Over the past decade, Vietnam has transformed into one of the most dynamic economies in Southeast Asia, attracting strong interest from foreign investors due to its open business environment, socio-political stability, reasonable operating costs, and attractive investment incentives. However, when investing and establishing a business in Vietnam, compliance with tax declaration obligations is among the primary concerns for foreign investors. In this article, LawPlus provides an overview of applicable regulations, tax declaration procedures, and key considerations to help foreign investors better understand the Vietnamese tax environment and develop an effective business strategy.
Table of Contents/Mục lục
1. Legal Provisions on Tax Obligations for Foreign Investors
Foreign investors may choose from a variety of investment forms in Vietnam, such as establishing an economic organization, contributing capital/purchasing shares, implementing investment projects, or entering into business cooperation contracts (BCCs). Depending on the specific investment form and business model, the investor will be subject to corresponding tax obligations under Vietnamese law.
Below are common taxes applicable to foreign investors:
Value-Added Tax (VAT):
VAT is an indirect tax levied on goods and services consumed in Vietnam. Pursuant to Article 2 of the 2008 Law on VAT (as amended and supplemented), taxable objects include goods and services used for production, business, and consumption in Vietnam (including imports). Current VAT rates include 0%, 5%, 8%, and the standard rate of 10%. When the 2024 Law on VAT comes into effect on July 1, 2025, only three rates will apply: 0%, 5%, and 10%. Foreign-invested enterprises conducting VAT-taxable business activities in Vietnam must declare VAT in accordance with the law.
Corporate Income Tax (CIT) for Foreign Organizations:
Under Article 2 of the 2008 Law on CIT (as amended and supplemented), foreign organizations with a permanent establishment in Vietnam or earning income in Vietnam from business activities are subject to CIT. The standard rate is 20%. Preferential rates of 10%, 15%, or 17% may apply for investments in incentivized sectors (e.g., high technology, education, healthcare) or in underdeveloped geographical areas pursuant to Article 13 of the same law. Taxable income includes business profits, service provision, capital transfers, and investment project transfers.
Personal Income Tax (PIT) for Foreign Individuals:
According to Article 2 of the 2007 Law on PIT (as amended and supplemented), taxpayers include both resident and non-resident individuals with taxable income as prescribed in Article 3, such as income from salaries and wages, capital investment, capital transfers, etc. The tax treatment varies based on residency status: residents are subject to progressive tax rates similar to Vietnamese nationals, while non-residents are subject to a flat 20% tax on employment income earned in Vietnam.
Foreign Contractor Tax (FCT):
FCT applies to foreign organizations and individuals without legal presence in Vietnam but earning income from providing services or services associated with goods in Vietnam. FCT is not a separate tax category but a policy mechanism to manage tax collection from foreign contractors. FCT comprises CIT and VAT (for foreign entities) or PIT and VAT (for foreign individuals).
Export and Import Duties:
These are indirect taxes levied on goods legally exported or imported across Vietnam’s borders. Pursuant to Article 2 of the 2016 Law on Export and Import Duties, taxable goods include those listed in the relevant tariff schedules, unless specifically exempted or excluded. There are two main tariff rates: preferential rates (applicable to goods originating from countries/territories with bilateral or multilateral trade agreements with Vietnam) and ordinary rates (applicable when preferential conditions are not met).
2. Tax Declaration Process in Vietnam
Tax declaration is a mandatory step and plays a crucial role in ensuring compliance with tax obligations in Vietnam. Whether the taxpayer is an individual or a legal entity, the declaration process must strictly follow legal procedures. The general process includes the following three stages:
a. Determining Tax Obligations
Investors must first determine whether their investment activities give rise to tax liabilities in Vietnam. This depends on the investment form (individual or organization, with or without local presence) and types of income earned (e.g., from business operations, asset transfers, employment income, service provision, etc.). Proper identification of applicable taxes such as VAT, CIT, PIT, export/import duties, etc., is essential to avoid errors, delays, or administrative penalties.
b. Tax Registration
Once tax liability is established, the investor must register with the tax authority to obtain a Tax Identification Number (TIN), which serves as a unique reference for tax management throughout the business’s presence in Vietnam. Depending on whether the taxpayer is an individual or entity, tax registration documents differ, based on Article 31 of the 2019 Law on Tax Administration and Circular No. 86/2024/TT-BTC (typically including: registration form, legal documents, investment certificate, etc.). Registration can be completed via the General Department of Taxation’s eTax portal or directly at the local tax office.
c. Preparation and Submission of Tax Returns
Depending on the type of tax, investors must prepare tax returns using official templates. Filing can be periodic (monthly or quarterly, such as for VAT, PIT, or provisional CIT), one-off (e.g., FCT), or annual (e.g., CIT finalization, PIT annual returns). In some cases, the responsibility to declare and withhold tax may fall on the Vietnamese contracting party. Therefore, investors must clearly determine who is liable for filing in each specific case.
Tax returns must be submitted to the competent tax authority within the prescribed deadlines. Electronic filing via the eTax system is strongly encouraged. Late, incorrect, or incomplete submissions are subject to penalties under the 2019 Law on Tax Administration and its implementing regulations.
>> PROCEDURE FOR ESTABLISHING A BUSINESS IN VIETNAM
3. Common Challenges in Tax Declaration
Despite the implementation of digital tax systems and continuous administrative reforms, foreign investors still face several practical challenges in fulfilling their tax obligations in Vietnam:
Language and Legal System Barriers
Language differences are a major challenge for foreign investors trying to access, interpret, and apply Vietnamese tax laws. While key legal documents may be available in English, many technical guidelines are only issued in Vietnamese. Additionally, Vietnam’s legal framework is complex and frequently amended, requiring professional legal or tax support to ensure proper compliance.
Difficulty in Determining Tax Obligations
The variety of taxes in Vietnam makes it difficult to determine which taxes apply and at what rates, as this depends on investment form, income source, and legal status. Misidentification of tax obligations may result in under-declaration, late payment, or retrospective penalties.
Complex Filing Procedures and Deadlines
Tax declarations may be required on a monthly, quarterly, or per-transaction basis. Many foreign investors are unfamiliar with the exact schedules and submission deadlines, increasing the risk of late filings, incorrect returns, and associated penalties. Moreover, navigating the eTax platform can still be challenging for new users or those unfamiliar with the system.
Inconsistent Guidance from Local Tax Authorities
Interpretations and enforcement practices can vary across local tax departments. The same tax issue may receive different responses in Hanoi compared to Ho Chi Minh City or other provinces. This lack of uniformity can hinder accurate tax planning and legal compliance.
Frequent Tax Policy Changes
Vietnam’s tax laws evolve rapidly in response to economic developments and technological advances. Continuous legislative updates require taxpayers to stay informed to ensure ongoing compliance. This may be particularly difficult for foreign investors lacking in-house tax/legal departments.
4. Practical Solutions for Effective Tax Declaration
Timely and accurate tax compliance is critical to maintaining smooth investment operations and avoiding unnecessary legal or financial risks. The following solutions may help foreign investors improve their tax compliance in Vietnam:
Proactively Update Legal Knowledge
Investors should regularly monitor changes in tax legislation, including laws, decrees, and circulars issued by the tax authorities. This can be done via official government portals or through consultations with reputable legal, accounting, or tax professionals.
Engage Professional Tax Advisors
Partnering with experienced tax advisory firms is a practical solution, especially for new investors in Vietnam. These firms offer expert guidance on determining tax liabilities, preparing declarations, ensuring compliance, and developing tailored tax strategies to mitigate risks and optimize costs.
Adopt Technology and Electronic Tax Systems
Using accounting software and Vietnam’s electronic tax systems (e.g., eTax, HTKK) enhances accuracy, saves time, and streamlines tax management. These platforms often include deadline reminders, secure data storage, and easy access to previous filings.
Maintain Open Communication with Local Tax Authorities
Building a cooperative relationship with local tax officials can provide timely clarification and support in case of difficulties. This helps avoid misunderstandings and potential penalties due to incorrect or incomplete declarations.
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