TABLE OF CONTENTS
- 1 RUNNING
- 1.1 Business Location and Incentives in Vietnam
- 1.2 Annual accounting requirements in Vietnam
- 1.3 Corporate Income tax in Vietnam
- 1.4 Withholding tax in Vietnam
- 1.5 Value Added Tax (VAT) in Vietnam
- 1.6 Personal Income tax in Vietnam
- 1.7 Vietnam Double Tax treaty network
Business Location and Incentives in Vietnam
Vietnam Singapore Industrial Park (VSIP)
Singapore’s experience as a city-state economy has served a role model for many developing countries. Vietnam Singapore Industrial Park (VSIP) is a high standard industrial park initiated by the government of Singapore and Vietnam on the basis of infrastructure and industrial cooperation.
The first Vietnam Singapore Industrial Park (VSIP) is located in the Binh Duong province in South Vietnam and was established in 1996. Since then, the following VSIP parks have been established with the concept remodelled from a traditional industrial park to an integrated township and industrial park.
- VSIP I Binh Duong Province (1996)
- VSIP II Binh Duong Province (2006)
- VSIP Bac Ninh Province (2007)
- VSIP Hai Phong City (2010)
- VSIP Quang Ngai Province (broke ground in Sept 2013)
With the environmental infrastructure in place, VSIP parks have attracted more than 23 foreign investors to set up their operations in Vietnam. In addition, the Vietnamese government has provided investment incentives for different VSIP parks. This includes corporate and personal income tax reduction for certain years.
If required, RBA has the experience and expertise to project-managing your Vietnamese company setup in your preferred VSIP Park.
Should you require any further information or have any inquiries, please do not hesitate to contact us.
Annual accounting requirements in Vietnam
All enterprises operating in Vietnam are required to apply the Vietnamese Accounting Standards and Systems (VAS). The VAS applies to all private Vietnamese companies as well as state-owned companies.
The basic set of financial statements prepared under VAS is comprised of (i) balance sheet, (ii) income statement, (iii) cash flow statement and (iv) notes to the financial statements.
Company financial statements must be prepared and audited annually. After that, the audited financial statements are required to be filed with the Provincial Tax Office, Ministry of Planning and Investment and General Statistics Office. Audited financial statements have to be filed within 90 days after the financial year end.
For a newly registered company, if the period from the incorporation date to the nearest financial year end is less than 90 days, such period will be included in the following reporting year.
Companies need to engage a licensed independent audit firm (no later than 30 days before the financial year end) to sign off audit engagement contracts.
Vietnam is expected to adopt International Financial Reporting Standards (IFRS) in 2017 in its efforts to improve transparency and increase comparability. It is planned that between 2017 and 2020, some IFRS standards will be chosen to be used in practice, and then will become applicable for some companies from 2020. From 2023 to 2025, all Vietnam firms will have to apply these new standards.
Corporate Income tax in Vietnam
Vietnam Corporate Income tax is applicable to Limited Liability Companies, Joint Stock Companies and Commercial Branches that generate profits.
The standard corporate income tax is 20 % as from 1 January 2016. Companies engaging in the exploration of oil and gas and mineral resources are subject to tax rate ranging from 32% to 50%.
Corporate income tax can be reduced where the investment is made in regions with difficult socio-economic conditions and investment in certain qualified industrial parks. Such investments qualify for tax incentives (e.g. corporate income tax reduction, corporate income tax holidays) and their availability depends on the region of incorporation and business activities.
Company losses may be carried forward for up to 5 years to offset against taxable income.
Withholding tax in Vietnam
For Corporate Income Tax in Vietnam, the following non-treaty rates will apply:
- Dividends paid by a company in Vietnam to its corporate shareholder are not subject to tax, this includes dividends remitted overseas. However, a 5% withholding tax is imposed on dividends paid to individual.
- Royalties and license fees paid to a non-resident are subject to a 10% withholding tax.
- Interest paid (e.g. loan from foreign entities) to a non-resident is subject to a 5% withholding tax.
- Payments for most services are subject to 5% withholding tax.
It is important to note that a further deduction at source, for Value-Added Tax, can be applied to some payments from overseas contractors. For instance, the supply of most of the services to an overseas contractor will be subject to a VAT rate of 5% which will be deducted at source by the Vietnamese party.
Value Added Tax (VAT) in Vietnam
VAT is levied on the sale of goods and the provision of services in Vietnam. The standard VAT rate in Vietnam is 10% which applied to most goods and services. However, a reduced rate of 5% VAT is levied on certain goods and services in the farming, healthcare, media, technical and scientific categories.
Goods and services provided directly to foreign companies are subject to 0% VAT if they are consumed outside Vietnam or in non-tariff areas. Also, certain agricultural products, medical services, printing and publishing and foreign currency trading are exempted from VAT.
Companies in Vietnam are expected to register for VAT immediately upon receiving a business licence. Currently, there is no VAT registration threshold.
Monthly filing and payment of VAT must be made by the 20th day of the following month.
Personal Income tax in Vietnam
Generally, Vietnamese residents are taxed on their worldwide income, while non-residents are taxed only on Vietnamese sourced income.
Employment income of residents is taxed progressively, at rates ranging from 5% to 35%. For non-residents, a flat rate of 20 % is applied.
Non-employment income (e.g. dividends and capital gains from securities trading) is taxed at rates, ranging from 0.1% to 20%, which apply to both residents and non-residents.
Vietnam Double Tax treaty network
Vietnam has concluded a significant number of Double Tax Treaties (“DTA”). These treaties effectively eliminate double taxation through identifying exemptions or reducing the amount of taxes payable in Vietnam.
As of March 2016, Vietnam has signed Double Taxation Agreements with more than 60 countries, including G8 countries including France, UK, Canada, Germany, Italy, Japan.
Australia – Austria – Azerbaijan – Bangladesh – Belarus – Belgium – Brunei – Bulgaria – Canada – China – Cuba- Czech Republic – Denmark – Egypt – Finland – France – Germany – Hong Kong – Hungary – Iceland – India – Indonesia – Ireland – Israel – Italy – Japan – Korea Republic – Kuwait – Laos – Luxembourg – Malaysia – Mongolia – Morocco – Myanmar – Netherlands – New Zealand – Norway – Oman – Pakistan – Palestine – Philippines – Poland – Qatar – Romania – Russia – Saudi Arabia – Seychelles – Singapore – Slovakia – South Korea – Spain – Sri Lanka – Sweden – Switzerland – Taiwan – Thailand – Tunisia – UAE – UK – Ukraine – Uzbekistan – Venezuela