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1axa t ion

General overview
Most Ioreign investments and Ioreign investors will be aIIected by the Iollowing taxes:
Business income tax;
Various withholding taxes;
Capital assignment proIits tax;
Value added tax;
Import duties;
Personal income tax oI Vietnamese and expatriate employees;
Social insurance, unemployment insurance and health insurance.

There are various other taxes that may aIIect certain invest ors, including:
Special sales tax;
Natural resources tax;
Property taxes; and
Export duties.

All these taxes are imposed at the national level. There are no local, state or provincial taxes.

BUSIAESS IACOME 1AX ("BI1"

Rates of tax
Taxpayers are subject to the tax rates imposed under the BIT Law. The standard BIT rate is 25.
Enterprises operating in the oil and gas industry will be subject to BIT rates ranging Irom 32 to 50
depending on each project.

Tax incentives
Tax incentives are granted based on regulat ed encouraged sectors and diIIicult socio-economic
locations. The sectors which are encouraged by the Vietnamese Government include education, health
care, sport / culture, high technology, environmental protection, scientiIic research, inIrastructural
development and computer soItware manuIacture.

The two preIerential rates oI 10 and 20 are available Ior 15 years and 10 years respectively, starting
Irom the commencement oI operating activities. When the preIerential rate expires, the BIT rate
reverts to the standard rate.

Taxpayers may be eligible Ior tax holidays and reductions. The holidays take the Iorm oI a complete
exemption Irom BIT Ior a certain period beginning immediately aIter the enterprise Iirst makes proIits,
Iollowed by a period where tax is charged at 50 oI the applicable rate. However, where the enterprise
has not derived proIits within 3 years oI the commencement oI operations, the tax holiday/ tax
reduction will start Irom the Iourth year oI operation. Criteria Ior eligibility to these holidays and
reductions are set out in the BIT regulations.

Additional tax reductions may be available Ior engaging in manuIacturing, construction, and
transportation activities which employ many Iemale staII, and employing et hnic minorities.

Tax incentives do not apply to other income, which is broadly deIined.

Calcul a t io n of t axabl e p rofits
Taxable proIit is the diIIerence between total revenue, whether domestic or Ioreign sourced, and
deductible expenses, plus other assessable income.

Taxpayers are required to prepare an annual BIT return which includes a section Ior making
adjust ments bet ween accounting proIits and taxable proIits.

on-deductible e xpenses
Expenses which relate to the generation oI revenue, t hat are properly supported by suitable
documentation and are not speciIically identiIied as being non-deductible are tax deductible.
Examples oI non-deductible expenses include:
epreciation oI Iixed assets which is not in accordance with the prevailing regulat ions;
Employee remuneration expenses which are not actually paid or are not stated in a labour
contract or collective labour agreement;
LiIe insurance premiums Ior employees;
The portion oI costs oI raw materials, materials, Iuel or goods which are used in excess oI the
reasonable consumption levels;
Interest on loans corresponding to the portion oI chart er capital not yet contributed;
Interest on loans Irom non-economic and non-credit organisations exceeding 1.5 times the interest rate
set by the State Bank oI Vietnam;
Reserves Ior research and development not in accordance with the prevailing regulations;
Provisions Ior stock devaluation, bad debts, Iinancial investment losses, product warranties, or
construction work which are not in accordance with the prevailing regulations;
Advertising, promotion (except certain it ems), conIerences/ parties, commissions, prompt payment
discounts exceeding 10 oI total other deductible expenses (this cap is increased to 15 Ior newly-
established enterprises Ior the Iirst 3 operating years);
Unrealised Ioreign exchange losses due to the revaluation oI Ioreign currency items other than account
payables at the end oI a Iinancial year;
onations except certain donations Ior education, health care, natural disasters, or building charitable
homes Ior the poor;
Management expenses allocated to per manent establishments in Vietnam by the Ioreign company` s
head oIIice which are not in accordance with the regulations;
Administrative penalties, Iines;
Creditable input value added tax, business income tax, and other Iees/ charges;
For certain businesses such as insurance companies, securities trading, and lotteries, the Ministry oI
Finance provides speciIic guidance on deductible expenses Ior BIT purposes.

Business entities in Vietnam are allowed to set up a tax deductible Research and evelopment Iund.
Enterprises can appropriate up to 10 oI annual proIits beIore tax to the Iund. Various conditions
apply.

Losses
Taxpayers may carry Iorward tax losses Iully and consecutively Ior a maximum oI Iive years.

Losses oI non-incentivised activities can be oIIset against proIits Irom incentivised activities, and vice
versa.

Carry-back oI losses is not permitted. There is no provision Ior any Iorm oI consolidated Iiling or group
loss relieI.

Transfer prici ng
Vietnam has transIer pricing regulations which outline various situations where transactions will be
considered as being between related parties and the mechanisms Ior deter mining the market 'arm`s
length transaction value, e.g. comparable uncontrolled price, cost plus, resale price, comparable
proIits and proIit split.

Under the wide ranging deIinition oI associated parties, the control threshold is lower than in many
ot her countries (20), and the deIinition also extends to certain signiIicant supplier, customer and
Iunding relationships between otherwise unrelated parties.

Compliance requirements include an annual declaration oI related party transactions and transIer
pricing methodologies used, which is required to be Iiled together with the annual BIT return.

Companies which have related party transactions must prepare and maintain contemporaneous
transIer pricing documentation.

dmi nistration
Provisional quarterly BIT returns must be Iiled and taxes paid by the 30th day oI the Iirst month oI the
subsequent quarter.

Final BIT returns are Iiled annually. The annual BIT return must be Iiled and submitted not later than
90 days Irom the Iiscal year end. The outstanding tax payable must be paid at the same time the annual
BIT return is submitted.

Where a taxpayer has dependent branches in diIIerent provinces, a single BIT return is required.
However, manuIacturing enterprises are required to allocate tax payments to the various provincial
tax authorities in the locations where they have manuIacturing branches. The basis Ior allocation is the
proportion oI expenditure spent by each branch over the total expenditure oI the company.

The standard tax year is the calendar year. However, diIIerent tax and accounting year-ends can be
used iI approval is obtained Irom the Ministry oI Finance.

ProIit r e mi t t anc e
Foreign investors shall be per mitted to remit their proIits annually at the end oI the Iinancial year or
upon termination oI the investment in Vietnam. Foreign invest ors are not permitted to remit proIits iI
the invest ee company has accumulated losses.

The Ioreign investor or the investee company are required to notiIy the tax authorities oI the plan to
remit proIits at least 7 working days prior to the scheduled remittance.

oreign Contractor Withholding 1ax("CW1")


FCWT applies to payments oI interest, royalties, licence Iees, Ioreign contractors` Iees, cross
border leases, insurance/ reinsurance, airline and express deliver y charges.

ividends
No wit hholding or remittance tax is imposed on proIits paid to Ioreign corporate shareholders.

Interest
An interest wit hholding tax oI 10 applies to interest paid on loans Irom Ioreign entities. Pre
1999 loans may be exempt. OIIshore loans provided by cert ain Government or semi-Government
institutions may obtain an exemption Irom interest wit hholding tax where a relevant ouble
taxation agreement or Inter-Governmental Agreement applies.

Interest earned Irom bonds (except Ior tax exempt bonds) and certiIicates oI deposit are subject to
10 wit hholding tax. The sale oI bonds and certiIicates oI deposits are subject to deemed tax oI
0.1 oI the gross sales proceeds.

Royalties, licence fees , etc.
A 10 royalty wit hholding tax applies in the case oI payments made to a Ioreign party Ior
transIers oI technology. TransIers oI technology are deIined broadly.

reight & transportation services
The Iormer Ireight tax was abolished eIIective 1 January 2009. Foreign entities perIorming
transportation ser vices are now subject to the FCWT.

Payments to foreign co ntractors
A withholding tax on payments to Ioreign contractors applies where a Vietnamese contracting part y
(including Ioreign owned enterprises) contracts with a Ioreign party that does not have a licensed
presence in Vietnam.

This FCWT generally applies to payments derived in Vietnam Ior services provided in Vietnam and
overseas, except Ior the pure supply oI goods, services perIor med and consumed outside Vietnam, and
various other services perIormed wholly outside Vietnam (e.g. certain repairs, training, advertising,
promotion etc).

Foreign contractors can choose between three methods Ior tax payment.

Method One Deduction Met hod
Foreign contractors can register Ior VAT iI they meet the requirements below:
They have a per manent establishment ('PE) or are tax resident in Vietnam;
The duration oI the project in Vietnam is more than 182 days;
They adopt the Iull Vietnamese Accounting System ('VAS).

The Vietnamese customer is required to notiIy the tax oIIice that the Ioreign contractor will pay tax
under t he deduction method within 20 working days Irom the date oI signing the contract.

II the Ioreign contractor carries out many projects, and qualiIies Ior application oI the deduction
method Ior one project, the contractor is required to apply t he deduction method Ior its other
projects as well.

The Ioreign contractor will pay BIT at 25 oI its net proIits.
Method Two Direct Met hod
irect method Ioreign contractors do not register Ior VAT. VAT and BIT will be withheld by the
Vietnamese contracting party at deemed percentages oI taxable turnover. Various rates are speciIied
according to the nature oI the services perIormed. The VAT withheld by the contracting party is
generally an allowable input credit in the Vietnamese contracting party`s VAT return.

Method Three Hybrid Met hod
The hybrid met hod allows Ioreign contractors to regist er Ior VAT and accordingly pay VAT based on
the conventional method (i.e. output VAT less input VAT), but with BIT continuing to be subject to
deemed rates.

Foreign contractors wishing to adopt the hybrid met hod must :
Have a PE in Vietnam or be tax resident oI Vietnam;
Operate in Vietnam under a contract with a term oI more than 182 days;
Maintain accounting records in accordance with the accounting regulations and guidance oI the
Ministry oI Finance.




The VAT and BIT rates are summarised below:
#,tes


Industry
Effective VT
rate
eemed
BIT
rate
Trading: distribution, supply oI goods, materials, machinery and equipment in
Vietnam.

Exempt (*)

1

Services

5

5
Services together with supply oI machinery and equipment

3

2
Construction, installation** wit hout supply oI materials or machinery, equipment.
5

2


Industry
Effective VT
rate
eemed BIT
rate
Construction, installation** with supply oI materials or
machinery, equipment.

3

2

Leasing oI machinery and equipment

5

5
Leasing oI aircraIt, vessels (including components)

Not speciIied

2

Transportation

3

2

Interest

Exempt

10

Royalties

Exempt

10

Insurance

Exempt

2

TransIer oI securities

Exempt

0.1

ManuIacturing, other business activities

3

2

* on the basis import VAT is paid
** relates to VAT only

ouble taxation agreements (~Ts)
The above withholding taxes may be aIIected by relevant TAs. For example, the deemed BIT on
Ioreign contractors may be eliminated or reduced through a relevant TA.

Vietnam has more than 60 agreements signed, and numerous others at various stages oI
implementation and negotiation. The agreements in Iorce include those with Australia, France,
Germany, Japan, Korea, Malaysia, the Netherlands, Singapore, Thailand, Hong Kong and the United
Kingdom, etc. Notably absent is a TA with the United States oI America. A summary oI the provisions
oI some key TAs is given in Appendix I.

,5it, Assignment Pro fit s T,

Gains on transIers oI interests (as opposed to shares) in a Ioreign invested or Vietnamese enterprise
are subject to 25 BIT. The taxable gain is deter mined as the excess oI the sale proceeds less cost
(or the initial value oI contributed charter capital Ior the Iirst transIer) less transIer expenses.

Where the vendor is a Ioreign organisation or Ioreign individual, the purchaser is required to
wit hhold the tax due Irom the payment to the vendor, and account Ior this to the tax aut horities.
The return and payment is required within 10 days Irom the date oI the approval oI the
assignment.

TransIers oI securities (bonds, shares oI public joint stock companies, etc.) are subject to BIT on a
deemed basis at 0.1 oI the total value oI the disposal proceeds.

'alue Added 1ax ("'A1")

$cope of application
VAT applies to goods and services used Ior production, trading and consumption in Vietnam
(including goods and services purchased Irom abroad). In each case t he business must charge
VAT on the value oI goods or services supplied.

In addition, VAT applies on the duty paid value oI imported goods. The importer must pay VAT to
Cust oms at the same time that they pay import duties.

VAT payable is calculated as the output VAT charged t o customers less the input tax suIIered on
purchases oI goods and services. For input tax to be creditable, t he taxpayer must obtain a proper
VAT invoice Irom t he supplier.

Exempt goods and services
There are stipulated categories oI VAT exempt ions, including:
Certain agricultural products;
Imported leased drilling rigs, aeroplanes and ships oI a type which cannot be produced in Vietnam;
TransIer oI land use rights;
Financial derivatives and credit services; Certain insurance services
O(including liIe and non-commercial nsurance);
Medical services;
Teaching and training;
Printing and publishing oI newspapers, magazines, and certain types oI books;
Certain cultural, artistic, sport services/products;
Passenger transport by public buses;
TransIer oI technology and soItware services, except exported soItware which is entitled to 0 rate;
Gold imported in pieces which have not been processed into jewerery;
Exported unprocessed mineral products such as crude oil, rock, sand, rare soil, rare stones, etc;
Imports oI machinery, equipment and special means oI transport which are directly Ior use in
technology research and development activities and which cannot be made in Vietnam;
Equipment, machinery, spare parts, specialised means oI transportation and necessary materials
used Ior prospecting, exploration and development oI oil and gas Iields (which cannot be produced
in Vietnam);
Goods imported in the Iollowing cases: international non-reIundable aid, including Irom OIIicial
evelopment Aid, Ioreign donations to government bodies and to individuals (subject to
limitat ions).

Rates of tax
There are three rates as Iollows:
0 This rate applies to exported goods including goods sold to enterprises without permanent
establishments in Vietnam (including companies in non-tariII zones), goods processed Ior export,
goods sold to duty Iree shops, exported services, construction and installation carried out abroad or Ior
export processing ent erprises, aviation, marine and int ernational transportation services.

5 This rate applies generally to areas oI the economy concerned with the provision oI essential goods
and services. This includes: clean water; Iertiliser production; teaching aids; books; IoodstuIIs;
medicine and medical equipment; husbandry Ieed; various agricultural products and services,
technical/scientiIic services; rubber latex; sugar and its by-products.
10 This 'standard rate applies to activities not speciIied as exempt or subject to 0 or 5.

When a supply cannot be readily classiIied based on the tax tariII, VAT must be calculated based on the
highest rat e applicable Ior the particular range oI goods which the business supplies.

Exported services
Services rendered to Ioreign companies, including companies in non-tariII areas, will be subject to 0
VAT iI the Iollowing conditions are met:
The Ioreign company has no PE in Vietnam. (PE is not deIined in the VAT regulations and the
deIinition under the domestic BIT regulations will apply in this respect); and
The Ioreign company is not a VAT registrant or payer in Vietnam.

Various supporting documents are required in order to apply 0 VAT to exported goods and services
e.g. contracts, payment via bank transIer, customs declaration (Ior exported goods only).

There are a number oI services speciIied in the VAT regulations which will not qualiIy Ior 0 VAT, in
particular various services provided to non-tariII areas, including leasing oI houses; transport services
Ior employees to and Irom their work place; and catering services (except Ior meals provided Ior
employees in the non-tariII areas and catering services operated in the non-tariII areas).

Calculation of output tax
The output tax to be charged is calculated by multiplying the taxable price (net oI tax) by the
applicable VAT rate. With respect to imported goods, VAT is calculated on the import dutiable price
plus import duty plus special sales tax (iI applicable). For goods sold on an instalment basis (except Ior
real estate), VAT is calculated on the total price without interest, rather than the instalments actually
received.
Input tax credits
Input credits can be claimed in the month in which the invoice is issued. For imports, input credits are
based on the date oI payment to the Customs oIIice. Input credits can be declared and claimed within 6
months Irom the month they arise. Input VAT credits can only be claimed where payments are made
through the banking system, except Ior purchases oI less than VN20 million or certain situations
where oIIsets can be proven. Input VAT withheld Irom payments to overseas suppliers (i.e. under the
Ioreign contractor withholding tax system) can also be claimed.

II a business sells exempt goods or services, it cannot recover any input tax paid on its purchases. This
contrasts with the application oI 0 VAT, where the sales are within the VAT system (albeit at a VAT
rate oI zero), and hence input tax can be recovered. Where a business generat es bot h taxable and
exempt sales, it can only claim an input tax credit Ior the portion oI inputs used in the taxable activity.

iscounts and promotions
Price discounts generally reduce the value on which VAT applies. However, certain types oI discounts
may not be permitted as a reduction beIore the calculation oI VAT, and various rules and conditions
apply.

Goods and services used internally
Goods and services used internally by a business are taxable at selling price.

dmi nistration
All organisations and individuals producing or trading in taxable goods and services in Vietnam must
register Ior VAT. In certain cases, branches oI an enterprise must register separately and declare VAT on
their own activities.
Taxpayers must Iile VAT returns monthly, by the 20th day oI the Iollowing month. Taxpayers paying
tax under the deduction method are not required to lodge an annual VAT Iinalisation or
reconciliation.
Refunds
Where the taxpayer`s input VAT Ior the period exceeds its output VAT, it will have to carry the
excess Iorward Ior three mont hs. It can then claim a reIund Irom the tax aut horities. In certain
cases (e.g. exporters where excess input VAT credits exceed VN 200 million), a reIund may be
granted on a monthly basis. Newly established entities in a construction period and having no
output VAT may claim VAT reIunds on a yearly basis or more Irequently depending on the
amount oI input VAT incurred.

Newly established entities and certain invest ment projects which are in pre-operation stage may
be entitled to reIunds Ior VAT paid on i mported Iixed assets based on shorter timelines than
normal, subject to conditions.

Tax i nvo ices
Entities in Vietnam can use pre-printed invoices, selI-printed invoices or electronic invoices. The
tax invoice template must contain stipulated items and be registered with the local tax authorities.

Special Sales 1ax ("SS1")

SST is a Iorm oI excise tax that applies to the production or import oI certain goods and the
provision oI cert ain services. Goods and services that are subject to SST are also subject to VAT.
The Law on SST classiIies objects subject to SST into t wo groups:
1. Commodities - cigarettes, liquor, beer, automobiles having less than 24 seats, motorcycle,
airplane, boat, petrol, air-conditioners up to 90,000 BTU, playing cards, votive papers; and
2. Service activities - discot heque, massage, karaoke, casino, gambling, golI clubs, entertainment
with betting and lott eries.

The tax rates are as Iollows:

Products / services Tax rates
Cigar/Cigarett e 65
Spirit/Wine 25 - 45
Beer 45
Automobiles having less than 24

10 - 60
Motorcycle oI cylinder capacity

20
Airplane 30
Boat
30
Petrol
10
Air-conditioners (not more

10
Playing cards
40
Votive paper 70
Products / services Tax rates
iscot heques
40
Massage, karaoke
30
Casinos, jackpot games
30
Entertainment with betting
30
GolI
20
Lottery
15

Aatural Resources 1ax

Natural resources tax is payable by industries exploiting Vietnam`s natural resources such as
petroleum, minerals, Iorest products, seaIood and natural wat er.

The tax rates vary depending on the natural resource being exploited and are applied to the
production output at a speciIied taxable value per unit. Various methods are available Ior the
calculation oI the taxable value oI the resources, including cases where t he commercial value oI
the resources cannot be det er mined.

!ropert y 1axes

The rental oI land use rights by Ioreign investors (iI not contributed as capital) is in eIIect a Iorm
oI propert y tax. It is usually known as land rental and the range oI rates is wide depending upon
the location, inIrastructure and the industrial sector in which t he business is operat ing.

Environment !rot ection 1ax

The Law on environment protection tax shall take eIIect Irom
1 January 2012.

The environment protection tax is an indirect tax which is applicable upon the production and
importation oI certain goods including petroleum products. The tax is calculated as an absolute
amount on the quantity oI t he goods.
Import And Export Duties

Rates
Import and export duty rates are subject to Irequent changes and it is always prudent to check the
lat est position.

Import duty rates are classiIied into 3 categories: ordinary rates, preIerential rates and special
preIerential rates. PreIerential rates are applicable to import ed goods Irom countries that have
Most Favoured Nation (MFN, also known as Normal Trade Relations) stat us with Vietnam. The
MFN rates are in accordance with Vietnam`s WTO commit ments and are applicable t o goods
imported Irom other member countries oI t he WTO.

Special preIerential rates are applicable to imported goods Irom countries that have a special
preIerential trade agreement with Vietnam. Vietnam has special preIerential trade agreements
with the ASEAN member states, Japan and China.

Also, as part oI ASEAN, Vietnam has special preIerential trade agreements with:
China;
Korea;
Ja p a n;
Australia and New Zealand;
India (signed but not yet in Iorce).

To be eligible Ior preIerential rates or special preIerential rates, the imported goods must be
accompanied by an appropriate CertiIicate oI Origin ('C/O). Without such a C/O, or when goods
are sourced Irom non-preIerential treat ment countries, the ordinary rate (being the MFN rate with
a 50 surcharge) is imposed.

Calcul ati o ns
In principle Vietnam Iollows the WTO Valuation Agreement with certain variations. The dutiable
value oI imported goods is typically based on the transaction value (i.e. the price paid or payable Ior
the imported goods, and where appropriate, adjusted Ior cert ain dutiable or non-dutiable
elements). Where t he transaction value is not applied, alternative met hodologies Ior the
calculation oI the customs value will be used.

SST applies to some products in addition to import duties. VAT will also be applied on all
imported goods and services (unless exempt under the VAT regulat ions).

Exempti o ns
Import duty exemptions are provided Ior projects which are listed as encouraged sectors and
goods imported in certain circumst ances.

There are 20 categories oI import duty exempt ion, including:
Machinery & equipment, specialised means oI transportation and construction materials (which
cannot be produced in Vietnam) comprising t he Iixed assets oI certain projects.
Raw materials, spare parts, accessories, other supplies, samples, machinery and equipment
imported Ior the processing oI goods Ior export and Iinished products imported Ior use in the
processed goods.

Currently, export enterprises do not pay import duties on raw materials where the products are
destined Ior export. However, where the enterprise does not, or is not expected to, export the
Iinished product within 275 days the local Customs epart ment will charge t emporary import
duty on the raw materials. Penalties Ior lat e payment can apply. Where the enterprise actually
exports the Iinished product, a reIund will be provided in proportion to the raw materials
contained in t he exports.
Machinery, equipment, specialised means oI transportation, materials (which cannot be
produced in Vietnam), health and oIIice equipment imported to use Ior oil and gas activities.
Exemptions are also available, inter alia, Ior Build-Operate- TransIer enterprises, including t heir
sub-contractors and Ior direct production oI soIt ware.
Goods imported by courier with a value oI up to VN1 million.

Refunds
There are various cases where a reIund oI paid import duties is possible, including Ior:

Goods Ior which import duties have been paid but which are not actually physically import ed;
Imported raw materials that have not yet been used in production and which must be re-
exported t o Ioreign owners or re-exported to a third country or t o a non-tariII area;
Imported raw materials that were imported Ior the production oI products Ior the domestic
market but are later used Ior the processing oI goods Ior export under processing contracts with
Ioreign parties.

Export duti es
Export duties are charged only on a Iew items, basically natural resources such as sand, chalk,
marble, granite, ore, crude oil, Iorest products, and scrap metal etc. Rat es range Irom 0 to 33.
The price Ior t he computation oI export duties is Free on Board /elivered at Irontier price, i.e.
selling price oI goods at the port oI departure as stated in the contract, excluding Ireight and
insurance costs.

!ersonal Income 1ax ("!I1")

Tax resi dency
Residents are those individuals residing in Vietnam Ior 183 days or more in a calendar year, or in
12 consecutive months Irom the Iirst date oI arrival; or those having a permanent residence in
Vietnam (including a regist ered residence which is recorded on the per manent/ temporary
residence card in case oI Ioreigners). Where an individual stays in Vietnam Ior more than 90 days
but less than 183 days in a tax year, the individual will be treated as a tax non-resident iI he/ she
can prove t hat t hey are tax resident oI anot her country.

Tax residents are subject to Vietnamese PIT on t heir worldwide taxable income, wherever it is
paid or received. Employment income is taxed on a graduated tax rates basis. Non-employment
income is taxed at a variety oI diIIerent rat es.

Individuals not meeting the conditions Ior being tax residents are considered tax non-residents in
Vietnam. Non-residents are subject to PIT at a Ilat tax rate oI 20 on the income received as a
result oI working in Viet nam in the tax year, and at various other rates on their non-employment
income. However, this will need to be considered in light oI the provisions oI any TA that might
apply.

Employment i nco me
The deIinition oI taxable employment income is broad and includes all cash remuneration and
beneIits-in-kind. However, the Iollowing items are not subject to tax:
Payments Ior business trips (subject to a cap);
Payments Ior telephone charges (subject to a cap);
Payments Ior uniIor m/stationery costs (subject to a cap);
Overtime premium (i.e. the additional payment above the normal wage, not the Iull amount oI
t he overtime/nightshiIt payment);
One-oII allowance Ior relocation to Vietnam;
Once per year home leave round trip airIare Ior expatriate employees;
School Iee Ior expatriates` children Irom primary to high school in Vietnam;
Training;
Mid-shiIt meals (subject to a cap iI the meals are paid in cash);
Certain beneIits in kind provided on a collective basis (e.g. membership Iee, entertainment,
healt hcare, transportations to and Irom work)
There are a range oI conditions and restrictions applicable to the above exempt ions.

on - employment i nco me
Taxable non - employment income includes:
Business income (e.g. rental income);
Invest ment income (e.g. interest, dividends);
Gains on sale oI shares;
Gains on sale oI real estate;
Inheritances in excess oI VN10 million.

on taxable i nco me
Non taxable income includes:
Interest earned on deposits with credit institutions/banks and on liIe insurance policies;
Compensation paid under liIe/non-liIe insurance policies;
Retirement pensions paid under the Social Insurance law;
Income Irom transIer oI properties between various direct Iamily members;
Inheritances/giIts between various direct Iamily members.

oreign tax credits
In respect oI tax residents who have overseas income, PIT paid in a Ioreign country is creditable.
The credit shall not exceed the PIT amount payable on t he income in Viet nam.

Tax deducti o ns
Tax deductions include:
1. Contributions to mandatory social, health and unemployment insurance schemes;
2. Contributions to certain approved charities;
3. Tax allowances:
Personal allowance: VN48 million/year,
ependent allowance: VN1.6 million/ mont h. The dependent allowance is not automatically
grant ed, and the taxpayer needs to regist er qualiIying dependants and provide support ing
documents to the tax authority.

Personal i nco me tax rates
#esidents - em5oyment ,nd business income


nnual
Taxable
Monthly
Taxable
Income


Tax
rate
0 60 0 5 5
60 120 5 10 10
120 216 10 18 15
216 384 18 32 20
384 624 32 52 25
624 960 52 80 30
More than 960 More than 80 35
#esidents non-em5oyment income

Type of taxable income Tax
Interest / dividends 5
Sale oI securities: Net gain; or
Sales proceeds
20
0.1
Capital assignment Net gain 20
Sale oI real estat e: Net gain;
or Sales proceeds
25
2
Income Irom copyright 5
Income Irom

5
Income Irom winning prizes 10
Income Irom

10

Non-residents

Type of taxable

Tax rate
Employment income 20

Business income
1 - 5 (based on
type oI business
income)
Interest / dividends 5

Sale oI securities,
capital assignment
0.1 (on sales
proceeds)

Sale oI real estat e
2 (on sales
proceeds)
Income Irom royalties /

5
Income Irom 10

dmi nistration T, codes Individuals who have t axable income are required to obtain a tax
code.
Those who have taxable employment income must submit the tax
registration Iile to their employer who will subsequently submit this to the local tax oIIice. Those
who have ot her items oI taxable income are required to submit their tax registration Iile to the
district tax oIIice oI the locality where they reside.

T, dec,r,tions ,nd 5,yment
For employment income, tax has to be declared and paid provisionally on a monthly basis by the
20
th
day oI the Iollowing month. The amounts paid are reconciled t o t he total tax liability at year-
end. Expatriate employees are also required to carry out a PIT Iinalization on ter mination oI their
Vietnamese assignments beIore exiting Vietnam. Tax reIunds due to excess tax payments are only
available to those who have a tax code.

For non employment income, the individual is required to declare and pay PIT in
relation to each type oI taxable non employment income. The PIT regulations
require income to be declared and tax to be paid on a regular basis, oIten each time
income is received
.
Social, Healt h And Unemploym ent
Insurance

Social insurance ('SI) and unemployment Insurance ('UI) contributions are applicable to
Viet namese individuals only. Health insurance ('HI) contributions are required Ior Vietnamese
and Ioreign individuals that are employed under Viet nam labour contracts.


$I HI UI
Employ

6 1.5 1
Employ

16 3 1

SI/HI/UI contributions are as Iollows: The salary/ wages subject to SI/HI/UI contribution is the
salary/ wages stated in the labour contract, but is capped at 20 times the minimum salary (the
minimum salary is VN 730,000 per mont h).

Statutory SI, HI and UI employer contributions do not constitute a taxable beneIit to the employee.
The employee contributions are deductible Ior PIT purposes.

Other 1axes

Numerous other Iees and taxes can apply in Vietnam, including, business license tax and st amp
duty/registration Iees.

1ax Audits And !enalt ies

Tax audits are carried out regularly and oIten cover a number oI tax years. Prior to an audit, the
tax authorities send the taxpayer a written notice oI time and scope oI the audit inspection.

There are detailed regulations setting out penalties Ior various tax oIIences. These range Irom
relatively minor administrative penalties t hrough to tax penalties amounting to various multiples
oI the additional tax assessed.

The general statute oI limitations Ior imposing penalties is 5 years. The tax authorities can collect
under declared and unpaid tax at any time.

In practice, imposition oI penalties has been arbitrary and inconsistent. However in recent periods,
there has been a much tougher stance adopted by the tax authorities. Hence where tax is paid late,
as a result Ior example oI a tax audit investigation, there is a signiIicant likelihood oI penalties being
imposed.

Accounting And Audi t ing

Foreign-invested business entities are generally required to adopt the Vietnamese Accounting
Syst em ('VAS). II a company strictly Iollows the VAS, registration with the MoF is not required.
However, iI the VAS is modiIied, a written approval Irom the MoF is required beIore
implementation.

Accounting records are required to be maintained in VN. A Ioreign- invested business entity can
selI-assess to select a Ioreign currency to be used Ior its accounting records and Iinancial
statements and notiIy its local tax aut hority. Accounting records are required in Viet namese
language, alt hough a commonly-used Ioreign language can be used at the same time along with
the Vietnamese language. At the end oI the Iiscal year, the entity must perIorm a physical count oI
its Iixed assets.

The annual Iinancial statements oI all Ioreign-invest ed business entities must be audited by an
independent auditing company operating in Vietnam. Audited annual Iinancial statements must
be completed within 90 days Irom the end oI the year. These Iinancial stat ements should be Iiled
with the applicable licensing body, Ministry oI Finance, local tax authority, epartment oI
Statistics, and other local aut horities iI required by law.

Vietnam has issued 26 accounting standards and 37 auditing standards which are primarily based
on international standards, but with some local modiIications.
Certain provincial tax aut horities have used non-compliance with VAS as a mechanism to collect
additional tax. Such actions are supported by the tax regulations. Measures the tax aut hority can
take t o penalise non-compliance include:
The disallowance oI input VAT credits, and not just in the case oI
VAT reIunds.
The wit hdrawal oI BIT incentives.
Change oI the method Ior application oI BIT.
Appendix I
OUBLE TAXATION AGREEMENTS A summar y oI withholding tax rates is presented as Iollows:


Reci pi ent
Interest

Royalti e
s


otes
Algeria (*) - - -
Australia 10 10 -
Austria 10 7. 5/ 10 1, 3
Bangladesh 15 15 1,2
Belarus 10 15 1, 2
Belgium 10 5/ 10/ 15 1, 2, 3
Brunei 10 10 1,2
Bulgaria 10 15 1, 2
Canada 10 7. 5/ 10 3
China 10 10 2
Cuba 10 10 -
Czech Republic 10 10 2
enmark 10 5/ 15 1, 2, 3
Egypt (*) - - -
France Nil 10 -
Finland 10 10 -
Ger many 10 7. 5/ 10 2, 3
Hong Kong 10 7/ 10 2,3


Recipient
Interes
t

Royalti
es


otes
Hungary 10 10 -
Iceland 10 10 2
India 10 10 2
Indonesia 15 15 1, 2
Israel 10 5/ 7. 5/1

1, 2, 3

Italy 10 7.5/ 10 2, 3
Ireland 10 5/ 10/15 2
Japan 10 10 1, 2, 3
Korea

10 5/ 15 -
Korea

10 10 1, 2
Kuwait (*) - - -
Laos 10 10 -
Luxembourg 10 10 2
Malaysia 10 10 2
Mongolia 10 10 2
Morocco (*) - - -
Mozambique

- - -
Myanmar 10 10 1, 2, 3
Netherlands 10 5/ 10/15 2
Norway 10 10 1, 2
Oman 10 10 1, 2
Pakistan 15 15 1








Recipient
Interes
t

Royalt
i es


ote s
Philippines 15 15 1, 3
Poland 10 10/ 15 1, 2
Qatar (*) - - -
Romania 10 15 1
Russia 10 15 -
Saudi Arabia (*) - - -
Seychelles 10 10 1, 2, 3
Singapore 10 5/ 15 2
Slovakia - - -
Spain 10 10 1,2
Sri Lanka 10 15 1,2,3
Sweden 10 5/ 15 2
Switzerland 10 10 1
Taiwan 10 15 1,2
Thailand 10/ 15 15 2
Tunisia (*) - - -
UAE - - -
Ukraine 10 10 2
United Kingdom 10 10 1,2
Uzbekistan 10 15 -
Venezuela - - -

(*) not in Iorce yet
Notes.
1. In some cases the limits set by the treaty are not lower than the present withholding rate under domestic law.
ThereIore the domestic rates will apply.
2. Interest derived by certain government bodies is exempt Irom withholding tax.
3.Royalty withholding tax rates vary Ior certain types oI royalties.

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