VIETNAM Law and Practice Contributed by: Ngoc Luong Trinh, Tung Nguyen, Hanh Vo, Esko Cate, Nguyen Dang, Khanh Le, Hoang Nguyen and Truc Ta, VILAF
while non-tax residents are taxed at 20% on Vietnam- sourced income. Both Vietnamese employees and employers are required to contribute to compulsory insurances, sub - ject to statutory caps: • employee contributions include 8% social insur - ance, 1.5% health insurance and 1% unemploy - ment insurance; and • employer contributions include 17.5% for social insurance, 3% for health insurance and 1% for unemployment insurance. 5.2 Taxes Applicable to Businesses A company is generally subject to taxation in Vietnam if it is established under Vietnamese law or has income sourced from Vietnam. The principal taxes applicable to companies doing business in Vietnam include: Corporate Income Tax (“CIT”) CIT rates in Vietnam generally range from 15% to 50%, depending on the taxpayer’s revenue level and the nature of its business activities. The standard CIT rate is 20%. Reduced rates of 15% and 17% apply to certain enterprises meeting prescribed revenue thresholds, while higher rates ranging from 25% to 50% apply to oil and gas exploration and produc - tion activities and certain precious and rare natural resource extraction activities. Expenses are generally deductible for CIT purposes where they are incurred in relation to the taxpayer’s business operations and income-generating activities, are supported by suf - ficient supporting documents and are not specifically excluded from deductibility under the prevailing tax regulations. Value-Added Tax (“VAT”) Vietnam applies three VAT rates: 0%, 5% and 10%. The 0% rate generally applies to exports and certain international services; the 5% rate applies to specified essential goods and services; and the standard 10% rate applies to all other taxable goods and services. Foreign Contractor Tax (“FCT”) FCT applies to foreign entities and individuals that earn income sourced from Vietnam under agreements with Vietnamese parties. FCT comprises VAT and CIT
or PIT, for the income of foreign individuals. Payments subject to the foreign contractor tax include interest, royalties, service fees, leases, insurance, transporta - tion, transfers of securities and goods supplied within Vietnam or associated with services rendered in Viet - nam. There are several options for tax declaration. However, the most common method is the direct method, where foreign contractors do not register for VAT purposes or file CIT or VAT returns. Instead, CIT and VAT are withheld by the Vietnamese party from the payments made to the foreign contractor. Import and Export Duties Import and export duty rates are subject to frequent changes and it is always prudent to check the latest position. Import duty rates are classified into three cat - egories: ordinary rates, preferential rates and special preferential rates. Preferential rates apply to imported goods from countries that have Most Favoured Nation (MFN, also known as Normal Trade Relations) status with Vietnam. The MFN rates are in accordance with Vietnam’s WTO commitments and apply to goods imported from other WTO member countries. Other Taxes Depending on the taxpayer’s business activities and industry sector, additional taxes may be applicable, including special sales tax, natural resources tax, environmental protection tax and other taxes pre - scribed under Vietnamese tax laws. Qualified Domestic Minimum Top-Up Tax rule and Income Inclusion Rule Effective from 1 January 2024, Vietnam applies the OECD Pillar Two Global Minimum Tax regime through the Qualified Domestic Minimum Top-Up Tax rule and Income Inclusion Rule. The regime is designed to ensure that in scope multinational enterprise groups are subject to a minimum level of taxation in accord - ance with the OECD’s Global Anti-Base Erosion rules. 5.3 Available Tax Credits/Incentives Vietnam does not generally provide tax credits. Instead, tax incentives are primarily granted through preferential Corporate Income Tax (“CIT”) rates, CIT exemptions and reductions and land rental incentives.
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