of a similar nature. Handling of dual residence issues: For individuals, determination is made through permanent home, center of vital interests, etc.; for enterprises, it is determined through the place of effective management.

• Practical significance: Determines the applicable subjects of the tax treaty, affecting the determination of the source of income and the allocation of taxation rights.

2.Permanent Establishment (Article 5)

Definition: A fixed place of business through which the business of an enterprise is wholly or partly carried on, including a place of management, a branch, an office, a factory, a workshop, a mine, etc. A building site, construction, assembly or installation project, or supervisory activities in connection therewith, but only if such site, project or activities last for a period of more than six months.

Practical significance: Determines whether the host country has the right to tax enterprise profits, affecting the tax cost of enterprises operating overseas.

3. Business Profits (Article 7)

Main provisions: Profits of an enterprise shall be taxable only in its resident state in principle. If an enterprise carries on business in the other country through a permanent establishment, the other country may tax the profits attributable to that permanent establishment.

Practical significance: Clarifies the principle of profit taxation rights allocation and emphasizes the importance of the permanent establishment concept in international taxation.

4. Dividends, Interest, and Royalties (Articles 10, 11, 12)

• Dividends: May be taxed in the paying state, but if the beneficial owner is a resident of the other state, the tax rate should not exceed: 5% for companies holding at least 25% of shares; 10% in other cases.
• Interest: May be taxed in the paying state, but if the beneficial owner is a resident of the other state, the tax rate should not exceed 10%.
• Royalties: May be taxed in the paying state, but if the beneficial owner is a resident of the other state, the tax rate should not exceed 10%.
• Practical significance: Reduces the tax cost of cross-border investment and provides tax incentives for enterprises’ cross-border financing and technology transfer.

5. Capital Gains (Article 13)

Main provisions: Gains from the alienation of immovable property may be taxed in the state where the property is situated.

Gains from the alienation of shares of a company, the property of which consists directly or indirectly principally of immovable property, may be taxed in the state where the property is situated. Gains from the alienation of business property of a permanent establishment may be taxed in the state where the permanent establishment is situated.

Practical significance: Affects tax planning for enterprise restructuring and asset disposal, and attention needs to be paid to the potential tax risks of indirect transfer of overseas immovable property.

6. Methods for Elimination of Double Taxation (Article 23)

China adopts the credit method: In the tax levied in China, deduct the tax paid in Vietnam. For dividends paid by a Vietnamese company to a Chinese company, if the Chinese company owns at least 10% of the shares of the Vietnamese company, the tax paid by the Vietnamese company on the income from which the dividends are paid may be credited.

Vietnam also adopts the credit method: In the tax levied in Vietnam, deduct the tax paid in China.

Practical significance: Effectively avoids double taxation; enterprises need to plan reasonably to maximize tax credit benefits.

How to Reasonably Utilize Treaty Benefits

1. Reasonable Establishment of Permanent Establishment

Strategies:

• Assess business needs and carefully establish permanent establishments.
• Consider conducting business through independent agents to avoid constituting a permanent establishment.
• Pay attention to the duration management of engineering projects to avoid exceeding the 6-month period.

Case: Chinese construction company A undertakes engineering projects in Vietnam. To avoid constituting a permanent establishment, Company A subcontracts the project into multiple sub-projects, each lasting no more than 6 months, and ensures that each sub-project is relatively independent.

2. Optimize Payments of Dividends, Interest, and Royalties

Strategies:

• Reasonably arrange shareholding ratios to enjoy lower withholding tax rates.
• Consider optimizing interest payments through appropriate financing structures.
• Carefully plan royalty payments to ensure compliance with beneficial owner requirements.

Case: Chinese company B plans to establish a subsidiary in Vietnam. Considering the treaty benefits, Company B decides to hold more than 25% of the shares of the Vietnamese subsidiary to enjoy the preferential dividend withholding tax rate of 5%.

3. Reasonable Application of Capital Gains Provisions

Strategies:

• Assess potential tax impacts before disposing of immovable property or equity.
• Consider optimizing the tax effect of asset disposal through appropriate holding structures.
• Pay attention to the tax risks of indirect transfers, consider pre-filing or consultation when necessary.

Case: Chinese company C intends to sell its subsidiary in Vietnam. Given that the subsidiary’s main assets are immovable property in Vietnam, Company C decides to directly transfer the subsidiary’s shares rather than transferring its upper-level holding company to avoid being viewed by Vietnamese tax authorities as circumventing the tax treaty.

4. Maximize Tax Credits

Strategies:

• Comprehensively understand and collect proof of taxes paid abroad.
• Reasonably arrange the repatriation time of foreign income.
• Consider applying indirect credits to maximize credit benefits.

Case: Chinese company D receives dividend income from its Vietnamese subsidiary. Company D ensures it obtains tax payment certificates issued by Vietnamese tax authorities and applies for both direct credit (dividend withholding tax) and indirect credit (corporate income tax paid by the Vietnamese subsidiary on related profits) when declaring foreign income in China.

5. Focus on Beneficial Owner Status

Strategies:

• Ensure that entities applying for treaty benefits have substantial business activities.
• Improve corporate governance structure, strengthening decision-making and risk-bearing capabilities.
• Retain sufficient documentation proving beneficial owner status.

Case: Chinese company E pays royalties to a Vietnamese company through a Hong Kong company. To ensure eligibility for China-Vietnam tax treaty benefits, Company E directly signs contracts with and pays fees to the Vietnamese company, avoiding transit through the Hong Kong company to meet beneficial owner requirements.

Points to Note

Correct interpretation of treaty provisions: Combine with OECD Model Tax Convention and its commentary, referring to relevant regulations and practices of tax authorities in both countries.

Compliance with domestic laws: The application of treaty benefits still needs to meet relevant domestic law requirements. Pay attention to possible differences in certain concepts between the treaty and domestic laws.

Consideration of anti-avoidance rules: Be cautious of treaty abuse behaviors and pay attention to the application of general anti-avoidance provisions in both countries.

Meeting procedural requirements: Timely fulfill treaty benefit application and filing procedures, and prepare sufficient supporting documentation.

Utilization of dispute resolution mechanisms: Understand and initiate mutual agreement procedures when necessary, and consider proactive dispute prevention mechanisms such as Advance Pricing Arrangements (APA).

Summary: The China-Vietnam tax treaty provides important tax benefits and protection for enterprises of both countries. When utilizing treaty benefits, enterprises should formulate reasonable tax planning schemes based on their own business characteristics and development strategies while complying with laws and regulations. At the same time, given the constant changes in the international tax environment, especially the ongoing impact of the BEPS action plan, enterprises also need to closely monitor the latest developments in tax policies of both countries and adjust strategies in a timely manner to achieve a balance between tax compliance and tax burden optimization.

Vietnam Customs Valuation Rules and Considerations for China-Vietnam Trade

In international trade, customs valuation is a key factor in determining import duties and other taxes on imported goods. For cross-border enterprises trading with Vietnam, understanding Vietnam’s customs valuation rules is crucial. The following will introduce Vietnam’s customs valuation rules in detail, with special notes on considerations for China-Vietnam trade.

Vietnam Customs Valuation Legal Framework

Vietnam’s customs valuation rules are mainly based on the following legal documents:

• Customs Law (No. 54/2014/QH13, passed on June 23, 2014).
• Decree on Implementation of the Customs Law (Decree No. 08/2015/ND-CP, issued on January 21, 2015).
• Circular on Customs Valuation Guidelines (Circular No. 39/2015/TT-BTC, issued on March 25, 2015).

These regulations comprehensively elaborate on Vietnam’s customs valuation policies, including valuation methods and declaration requirements. It’s worth noting that Vietnam’s customs valuation rules basically follow the World Trade Organization (WTO) “Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994” (referred to as the “Valuation Agreement”).

Vietnam Customs Valuation Methods

Vietnam Customs adopts the following six valuation methods, with their order of application consistent with the WTO Valuation Agreement: Transaction Value Method, Transaction Value of Identical Goods Method, Transaction Value of Similar Goods Method, Deductive Value Method, Computed Value Method, Fall-back Method.

1.Transaction Value Method: This is the primary valuation method, referring to the price actually paid or payable by the buyer to the seller for the imported goods, plus certain statutory adjustments. Key points:

• The price actually paid or payable must be supported by reliable written evidence.
• There should be no special relationship between the buyer and seller, or the special relationship does not influence the price.
• There should be no restrictions on the use or disposition of the goods that affect the price.

2.Transaction Value of Identical Goods Method: When the transaction value method cannot be used, customs will refer to the transaction value of identical goods imported to Vietnam. Key points:

• Identical goods should be exported to Vietnam at or about the same time (not exceeding 90 days).
• The commercial level and quantity level should be comparable.

3. Transaction Value of Similar Goods Method: If identical goods cannot be found, refer to the transaction value of similar goods imported to Vietnam. Key points:

• Similar goods should have similar characteristics and component materials.
• They should be capable of performing the same functions and be commercially interchangeable.

4. Deductive Value Method: Determine the customs value based on the selling price of the goods in the Vietnamese domestic market, deducting relevant expenses and profits.

5. Computed Value Method: Calculate the price of goods based on production costs, profits, and general expenses.

6. Fall-back Method: When the above methods cannot be used, customs will use reasonable methods to determine the customs value.

Considerations for China-Vietnam Trade

1. Handling of Related Party Transactions

In China-Vietnam trade, transactions between related enterprises are common. In such cases:

• Vietnam Customs will focus on examining whether the transaction price is affected by the special relationship.
• Enterprises need to prepare sufficient documentation to prove that the transaction price conforms to the arm’s length principle.
• It is recommended to retain price information of comparable unrelated transactions during the same period for customs verification.

2. Royalties and License Fees

For transactions involving technology transfer, brand use, etc.:

• Vietnam Customs usually requires royalties to be included in the customs value.
• Enterprises need to clearly distinguish between the price of goods and royalties, and provide relevant contracts and payment proofs.

3. Goods Discounts

Various forms of discounts are common in China-Vietnam trade: Vietnam Customs is relatively strict in recognizing discounts, usually only accepting discounts directly reflected on invoices. Discounts given after the fact may not be recognized. It is recommended to clearly agree on discounts at the time of transaction and note them on invoices.

4. Exchange Rate Issues

Since the currencies of both China and Vietnam are not freely convertible:

• Vietnam Customs uses exchange rates published by the State Bank of Vietnam for conversion.
• Enterprises need to consider exchange rate fluctuation risks when pricing, and may adopt hedging measures if necessary.

5. Processing Trade

For goods in processing trade: Vietnam implements a bonded policy for processing trade, but valuation of raw materials is still important. Enterprises need to establish a sound cost accounting system to accurately distinguish between raw material value and processing fees.

6. Declaration Document Requirements

Vietnam Customs has relatively strict requirements for declaration documents:

• Commercial invoices must detail the name, specifications, quantity, unit price, and total price of the goods.
• For machinery and equipment, detailed packing lists and technical specifications are usually required.
• All documents are required to be in Vietnamese in principle. If other languages are used, Vietnamese translations need to be provided.

7. Advance Ruling System

Vietnam Customs implements an advance ruling system: Enterprises can apply to customs for advance rulings on complex or controversial valuation issues. It is recommended that multinational enterprises fully utilize this system to eliminate potential valuation disputes in advance.

Suggestions for Enterprises

Document Management: Maintain complete transaction documents, including contracts, invoices, payment vouchers, etc. For related party transactions, prepare transfer pricing documentation to prove the reasonableness of transaction prices.

Internal Control: Establish a sound pricing management system to ensure the consistency and explainability of transaction prices. Regularly review pricing policies to ensure compliance with market principles.

Proactive Communication: Maintain good communication with Vietnam Customs, consider pre-consultation for complex issues. Engage local tax advisors when necessary to assist in handling customs valuation issues.

Continuous Learning: Closely monitor changes in Vietnam’s customs policies and adjust compliance strategies in a timely manner. Participate in relevant training to improve professional knowledge of customs valuation.

Summary: Although Vietnam’s customs valuation rules basically follow the WTO framework, they still have their particularities in specific implementation. When conducting trade with Vietnam, multinational enterprises need to fully understand these rules, establish sound internal control systems to ensure the accuracy and compliance of customs declarations. At the same time, with the implementation of the Regional Comprehensive Economic Partnership (RCEP), economic and trade exchanges between China and Vietnam are expected to further deepen. Enterprises should plan ahead, prepare for customs valuation management in advance to lay a foundation for larger-scale trade exchanges.

Key Areas of Vietnam Tax Audits and Response Strategies

As foreign investment continues to increase, Vietnamese tax authorities are also intensifying their efforts in tax collection and administration. Understanding the hot issues that Vietnamese tax authorities focus on is crucial for enterprises operating in Vietnam. The following will analyze in depth the key areas of Vietnamese tax audits and provide corresponding response strategies.

Deduction of Management Fees

1. Tax Authority Focus Points

Vietnamese tax authorities have consistently maintained a high level of attention on the deduction of management fees, mainly including the following aspects:

• Authenticity and necessity of expenses.
• Relevance to income.
• Whether there are sufficient supporting documents.
• Whether it conforms to the arm’s length principle.
• Whether it exceeds statutory limits.

2. Typical Cases

Case 1: A foreign-invested enterprise deducted a large amount of management consulting fees in its annual tax settlement, but was unable to provide detailed service content and outcome reports, resulting in full adjustment by the tax authorities.

Case 2: A manufacturing company allocated part of its management fees incurred outside Vietnam to its Vietnamese subsidiary. Due to the lack of reasonable allocation standards and detailed calculation processes, it was partially disallowed by the tax authorities.

3. Legal Basis

According to Circular No. 78/2014/TT-BTC, expenses incurred by enterprises must meet the following conditions to be deductible before tax: actually related to the enterprise’s income-generating business activities, have legal invoices and documents, and for payments exceeding 20 million VND, there must be proof of non-cash payment.

4. Response Strategies

Establish sound internal control systems to ensure the authenticity and necessity of expenses; retain detailed service contracts, work outcome reports, and other supporting documents; for intra-group management fee allocations, develop reasonable allocation standards and retain detailed calculation processes; pay attention to Vietnam’s regulations on deduction limits for specific expenses, such as advertising and promotion expenses not exceeding 15% of total deductible expenses.

Royalties

1.Tax Authority Focus Points

Royalties have always been a focus of Vietnamese tax authority audits, mainly concerning: Reasonableness and necessity of fee payments; Whether pricing conforms to the arm’s length principle; Whether withholding tax obligations have been fulfilled; Whether relevant approvals for technology transfer have been obtained.

2. Typical Cases

Case 1: A multinational company charged its Vietnamese subsidiary for brand usage fees. The tax authorities questioned the high fee standard and required the enterprise to provide comparable cases from the same industry.

Case 2: A foreign-invested enterprise paid software usage fees but was unable to provide proof of actual software use, resulting in the tax authorities disallowing the expense deduction.

3. Legal Basis

According to Decree No. 20/2017/ND-CP and Circular No. 41/2017/TT-BTC: Royalties must conform to the arm’s length principle, technology transfer contracts need to be registered with the science and technology department, and 10% withholding tax needs to be withheld and paid when paying royalties to non-residents.

4. Response Strategies

Prepare detailed royalty pricing documentation, including comparability analysis and selection of pricing methods; ensure timely registration of technology transfer contracts with relevant departments; retain proof documents of actual patent rights use, such as operation manuals, training records, etc.; timely fulfill withholding tax obligations to avoid being viewed as illegal profit transfer.

Related Party Transactions

1. Tax Authority Focus Points

With the advancement of the BEPS action plan, Vietnamese tax authorities’ scrutiny of related party transactions has become increasingly strict, focusing on: Completeness and timeliness of transfer pricing documentation. Fairness of related party transaction prices; Whether there is profit shifting behavior; Whether function, risk, and profit allocation match.

2. Typical Cases

Case 1: A manufacturing enterprise has been consistently loss-making but continues to expand production scale. The tax authorities suspected it of transferring profits through related party purchases and sales.

Case 2: A foreign-invested enterprise paid large service fees to its overseas related party but was unable to provide evidence of the substantive nature of the services. It was viewed as profit shifting by the tax authorities and adjustments were made.

3. Legal Basis

According to Decree No. 20/2017/ND-CP: Enterprises with annual related party transaction amounts exceeding specific thresholds need to prepare contemporaneous documentation, introduce requirements for other reports, and strengthen the application of the substance-over-form principle.

4. Response Strategies

Timely prepare complete transfer pricing contemporaneous documentation; conduct functional and risk analysis for significant related party transactions to ensure reasonable profit allocation; consider applying for Advance Pricing Arrangements (APA) to lock in related party transaction pricing methods in advance; retain proof documents of the substantive nature of related party transactions, such as service outcome reports, technical documentation, etc.

Permanent Establishment Determination

1. Tax Authority Focus Points

With the development of cross-border e-commerce and the digital economy, Vietnamese tax authorities are now more cautious in determining permanent establishments: Reasonableness of profit attribution to permanent establishments; Whether a substantive permanent establishment is constituted; Whether foreign enterprises constitute permanent establishments through agents; Time calculation for project-type permanent establishments.

2. Typical Cases

Case 1: A multinational company set up a representative office in Vietnam and actually carried out some commercial activities. It was determined by the tax authorities to constitute a permanent establishment and had to pay additional taxes.

Case 2: An engineering company undertook multiple projects in Vietnam. Although no single project exceeded 183 days, the tax authorities combined the time of multiple related projects and determined it constituted a permanent establishment.

3. Legal Basis

According to Vietnam’s Tax Administration Law and relevant tax treaties: Fixed place of business, construction site or assembly project exceeding 6 months can constitute a permanent establishment; Habitual conclusion of contracts without compensation rights through non-independent agents can constitute a permanent establishment; Determination of permanent establishments for the digital economy is gradually being improved.

4. Response Strategies

Carefully plan commercial activities in Vietnam to avoid unintentionally constituting permanent establishments; pay attention to the boundaries of representative office activities, strictly adhere to the prohibition of direct business activities; for project-type businesses, reasonably arrange project execution time, consider operating through local subsidiaries when necessary. Retain detailed project documentation, including personnel dispatch records, work content descriptions, etc.

VAT Refunds

1. Tax Authority Focus Points

VAT refunds have always been a key area of tax audits, mainly focusing on: Authenticity and compliance of refund applications; Authenticity and legality of invoices; Actual flow of exported goods; Whether there is fraudulent behavior in obtaining refunds.

2. Typical Cases

Case 1: A trading company applied for a large VAT refund. During on-site verification, the tax authorities found that some purchased goods did not exist, rejected the refund application, and imposed penalties.

Case 2: Some export sales of a manufacturing enterprise were found to actually flow into the domestic market. The tax authorities reclaimed the already refunded VAT and added late payment fees.

3. Legal Basis

According to Circular No. 219/2013/TT-BTC and subsequent amendments: Clarifies the applicable tax rates for various goods and services, stipulates conditions and procedures for VAT refunds, and strengthens the management of VAT refunds for specific industries (such as precious metals, natural resources).

4. Response Strategies

Establish sound internal control systems to ensure the authenticity and compliance of all transactions; properly maintain all original documents, including contracts, invoices, customs documents, etc.; for export businesses, retain complete proof documents of goods flow; consider engaging professional institutions to conduct internal audits before refund applications to identify potential risks.

Summary: The focus areas of Vietnamese tax audits are constantly evolving, targeting new economic situations and international tax development trends. Enterprises should raise tax compliance awareness, establish sound internal control systems, and maintain good communication with tax authorities. At the same time, given the complexity and frequent changes of Vietnamese tax laws, it is recommended that enterprises conduct regular tax health checks and seek assistance from professional advisors when necessary to minimize tax risks and achieve legal and compliant operations.

Case Analysis: Typical Tax Issues Encountered by Multinational Enterprises in Vietnam and Solutions

Multinational enterprises operating in Vietnam often encounter tax issues. The following will analyze some typical cases in detail, combining relevant Vietnamese tax regulations to provide in-depth analysis of problems that enterprises may encounter in practical operations and corresponding solutions.

Case One: Exchange Rate Fluctuation Issues in Corporate Income Tax Declaration

Background: A Chinese electronic manufacturing company established a subsidiary in Vietnam, mainly engaged in the export of components. As its parent company uses US dollars (USD) as the settlement currency, while the Vietnamese subsidiary must use Vietnamese dong (VND) for financial statement preparation and tax declaration. The exchange rate fluctuations between these currencies led to errors in the calculation of foreign exchange gains and losses when declaring corporate income tax (CIT), ultimately resulting in tax penalties from the tax audit department.

Relevant Vietnamese Policies: According to Vietnam’s Enterprise Income Tax Law (Law No. 14/2008/QH12) and its amendments, enterprises must use Vietnamese dong for tax declaration when calculating taxable income. If enterprises conduct transactions in foreign currencies, they need to convert using the exchange rate published by the State Bank of Vietnam. In addition, Vietnam’s Tax Administration Law (Law No. 38/2019/QH14) stipulates that enterprises must accurately declare income, expenses, and taxes, and may face fines and additional tax payments if declarations are inaccurate.

Problem Analysis: The company failed to accurately convert according to the State Bank of Vietnam’s exchange rate when preparing financial statements, thus underestimating taxable income in the corporate income tax declaration. The tax audit department discovered this issue during inspection and imposed fines and additional tax payments based on Article 142 of the Tax Administration Law.

Solutions:

• Exchange Rate Management: Enterprises should ensure that the finance department strictly calculates foreign exchange gains and losses according to the exchange rate published by the State Bank of Vietnam. In cases of significant exchange rate fluctuations, enterprises may consider using financial instruments such as forward foreign exchange contracts to lock in exchange rate risks.
• Internal Audit: Conduct regular internal audits to ensure the accuracy of data in financial statements, especially when involving foreign currency conversions.
• Policy Training: Strengthen learning and understanding of Vietnam’s Enterprise Income Tax Law and Tax Administration Law, ensuring that enterprise financial personnel are familiar with relevant legal provisions to avoid similar issues from recurring.

Case Two: Contract Clause Issues in Value Added Tax (VAT) Declaration

Background: A Chinese construction company undertook a large infrastructure project in Vietnam, with a long project cycle involving multiple complex contract clauses. Due to the contract not clearly distinguishing between material procurement and labor services, the company uniformly declared material procurement and labor services when declaring Value Added Tax (VAT), leading the tax bureau to believe it had underestimated the taxable amount.

Relevant Vietnamese Policies: According to Vietnam’s Value Added Tax Law (Law No. 13/2008/QH12) and its amendments, VAT rates for material procurement and labor services are different and need to be listed separately when declaring. The Guidance on VAT Declaration (Circular No. 219/2013/TT-BTC) issued by the General Department of Taxation of Vietnam clearly requires enterprises to accurately distinguish and separately list the content and tax rates of taxable items when declaring VAT.

Problem Analysis: The company failed to accurately distinguish between material procurement and labor services when declaring VAT due to ambiguous contract clauses, thus being deemed by the tax bureau to have underestimated the taxable amount, violating Article 8 of Vietnam’s VAT Law regarding the requirement to declare different taxable items separately.

Solutions:

• Specialized Training: Conduct specialized training on VAT regulations for the finance team and project management personnel to ensure accuracy in project execution and tax declaration.
• Contract Review: Before signing contracts, enterprises should ensure that contract clauses are clear, especially in parts involving VAT, with material procurement and labor services listed separately along with relevant tax rates.
• Legal Consultation: During project execution, regularly communicate with local tax advisors or law firms to ensure tax declarations comply with relevant Vietnamese regulations.

Case Three: Transfer Pricing Issues in Related Party Transactions

Background: A Chinese manufacturing enterprise established a production base in Vietnam, providing components to its parent company. The enterprise lacked sufficient documentation support for transfer pricing, leading the tax authorities to suspect profit shifting through related party transactions to evade Vietnamese taxes.

Relevant Vietnamese Policies: According to Vietnam’s Enterprise Income Tax Law and Transfer Pricing Management Law (Circular No. 66/2010/TT-BTC), enterprises must provide contemporaneous documentation (Local File) and master file when conducting related party transactions to prove their pricing is reasonable and complies with the arm’s length principle. Tax authorities have the right to request enterprises to provide relevant materials and, if enterprises fail to provide them, make tax adjustments and impose penalties according to Article 50 of the Tax Administration Law.

Problem Analysis: The enterprise failed to prepare and provide sufficient documentation as required by Vietnam’s Transfer Pricing Management Law, leading tax authorities to suspect unreasonable pricing in related party transactions and thus profit shifting. This violated Vietnam’s transfer pricing regulations, and the enterprise may face tax adjustments and fines.

Solutions:

• External Audit: Engage professional tax advisors or accounting firms to conduct independent audits of related party transaction pricing and documentation to ensure compliance with relevant Vietnamese regulations.
• Improve Document Management: Enterprises should timely prepare and update contemporaneous documentation and master files according to Vietnam’s transfer pricing regulations, ensuring related party transaction pricing has reasonable basis.
• Regular Assessment: Regularly assess related party transaction pricing strategies to ensure compliance with market fair value and avoid tax risks due to transfer pricing issues.

Case Four: Import Goods Pricing Issues in Customs Valuation

Background: A Chinese trading company imported a large amount of machinery and equipment to Vietnam for sale. As the company failed to submit sufficient supporting documents as required by customs, customs questioned that the declared price of imported goods was too low and decided to re-evaluate.

Relevant Vietnamese Policies: According to Vietnam’s Customs Law (Law No. 54/2014/QH13) and its implementing regulations, the valuation of imported goods must be based on true transaction value, and enterprises need to provide corresponding invoices, contracts, and payment proofs. If customs considers the declared price unreasonable, it has the right to re-evaluate according to Article 25 of the Customs Law and may require additional tax payments.

Problem Analysis: The company failed to provide sufficient supporting documents when submitting the declared price of imported goods, leading customs to question the reasonableness of its pricing and decide to re-evaluate. This resulted in the enterprise needing to pay additional taxes and possibly facing additional fines and late payment fees.

Solutions:

• Document Preparation: Ensure all necessary supporting documents are provided when declaring imported goods, including invoices, contracts, payment proofs, etc., to support the authenticity of the declared price.
• Price Assessment: Conduct detailed market research and price assessment before importing to ensure the declared price is consistent with market conditions, avoiding customs disputes due to underestimated prices.
• Communication with Customs: When encountering customs questioning, promptly communicate with customs departments, provide additional supporting materials or appeal to reduce the risk of additional tax payments and fines.

Summary: These cases demonstrate typical tax issues that multinational enterprises may encounter during operations in Vietnam, and how to effectively address these challenges by complying with relevant Vietnamese laws and regulations, strengthening internal management, and external cooperation. It is hoped that these detailed analyses and solutions can provide practical guidance for enterprises developing in Vietnam, helping them achieve greater success in the international market.

Latest Trends in Vietnam’s Tax Policies

With the rapid development of Vietnam’s economy and accelerating globalization, the Vietnamese government is continuously adjusting and updating tax policies to adapt to new economic situations and market demands. These policy changes have important implications for multinational companies operating in Vietnam. The following are some recent tax policy changes in Vietnam and their potential impacts on enterprises, hoping to provide forward-looking guidance for your enterprise and help enterprises maintain compliance and seize opportunities in the Vietnamese market.

Adjustments to Corporate Income Tax Policies

Policy Background: To further attract foreign investment, Vietnam has made multiple adjustments to corporate income tax policies in recent years. Particularly in the fields of high-tech enterprises, environmental protection enterprises, and agriculture, Vietnam has introduced numerous tax incentive policies to encourage the development of these industries.

Latest Changes: In 2023, the Vietnamese government promulgated the “Draft Amendment on Corporate Income Tax Incentive Policies for High-Tech Enterprises” (Decree No. 57/2023/ND-CP), which clearly stipulates that eligible high-tech enterprises can enjoy corporate income tax exemption for 10 years during their start-up period. In addition, the Vietnamese government also provides further tax incentives for environmental protection enterprises and enterprises engaged in agricultural modernization technologies.

Suggestions for Enterprises:

Tax Planning: For enterprises eligible for preferential policies, long-term tax planning should be done to fully utilize tax exemptions and preferential policies, reduce overall tax burden, and enhance enterprise competitiveness.

Industry Selection and Application: Enterprises should fully evaluate whether their own businesses meet the requirements of high-tech or environmental protection fields, and actively apply for corresponding tax incentives. During the application process, detailed technical reports and market plans need to be submitted to prove the enterprise’s high-tech attributes.

New Regulations on VAT Declaration and Deduction

Policy Background: To optimize the tax environment and simplify tax procedures, the General Department of Taxation of Vietnam has revised policies on VAT declaration and deduction, especially in cross-border e-commerce and digital services, introducing new regulations.

Latest Changes: In early 2024, the General Department of Taxation of Vietnam issued the “Guidance on VAT Declaration and Deduction for Cross-border E-commerce” (Circular No. 13/2024/TT-BTC). The new regulations require all enterprises providing cross-border e-commerce services in Vietnam, whether or not they have established entities in Vietnam, to declare VAT in Vietnam. Digital service providers must complete VAT declarations within 15 days after the end of each quarter and can make deductions through the electronic tax system.

Suggestions for Enterprises:

Adaptation to Digital Tax Systems: It is recommended that enterprises invest in developing or upgrading existing tax management systems to adapt to Vietnam’s electronic tax system. This not only helps improve declaration efficiency but also effectively reduces manual errors.

Compliance Review: Cross-border e-commerce enterprises should promptly review existing tax declaration processes to ensure compliance with new VAT declaration regulations. For enterprises that have not yet established entities in Vietnam, registration procedures should be considered early to avoid penalties due to non-declaration or untimely declaration.

Strengthening of Transfer Pricing (Transfer Pricing) Regulations

Policy Background: Transfer pricing has always been a key area of Vietnamese tax audits. As Vietnam integrates into the global economic system, tax authorities have implemented stricter supervision of multinational enterprises’ transfer pricing behaviors, especially regarding price transfers in related party transactions.

Latest Changes: In 2024, the Ministry of Finance of Vietnam issued the “Guidance on Strengthening Transfer Pricing Management” (Circular No. 16/2024/TT-BTC), requiring multinational enterprises to submit more detailed contemporaneous documentation and master files, especially in cases involving complex financial transactions and intangible asset transfers. In addition, Vietnamese tax authorities will strengthen the audit intensity of unreasonable low-price transfers and tax avoidance behaviors.

Suggestions for Enterprises:

Risk Assessment and Adjustment: It is recommended that enterprises regularly conduct internal transfer pricing risk assessments and adjust pricing strategies when necessary to ensure compliance with Vietnamese tax regulations and avoid penalties due to unreasonable pricing.

Transfer Pricing Documentation Preparation: Enterprises should ensure the completeness and accuracy of their transfer pricing documentation, especially in complex transactions, needing to detail pricing basis and market analysis.

Updates to Customs Valuation and Tariff Policies

Policy Background: Vietnam’s import and export trade has grown rapidly in recent years, and customs policies and tariff systems have undergone a series of updates aimed at standardizing the valuation of imported goods and tariff collection.

Latest Changes: In 2023, the Vietnamese government promulgated the “New Regulations on Imported Goods Valuation and Tariff Collection” (Decree No. 45/2023/ND-CP), which emphasizes the power to re-evaluate high-value imported goods. Vietnamese customs has the right to re-evaluate imported goods when suspecting undervaluation of declared values and levy tariffs based on market prices.

Suggestions for Enterprises:

Communication and Appeal with Customs: In case of customs re-evaluation, enterprises should actively communicate with customs and provide additional supporting materials. If there are objections to the evaluation results, enterprises should legally file appeals and prepare legal bases.

Accuracy of Import Declarations: When importing goods, enterprises need to ensure the authenticity and completeness of declared prices, especially for high-value goods, sufficient supporting documents should be provided, such as market research reports and independent valuation reports.

Increased Frequency of Tax Audits and Compliance Checks

Policy Background: With the rapid growth of Vietnam’s economy, tax authorities have increased the frequency of tax audits and compliance checks on enterprises, especially for large multinational enterprises and foreign-invested enterprises, further strengthening audit efforts.

Latest Changes: In 2024, the General Department of Taxation of Vietnam issued the “Notice on Strengthening Enterprise Tax Audit Work” (Official Dispatch No. 512/2024/TC), clearly stating that it will focus on checking the tax compliance of multinational enterprises, especially the authenticity of related party transactions, VAT deductions, and corporate income tax declarations. The increased frequency of audits means that enterprises need to be more cautious in handling tax issues to avoid major losses due to minor oversights.

Suggestions for Enterprises:

Contingency Plans and Professional Support: Enterprises should develop contingency plans for tax audits and seek support from professional tax advisors or legal advisors when necessary to ensure they can calmly respond to tax authority audits.

Internal Audit and Compliance Management: It is recommended that enterprises conduct regular internal tax audits to ensure the accuracy and compliance of tax declarations. Especially for multinational enterprises, communication with parent companies and other related enterprises should be strengthened to ensure the transparency of related party transactions.

Strengthening Tax Supervision of the Digital Economy

Policy Background: With the rapid development of the global digital economy, the Vietnamese government has realized that improving the regulatory and tax system for digital services and cross-border e-commerce is imperative. To ensure fair competition and tax revenue, the Vietnamese government has been continuously strengthening tax supervision of the digital economy in recent years.

Latest Changes: In early 2024, the General Department of Taxation of Vietnam issued the “Guidance on Strengthening Tax Supervision of the Digital Economy” (Circular No. 25/2024/TT-BTC), stipulating that all services provided through the internet, including digital advertising, streaming services, cloud computing, etc., need to pay VAT and corporate income tax in Vietnam. This new regulation applies to foreign companies without entities in Vietnam, requiring them to declare and pay taxes through the electronic tax system.

Suggestions for Enterprises:

• Adjustment of Cross-border Contract Terms: For cross-border contracts involving the Vietnamese market, enterprises should consider adjusting terms to reflect new tax responsibilities and clarify ways to share tax obligations with customers or partners.
• Tax Compliance Review: Digital service providers should immediately review their business models to ensure compliance with Vietnamese tax requirements, and register as taxpayers in Vietnam to avoid potential legal risks.

Expansion of Environmental Protection Tax

Policy Background: The Vietnamese government has been committed to promoting sustainable development, and environmental protection tax is one of its important regulatory tools. In recent years, with the enhancement of environmental awareness, the Vietnamese government has made multiple adjustments to the scope and rate of environmental protection tax collection.

Latest Changes: In 2023, the Vietnamese government passed the “Environmental Protection Tax Amendment Law” (Law No. 71/2023/QH15), expanding the scope of environmental protection tax to more pollution sources, including some chemical products, plastic packaging, and high-emission industrial equipment. The new tax rates are graded according to different pollution levels, with the highest rate reaching 10%.

Suggestions for Enterprises:

Environmental Compliance Certification: It is recommended that enterprises obtain relevant environmental compliance certifications to demonstrate their environmental protection efforts and compliance, which may lead to tax reductions or preferential policies.

Product Compliance and Alternative Solutions: Affected enterprises should conduct comprehensive assessments of their products and production processes, seeking possible environmentally friendly alternative materials or technologies to reduce the burden of environmental protection tax.

Personal Income Tax Adjustments

Policy Background: To maintain economic vitality and attract high-skilled talents, the Vietnamese government has made adjustments to personal income tax policies, especially for high-income groups and foreign employees.

Latest Changes: In 2024, the Ministry of Finance of Vietnam issued the “Notice on Revision of Personal Income Tax Rates and Deductions” (Circular No. 30/2024/TT-BTC), raising the personal income tax rate for high-income groups to 35%, while providing more deduction measures for low-income groups. In addition, the Vietnamese government has also introduced a new tax incentive policy, offering a five-year personal income tax reduction for high-skilled foreign employees working in Vietnam.

Suggestions for Enterprises:

• Salary Structure Adjustment: Enterprises can consider adjusting salary structures, such as increasing non-monetary benefits or bonus distribution methods, to optimize tax burdens and maintain employee work enthusiasm.
• Tax Planning for Foreign Employees: Multinational enterprises should develop detailed tax planning for their foreign employees to fully utilize the new personal income tax incentive policies and ensure maximization of employee benefits.

Digitalization of Tax Registration and Reporting Systems

Policy Background: The Vietnamese government is vigorously promoting the digitalization of tax administration to improve the efficiency and transparency of tax declarations. This trend not only aligns with the global digital transformation trend but also brings new challenges and opportunities for Vietnam’s tax collection and management.

Latest Changes: At the end of 2023, the General Department of Taxation of Vietnam launched the new “Electronic Tax Registration and Reporting Management System” (Decree No. 60/2023/ND-CP), requiring all enterprises operating in Vietnam to conduct tax registration, declaration, and payment through this system. The new system introduces blockchain technology and AI-assisted functions to improve data accuracy and security.

Suggestions for Enterprises:

Digital Compliance Strategy: In the context of digitalization, enterprises should develop comprehensive digital compliance strategies, including data security, reporting accuracy, and improvement of internal audit procedures, to meet future digital tax management requirements.

System Adaptation and Training: Enterprises should quickly adapt to the new system, ensure tax personnel are familiar with the new operation processes, and conduct corresponding technical training to avoid errors in declaration and payment processes.

The continuous changes in Vietnam’s tax policies pose higher requirements for enterprises. By timely following up on policy changes and formulating corresponding response measures, enterprises can effectively reduce tax risks and seize opportunities brought by tax incentive policies. In the Vietnamese market, compliant operation is not only a basic requirement for enterprises but also key to winning market competition. It is hoped that these latest policy interpretations and suggestions can provide practical guidance for enterprises and help them achieve greater success in the Vietnamese market.

Tax Compliance Recommendations for Enterprises in Different Industries and of Different Scales

In today’s globalized world, tax compliance has become a key factor for successful business operations, especially in cross-border operations. For enterprises in different industries and of different scales, tax compliance requirements may vary significantly, so it is crucial to formulate targeted tax risk prevention and compliance recommendations. The following will discuss key points and response strategies that enterprises of different industries and scales should pay attention to in terms of tax compliance, combined with Vietnam’s tax environment.

Tax Compliance Recommendations for Manufacturing Enterprises

Manufacturing enterprises, especially foreign-invested enterprises, usually face a complex tax environment, including value-added tax, corporate income tax, import duties, and environmental protection tax. For manufacturing enterprises, here are several key tax compliance points:

1. VAT Chain Management: Manufacturing enterprises usually involve the procurement of raw materials, production, and sales of products, with each link involving VAT. Therefore, ensuring the integrity and accuracy of the VAT chain is crucial. Enterprises should regularly verify input tax deduction vouchers to ensure their compliance and validity.

2. Import Duties on Equipment and Machinery: When manufacturing enterprises set up production bases in Vietnam, they usually need to import a large amount of equipment and machinery. Enterprises should fully understand Vietnam’s tax incentive policies for imported equipment, such as the high-tech enterprise equipment import tax exemption policy under the Investment Law, to ensure they enjoy maximum tax benefits.

3. Environmental Protection Tax: Manufacturing enterprises may face environmental protection tax, especially in high-pollution production processes. Enterprises need to ensure their production activities comply with Vietnam’s environmental standards, and correctly declare and pay environmental protection tax to avoid fines due to non-compliance.

Case Analysis: A Chinese manufacturing enterprise that set up a production base in Vietnam faced increased tax burden due to poor management of the VAT chain, resulting in inability to deduct input tax. Through systematic review and compliance adjustment, the enterprise re-sorted input tax vouchers and conducted supplementary declarations under the guidance of Vietnamese tax authorities, successfully recovering part of the tax.

Tax Compliance Recommendations for Service Enterprises

Service enterprises in Vietnam usually involve corporate income tax and value-added tax, and due to the intangibility of services, transfer pricing and cross-border tax issues are also compliance focuses.

1. Transfer Pricing Compliance: Service enterprises, especially those involved in cross-border service transactions, need to pay special attention to transfer pricing compliance. According to Vietnam’s Transfer Pricing Regulations (Decree No. 20/2017/ND-CP), enterprises must provide contemporaneous documentation for related party transactions and ensure transfer pricing complies with the arm’s length principle.

2. VAT Treatment of Cross-border Services: For enterprises providing cross-border services, understanding Vietnam’s VAT treatment methods is crucial. According to Vietnamese tax law, exported services are usually subject to zero-rate VAT, but enterprises must provide sufficient supporting documents to prove that the services are indeed provided to overseas entities.

3. Deduction of Labor Costs for Corporate Income Tax: In Vietnam, service enterprises usually face high labor costs. Enterprises should ensure the compliance of labor costs so that they can be fully deducted when declaring corporate income tax. At the same time, special attention should be paid to the restrictions on unreasonable expenses in the Enterprise Income Tax Law.

Case Analysis: A multinational consulting company failed to provide sufficient proof of service export when providing cross-border services in Vietnam, resulting in the Vietnamese tax authorities rejecting its zero-rate VAT declaration. After multiple communications with tax authorities and supplementing documents, the company finally obtained zero-rate treatment, avoiding additional tax burden.

Tax Compliance Recommendations for Retail and Distribution Enterprises

Retail and distribution enterprises often face complex tax declaration and compliance requirements due to the nature of their business models, especially in terms of VAT and corporate income tax.

1. VAT Management for Multi-channel Sales: Retail enterprises usually conduct sales through multiple channels, including online and offline channels. Enterprises should ensure that VAT treatment for each sales channel complies with Vietnamese tax law provisions to avoid compliance issues caused by tax rate differences between channels.

2. Inventory Management and Tax Compliance: Inventory management of retail enterprises is closely related to tax declarations. In Vietnam, inventory cost is an important deductible item for corporate income tax. Enterprises should ensure that their inventory management system can accurately record inventory costs and comply with relevant provisions of the Vietnamese Enterprise Income Tax Law.

3. Consumer Protection Tax Compliance: With increasingly strict consumer protection laws in Vietnam, retail enterprises should pay special attention to tax compliance issues when handling returns and customer complaints. According to the Law on Protection of Consumer Rights, enterprises need to ensure corresponding VAT and corporate income tax treatments when providing refund or exchange services.

Case Analysis: A large retail chain operating in Vietnam faced issues with VAT management for online and offline channels, resulting in some sales not being correctly declared for VAT. After internal review and adjustment, the enterprise re-sorted its sales channels and successfully avoided fines from tax authorities by optimizing its tax declaration system.

Tax Compliance Recommendations for Small and Medium-sized Enterprises (SMEs)

Small and medium-sized enterprises (SMEs) in Vietnam face unique challenges in tax compliance, mainly including limited resources, complexity of tax regulations, and increasingly strict supervision by tax authorities.

1. Simplify Tax Declaration Processes: SMEs usually lack dedicated tax teams, so they need to pay special attention to simplifying their tax declaration processes. The Vietnamese government provides some preferential policies for simplified declaration procedures for SMEs, such as the SME Tax Incentive Policy (Decree No. 39/2018/ND-CP), which allows enterprises to quickly declare and pay taxes through the electronic tax system.

2. Cash Flow and Tax Compliance: Cash flow management of SMEs is closely linked to tax compliance. Enterprises should pay special attention to the declaration and payment time of VAT to avoid tax arrears or fines due to fund shortages. It is recommended that SMEs establish sound fund management systems to maintain good cash flow status while ensuring tax compliance.

3. Tax Audit and Risk Management: SMEs often lack experience in dealing with tax audits. It is recommended that SMEs conduct regular internal tax compliance reviews to timely discover potential tax risks and develop response measures. Vietnamese tax authorities have a higher audit frequency for SMEs, so enterprises should be well prepared to ensure the completeness and compliance of tax materials.

Case Analysis: A Vietnamese startup faced multiple expenses that could not be reasonably deducted during a tax audit due to lack of professional tax management, ultimately resulting in fines from tax authorities. The enterprise subsequently hired professional tax advisors to comprehensively optimize its financial and tax processes, avoiding similar risks in the future.

Summary: Tax compliance is the cornerstone for enterprises to develop stably in the Vietnamese market. There are significant differences in tax policies and regulations for enterprises in different industries and of different scales in Vietnam. Therefore, enterprises need to formulate corresponding tax compliance strategies based on their own business characteristics to avoid fines and legal risks due to non-compliance behaviors. Through the above detailed tax compliance recommendations and case analyses, enterprises can better understand Vietnam’s tax environment and take appropriate measures to ensure compliant operations in the Vietnamese market and achieve long-term sustainable development.

Expert Q&A Session: Answering Hot Tax Issues of Concern to Enterprises

In tax compliance and cross-border operations, enterprises often face many complex and challenging issues. To help clients gain an in-depth understanding of Vietnam’s tax environment and effectively address various practical operational difficulties, we can set up an “Expert Q&A Session”. The following are detailed answers to some common hot tax issues, hoping to provide valuable guidance and learning opportunities for clients.

Q1: What tax incentives can high-tech enterprises enjoy in Vietnam? How to apply?

A1: According to Vietnam’s Investment Law, high-tech enterprises can enjoy various tax incentives such as corporate income tax reductions, VAT refunds, and import duty exemptions for equipment. Specific incentives include:

Corporate Income Tax: High-tech enterprises can enjoy a preferential tax rate of 10%, applicable to the entire life cycle of the enterprise, and in specific cases can even enjoy corporate income tax exemption for 3 to 4 years and half reduction for 9 years.

Value Added Tax: If the products produced by the enterprise are listed as high-tech products, the sale of these products can enjoy a zero VAT rate policy.

Import Duty Exemption: Imported equipment used for production, if meeting high-tech standards, can be exempt from import duties.

Application Process:

• Prepare materials: Enterprises need to prepare materials including enterprise charter, technical plan, product list, etc.
• Submit application: Submit application to the high-tech evaluation committee of the local province or city.
• Review and approval: After review, the enterprise will obtain the corresponding high-tech enterprise certificate and start enjoying tax incentives.

Suggestions: Enterprises should carefully study relevant provisions in the Investment Law before applying to ensure their technology and products meet Vietnam’s high-tech standards. If necessary, seek help from professional consulting agencies.

Q2: How to ensure transfer pricing complies with regulations when conducting cross-border related party transactions in Vietnam?

A2: Vietnam’s transfer pricing policies are regulated by the Transfer Pricing Regulations (Decree No. 20/2017/ND-CP) and the Enterprise Income Tax Law. To ensure transfer pricing compliance, enterprises should pay attention to the following points:

Related Party Transaction Reporting: Enterprises need to truthfully report all related party transactions in annual corporate income tax declarations, providing transaction amounts, types, and pricing bases of related parties.

Contemporaneous Documentation Preparation: Enterprises must prepare contemporaneous documentation (TP Documentation) as required by regulations, including master file, local file, and country-by-country report. These documents should detail the background of related party transactions, pricing strategies, and bases for conforming to market fairness.

Transfer Pricing Methods: Enterprises should choose appropriate transfer pricing methods, such as comparable uncontrolled price method, cost plus method, resale price method, etc., to ensure the fairness and compliance of transaction pricing.

Tax Audit Preparation: Vietnamese tax authorities conduct strict audits on related party transactions. Enterprises should be well prepared, including timely updating and maintaining contemporaneous documentation to ensure it meets the latest regulatory requirements.

Suggestions: Enterprises should establish a sound transfer pricing compliance system, regularly review the reasonableness of related party transaction pricing, and seek professional transfer pricing consulting services when necessary to avoid potential tax risks.

Q3: How does the tax treaty between Vietnam and China affect the tax burden of cross-border enterprises?

A3: The tax treaty between Vietnam and China aims to avoid double taxation and prevent tax evasion. Enterprises can reasonably reduce the tax burden of cross-border operations by utilizing the tax treaty. Here are several key provisions:

Determination of Tax Residency: According to the tax treaty, enterprises should determine their tax residency status. If an enterprise is determined to be a tax resident in both Vietnam and China, the “permanent establishment” clause in the treaty can be used to determine its primary tax resident country.

Tax Exemption or Reduction Treatment: The tax treaty stipulates tax exemption or reduction treatment for specific types of income (such as dividends, interest, royalties). For example, dividends paid by Vietnamese enterprises to Chinese parent companies, if meeting treaty provisions, can enjoy a preferential withholding tax rate of 5%-10%, rather than Vietnam’s usual 20% withholding tax.

Avoidance of Double Taxation: If an enterprise has paid taxes in both countries, the tax treaty allows enterprises to avoid double taxation through tax credit methods, i.e., taxes paid in one country can be used as tax credits in the other country.

Suggestions: Enterprises should study the tax treaty provisions in detail and combine them with their operating models to maximize the use of tax preferential policies. Especially in cross-border payments involving dividends, interest, and royalties, enterprises should ensure they meet the requirements of the tax treaty.

Q4: How to respond to tax audits by Vietnamese tax authorities? Which aspects are likely to trigger audits?

A4: Vietnamese tax authorities usually focus on the following aspects in tax audits:

Income Recognition and Expense Deduction: Tax authorities often review whether enterprise income recognition is timely and complete, and focus on whether expense deductions are reasonable, especially large expenses such as management fees and royalties.

Transfer Pricing: The unreasonableness of related party transaction pricing is a focus of tax audits. If enterprises cannot provide sufficient contemporaneous documentation to prove the fairness of transaction prices, they may face tax adjustments and fines.

VAT Declaration: The integrity of the VAT chain and the compliance of input tax deductions are also audit focus points. Enterprises should ensure the authenticity of their input tax invoices and the legality of deductions.

Labor Costs and Union Fees: Vietnam stipulates that enterprises need to pay union fees and social insurance for employees. Tax authorities will check whether enterprises have paid in full and focus on the compliance of labor costs.

Response Measures:

• Regular Internal Audits: Enterprises should conduct regular internal tax audits to identify potential risks and make corrections before tax authorities intervene.
• Compliance Material Preparation: Maintain the completeness of financial and tax records, especially materials related to related party transactions and VAT declarations, to be ready for tax audits.
• Communication with Tax Authorities: During tax audits, enterprises should actively cooperate with tax authorities, provide required materials promptly, and try to resolve disputes through communication.

Suggestions: Enterprises should strictly comply with Vietnamese tax law provisions in daily operations, regularly check the compliance of their financial and tax records, and seek support from professional tax advisors when necessary to ensure they are in an advantageous position during tax audits.

Q5: How can cross-border e-commerce enterprises ensure their tax compliance in Vietnam?

A5: With the rapid development of cross-border e-commerce, the Vietnamese government’s tax supervision in this field is becoming increasingly strict. Cross-border e-commerce enterprises should focus on the following points for tax compliance in Vietnam:

VAT Declaration: According to Vietnamese tax law, cross-border e-commerce enterprises selling goods or services to consumers within Vietnam need to register as VAT taxpayers in Vietnam and pay VAT according to regulations. Enterprises should ensure the accuracy of their VAT declarations and maintain consistency with actual sales data.

Corporate Income Tax: The profits of cross-border e-commerce enterprises in Vietnam need to pay corporate income tax. Enterprises should reasonably recognize income and costs according to the provisions of Vietnam’s Enterprise Income Tax Law, and declare and pay corporate income tax on time.

Customs Declaration: For goods passing through Vietnamese customs, cross-border e-commerce enterprises need to ensure the accuracy of declared goods value, quantity, and type. Vietnamese customs have strict penalties for false declarations, and enterprises should ensure the completeness and authenticity of customs documents.

Consumer Protection Law Compliance: Vietnam’s Law on Protection of Consumer Rights requires cross-border e-commerce enterprises to comply with relevant regulations when providing after-sales services, handling returns, and consumer complaints, ensuring consumer rights are fully protected.

Suggestions: Cross-border e-commerce enterprises should establish a sound tax compliance system, regularly review the accuracy of their tax declarations and customs declarations, and maintain good communication with Vietnamese tax authorities and customs. When necessary, local professional advisors can be hired for guidance to ensure compliant operations.