Tax Incentives in Vietnam: A Comprehensive Guide

Vietnam has long been considered an investment paradise for foreigners due to its abundant workforce and competitive costs of lower wages. Furthermore, the country has developed one of the most competitive tax policies that stipulate tax incentives and other tax rates in Vietnam, which appease most foreigners.

When being compared to other countries in Southeast Asia, Vietnam’s tax incentives stand out and create a more favourable condition for foreigners to expand their business operations or invest in new projects.

Through reading this article, you will have a bigger picture of tax incentives in Vietnam, which will help you take advantage of the tax incentives offered for your business expansion and investment in Vietnam.

Taxation in Vietnam

In general, there are three common taxes in Vietnam: corporate income tax, personal income tax and value-added tax.

Corporate Income Tax (CIT)

Foreigners continue to pour in and start businesses in Vietnam because they are aware of the continuous decrease in corporate income tax rate in the country. The Vietnamese CIT rate has decreased from 32% to 20% between 2000 and 2018. Except for Singapore, the CIT rate in Vietnam is lower than most countries in the region, including Malaysia, Thailand, Indonesia, the Philippines, and Japan. The following shows the CIT rates in Vietnam and some neighbouring countries:

• Vietnam – 20%
• Malaysia – 24%
• Indonesia – 25%
• Philippines – 30%

CIT is payable annually according to the tax law in Vietnam.

Personal Income Tax (PIT)

Personal income tax rate varies, depending on how much an individual earns per year. The tax rate ranges from 5% to 35%. Often time, senior managers are subject a PIT rate of 35%, whereas blue-collar workers are taxed around 5-10%.

Value Added Tax (VAT)

Value-added tax is considered the most prevalent and indirect tax in Vietnam. Consumers purchase goods and services in Vietnam will be imposed a VAT of 0%, 5% or 10%, depending on the types of goods and services. Most goods in Vietnam will be taxed at 10%.

Related article: 5 Challenges of Accounting and Tax Compliance in Vietnam

Tax Incentives in Vietnam

Legal companies and organisations in Vietnam can benefit from two main types of tax incentives – preferential tax rates and tax holidays.

Industry-based incentives

Large scale manufacturing

• investing more than USD 500M
• or more than USD 250M with additional conditions on new workplaces and expected revenue

High-tech companies

• IT
• Software production
• Biotech
• Material Tech
• Automation
• Scientific Research

These companies can enjoy 4 years of tax holidays, followed by 9 years of 5% CIT. Once this period is over, the companies can enjoy 10% CIT until 15 years of establishment.

Social impact projects

Projects in education, vocational training, healthcare, environment, culture and sport can enjoy even better incentives. After 4 years of tax holidays and 9 years of CIT 5%, the social impact companies will be subject to 10% CIT for lifetime of the project.

Location-based incentives

The areas distant from Hanoi and Ho Chi Minh city are classified as economically disadvantaged. Investors setting up business in these areas can also benefit from decrease tax rates.

Due to unavailability of proper infrastructure and lack of skilled labour, this can be interesting for labour intensive low-tech industries. The tax incentive scheme depends on the actual location.

Economically disadvantaged
2-4 years of tax exemption and 4-9 years of CIT 7.5% – 10%

Extremely economically disadvantaged
4 years of tax exemption and 9 years of CIT 5% and from 13th year CIT 10%

You might also want to read Annual Tax Return in Vietnam in 2019

How to Apply for Tax Incentives

As always, it is a good idea to prepare every required document and fulfill all requirements if you are looking to apply for tax incentives in Vietnam.

You need to ensure that the investment license of your business complies with the requirements for foreign investment incentives. Only then you can make the most out of the benefits offered by Vietnam’s tax incentives.

Cekindo as Your Tax Consultant

Talk to us now to know more about tax incentives in Vietnam. Cekindo’s professional consultants will help you identify if your operations or business activities fit in any of the categories of the above-mentioned tax holidays and preferential tax rates. Then, we will help you apply for tax incentives as well.