TAX INCENTIVES IN VIETNAM
Tax incentives have played an important role in attracting FDI into Vietnam over the past decades. The effectiveness of the tax incentives policy is evident from the amount of foreign investment capital influx into the country. Vietnam’s government has adjusted its regulations to boost foreign investment as well as maintain a rapid and sustainable development.
These benefits include reduction or even exemption from the following taxes:
– Corporate income tax
– Import tax
– Land rental or land use tax
Under Vietnam Law, tax incentives are granted based on regulated encouraged sectors and difficult socio-economic locations.
Taxes in Vietnam
Corporate income tax (CIT)
The standard corporate income tax (CIT) imposed in Vietnam is at a 20% flat rate.
Compare to other markets in South-East Asia, Vietnam already imposes very competitive corporate taxes and that is one of the reasons why a lot of investors opt for Vietnam
| Country | Corporate Income Tax (CIT) |
| Vietnam | 20% |
| Malaysia | 24% |
| China | 25% |
| Indonesia | 25% |
| Philippines | 30% |
Source:Trading Economics
Value-added tax (VAT)
Value-added tax is applied to goods and services and can be either 0%, 5% or 10%. In most cases, the VAT is levied at 10%.
Personal income tax (PIT)
Personal income tax in Vietnam is progressive for both local and foreign residents. The PIT rates in Vietnam vary from 5-35%, depending on the income of the individual. However, non-residents are subject to 20% flat of personal income tax.
Import-export taxes
The payable import/export tax amount is equal to the unit volume of each actually imported/exported goods item.
Special sales tax (SST)
Special sales tax is a form of excise tax that applies to the production or import of certain goods and the provision of certain services. Goods and services that are subject to SST are also subject to VAT. Tax rates can be flexible from 10% up to 70% depending on the products/services
The Law on SST classifies objects subject to SST into two groups:
– Commodities: cigarettes, liquor, beer, automobiles having less than 24 seats, motor-cycle, airplane, boat, petrol, …
– Service activities: discotheque, massage, karaoke,…
Tax incentives in Vietnam
Corporate income tax incentives in Vietnam
Beside the favorable CIT, there are tax incentives available for investments on promoted sectors and promoted location.
There are two main types of tax incentives in Vietnam:
Preferential tax rates
Depending on the sectors, CIT preferential tax rate can be either 10% (planting, protection of forests, agriculture… in areas with difficult socio-economic conditions); 15% (cultivation, processing in agriculture and fishery in areas without difficult socio-economic conditions) or 17% (people’s credit funds, cooperative banks, microfinance institutions).
This corporate income tax can be reduced for 10, 15 years or for the whole period of operation from the first year of revenue generation. After the incentive period, the standard CIT (currently at 20%) is applied.
Tax holidays
The holidays take the form of a complete exemption from CIT for a certain period (Normally two or four years) beginning immediately after the company first makes profits, followed by a period of four, five or nine years where tax is charged at 50% of the applicable rate. Generally, tax exemption kicks in once the company is in a taxable position or from the 4th year of revenue generation, whichever is earlier.
In which condition you can apply for a tax incentives?
High-priority products in Vietnam
As stated in Decree No. 111/2015/ND-CP, investment projects that involve manufacturing of materials, accessories, components, and spare parts used for assembling goods in certain industries are also eligible for tax incentives in Vietnam.
This includes the following industries:
– Automobile industry
– Electronics industry
– Mechanical fabrication sector
– Textile and garment industry
– Footwear and leather industry
– Supporting products used in high-tech industry
Tax incentives for prioritized industries in Vietnam
Vietnam offers investment incentives for projects that engage in business lines that are highly encouraged by the government. These prioritized industries can broadly be divided into three categories:
– High-tech industries, such as information technology, electronics, mechanics
– Projects that improve social conditions in Vietnam, such as environmental protection, healthcare, infrastructure construction
– Large-scale and labor-intensive projects
Tax incentives in disadvantaged regions
Vietnam offers tax reduction and exemption for investors who invest in areas with poor socio-economic situations to encourage and boost development in these regions.
For example, in areas which:
– have poor infrastructure
– experience labor force shortage
– are situated in remote rural areas
As stated in Decree No. 118/2015/ND-CP, these areas are classified as disadvantaged or extremely disadvantaged depending on the level of development.
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