Vietnam is a developing country. With the policy’s support for development, a lot of foreign investors & businesses want to go to Vietnam to start a new project. So, the problem is all investors are concerned about the tax information. With this field, Topa.vn want to send to investor some advice about 3 most important Tax: Value-Added Tax ( VAT) , Company income Tax ( CIT) & Personal income Tax ( PIT)
- VAT & Tax Refund
With the VAT & Tax information, we will divide all business to 2 type :
- Normal business. They start business to sell products/ services in Vietnam. In this case, the VAT Tax is same with all domestic company
- Export Business: Only start business to export production. With this type, we Need to check the investment certificate with the information:
“Enterprises are allowed to apply policies for export processing enterprises if they meet all the conditions specified for export processing enterprises”
Case 1 : Enterprise applicable policies for Export Processing Enterprise:
- Not subject to VAT declaration
- Goods purchased from the seller will be made customs on the Export processing zone with 0% VAT.
Case 2: Enterprise not applicable of policies for export processing enterprises:
- VAT Export output: 0%
- VAT Inputs: Can be refund
Conditions for tax refund:
- Input VATmore than 300 millions VND ( Not Yet deducted)
- Companies request tax refund procedures from the Tax Department.
- Each tax refund period, the tax agency will conduct inspection before or after tax refund.
In normal case:
CIT = (Total revenues – Total Expenses) x 20%
Total revenues: Total revenues based on invoices, commercial invoice when exported
Eligible expenses: are expenses with full invoices and vouchers in accordance with the tax law, serving production and business activities of enterprises.
However, Vietnam Government have support incentive for Foreign Direct Investment company.
Investor need to provide exact Company Address for :
- Determine the location of the project year in the industrial zone to determine CIT incentives for businesses. (E.g: Tax exemption for 2 years, 50% reduction for the next 4 years according to enterprises located in industrial zones, not in areas with favorable conditions)
Pursuant to Clause 3, Article 16, Decree 218:
“Tax exemption for 2 years and reduction of 50% of tax payable for the next 4 years for income from the execution of new investment projects specified in Clause 3, Article 15 of this Decree and income of enterprises from project execution make new investments in industrial zones (except for industrial zones located in favorable socio-economic conditions).
- Areas with favorable socio-economic conditions specified in this Clause are urban districts of special grade urban centers, centrally run grade I cities and provincial grade I urban centers; in cases where an industrial park is located in both favorable and unfavorable areas, the determination of tax incentives for an industrial park shall be based on the area with the larger portion of the industrial park area. The determination of special grade and grade I urban centers prescribed in this Clause shall comply with the Government’s regulations on urban classification.”
- In case of not eligible for incentives => CIT rate: 20%
Where to set up a Trading company to enjoy incentives
- Areas enjoying investment incentives:
- Industrial zone (except for industrial zones located in an area with favorable economic conditions): Tax exemption for 2 years, reduction of 50% of payable tax amount for the next 4 years
- Difficult economic areas: Tax exemption for 4 years, 50% tax reduction for the next 9 years, 17% tax rate for 10 years.
- Special economic difficult areas: Tax exemption for 4 years, 50% tax reduction for the next 9 years, 10% tax rate for 15 years.
- PIT on income from wages of foreigners
- In Vietnam less than 183 days => Non-resident individual => PIT rate: 20%
- In Vietnam for 183 days => Individuals of residence => PIT rate: 10%
- Share the profit:
- Only divide when the business is profitable
- PIT on capital investments (profit shared): 5%