Under Vietnam legislation regarding tax obligations, there are no difference between the foreign-invested enterprises and the local enterprises (both referred to as the taxpayer in the light of tax laws and regulation).
In this article, we would like to focus on some common taxes and fees applicable to the taxpayers aforementioned as the following:
I. BUSINESS LICENSE FEE
The business license fee is one of the initial fee obligations of taxpayers after establishment under Vietnam legislation which basically based on the size of charter capital stipulated in the Enterprise Registration Certificate/other equivalent license. Accordingly, taxpayers must submit the return and make payment to such fee to the State Budget as stipulated in the Decree No. 139/2016/ND-CP (Decree 139) and the Decree No. 22/2020/ND-CP supplementing and amending the Decree 139 (Decree 22).
Regarding the detail of business license fee for each size of registered charter capital of taxpayers, kindly refer to the below table for your information and reference:
|Size of registered charter capital||Annual Business License Fee|
|Over VND 10 billion||VND 3 million|
|Less than and equal to VND 10 billion||VND 2 million|
|Other||VND 1 million|
Deadline for submission and payment of business license fee shall be no later than 30 January of each year after the initial operating year under taxpayers’ issued certificates. Of note, taxpayers shall be exempted from business license fee for the initial operating year as stipulated in such certificates.
II. CORPORATE INCOME TAX
Corporate income tax (CIT) means a direct tax subjected to corporate income including production, business activities and other incomes of taxpayers.
CIT would specifically refer to Law on CIT, Decree 12/2015/ND-CP, Circular No. 78/2014/TT-BTC and Circular No. 96/2015/TT-BTC and in other relevant regulations guiding the implementation of CIT.
• “Corporate income tax payable = ((Assessable income – (Tax-free incomes + Losses carried forward under regulations) × Tax rate)”.
• “Assessable income = (Revenue – Expenses deducted) + other incomes”.
The general CIT tax rate is 20%, effective from 01 January 2016. At year-end, the taxpayers must finalize CIT calculation and submit the tax finalization returns to the tax authority no later than the last day of the 3rd month since the end of financial year.
III. VALUE ADDED TAX
Value-added tax (VAT), which is an indirect one, is imposed on the added value of goods and services during the process of production, circulation and distribution. However, not all goods and services are subject to tax payment.
VAT payment obligation is specified in the 2008 Value Added Tax Law, amended in 2013 and in other relevant documents.
Depending on different subjects, different methods of VAT calculation will be applied. According to the current regulations, VAT is calculated to pay by 02 methods: method of deduction and tax calculation directly based on added value.
• Deduction method:
“Payable VAT amount = Output VAT – Input VAT deductible”
• Direct calculation method:
“Payable VAT amount = Taxable price of goods or services sold × VAT rate of goods and services”
The amount of VAT that businesses have to pay depends on the group of goods or services produced or provided (there are many different VAT rates applicable to groups of goods/services).
IV. PERSONAL INCOME TAX
Vietnam tax laws and regulations stipulate that the taxpayers must be responsible for withholding Personal Income Tax (PIT) before declaring and submitting the tax returns to the tax authority along with the tax amount paid to the State Budget.
In PIT concept, the key point of PIT calculation is based on the residency status of employees working to the taxpayers which includes local hires and expatriates. Taxable income, PIT tax rates, tax calculation methods are specified in the Circular No. 111/2013/TT-BTC and the Circular No. 92/2015/TT-BTC and in relevant legal documents.
PIT declaration must be prepared and submitted in a monthly or quarterly basis. At year end, the taxpayers must finalize PIT calculation and submit the tax finalization returns to the tax authority no later than the last day of the 3rd month since the end of financial year.
V. FOREIGN CONTRACTOR WITHHOLDING TAX
Foreign contractor withholding tax (FCWT or FCT) means the tax obligations of the foreign contractors when having any income inside Vietnam, which specifically refers to Circular 103/2014/TT-BTC.
Given such tax areas are not directly subjected to the taxpayers aforementioned, in practical, there would be many cases the taxpayers shall be responsible for withholding, submitting and making payment of tax on behalf of foreign contractors to the State Budget in case the taxpayers seek for goods/ services from the foreign contractors.
Regarding tax rates of FCWT, kindly find the below table for detailed rate applied to each substance of transactions:
|Description||FCWT rate (CIT)||FCWT rate (VAT)|
|Trades (disturbing, supply goods and/or associated with services rendered in Vietnam, supplying goods under INCOTERMS)||1%||1% or exempted|
|Services (in general)||5%||5%|
|Restaurant/ hotel/ casino management services||10%||5%|
|Services associated with good supply which could not separate the value of goods and services||2%||3%|
|Insurance||5%||5% or exempted|
|Reinsurance abroad, commission of the reinsurance transfer||0.1%||exempted|
|Leasing machinery and equipment||5%||5%|
|Leasing aircraft, airplane engines/ spare parts, vessels (for aircraft and vessel cannot be produced in Vietnam)||2%||exempted|
|Derivative financial services||2%||exempted|
|Construction, installation, including or excluding supply of materials, machinery, equipment||2%||3% or 5%|
|Transportation||2%||3% or 0%|
|Other business activities||2%||2%|
VI. OTHER TYPES OF TAX
In some cases, the taxpayers shall be subjected to capital gain tax with 20% of tax rate to those of income gain from capital transferring for corporate owners or 0.1% of tax rate to sales amount for securities owned by individuals (applied to Joint Stock Company cases).
Apart from the above, the taxpayers operating in some business lines and sectors with special conditions may be subject to other taxes such as: environment protection tax; natural resources tax; special consumption tax, etc.
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