Employers have several tax responsibilities that they must fulfill. One of these is withholding Personal Income Tax (PIT) from employees' salaries. The tax rate is progressive and varies from 5% to 35%. Employers must declare and pay PIT withheld from employees to tax authorities on a monthly basis, specifically by the 20th of the following month. Additionally, employers are responsible for conducting annual PIT finalization for their employees.

Social Security Contributions

Employers are also obligated to contribute to the social security system on behalf of their employees. These contributions cover several areas. For Social Insurance, employers must contribute 17.5% of the employee's monthly salary. For Health Insurance, employers contribute 3% of the employee's monthly salary. Lastly, for Unemployment Insurance, employers contribute 1% of the employee's monthly salary.

Trade Union Fee

Another responsibility of employers is the withholding and payment of a 1% trade union fee from employees' salaries if they are members. This fee is then paid to the trade union.

Employees contribute 8% of their monthly salary to the social insurance fund. This contribution covers pensions, sickness, maternity, occupational accidents, diseases, and death benefits.

Health Insurance Deduction

Employees also contribute 1.5% of their monthly salary for health insurance coverage.

Unemployment Insurance Deduction

A further 1% of the employee's monthly salary goes to the unemployment insurance fund.

Personal Allowance Deduction

Each taxpayer is entitled to a monthly deduction of VND 11 million (approximately USD 478).

Dependent Allowance Deduction

A monthly deduction of VND 4.4 million (approximately USD 174) is available for each dependent, such as a spouse, child, or parent. To qualify, dependents must meet specific criteria.

Charitable Contributions Deduction

Deductions are also available for donations to approved charities and humanitarian organizations.

VAT is a consumption tax imposed on the supply of most goods and services within Vietnam. It's a crucial component of the Vietnamese tax system. Understanding the VAT rates and how the tax applies to your services is essential for any business operating in Vietnam.

Standard VAT Rate

The standard VAT rate in Vietnam is 10%. This rate applies to the majority of services supplied within the country.

Reduced VAT Rates

A reduced rate of 5% applies to specific essential services, including healthcare services, educational services, social housing, cultural, artistic, and sports services, and scientific and technological services.

A 0% rate applies to exported services and various other services, including services provided to customers located outside of Vietnam, goods and services consumed outside of Vietnam or within non-tariff areas, and certain international transportation services.

VAT Exemptions

Certain services may be exempt from VAT in Vietnam. Examples include financial and banking services, insurance services, and the transfer of land use rights.

VAT Calculation

VAT is calculated based on the taxable value of services provided. The taxable value is typically the transaction price, excluding any existing VAT. For example, if you provide consulting services in Vietnam for VND 100,000,000 (excluding VAT), the VAT due would be: VND 100,000,000 * 10% = VND 10,000,000.

VAT Registration and Compliance

Businesses with taxable revenues exceeding a specific threshold must register for VAT in Vietnam. VAT compliance includes issuing VAT invoices, filing VAT returns, and paying VAT to the tax authorities. It's important to note that the 2% VAT reduction that was initially in place during 2023 has been extended into 2024 (until June 2024) for most sectors.

Vietnam offers a range of Corporate Income Tax (CIT) incentives to stimulate investment in specific sectors and locations.

Preferential Tax Rates

There are several preferential tax rates available:

• A 10% rate is available for projects in sectors such as education, healthcare, scientific research, and environmental protection. This rate may apply for 15 years, the entire project life, or a specific period depending on the project.
• A 17% rate is available for projects in new technology, supporting industries, or software production for a period of 10 years.
• The standard corporate income tax rate in Vietnam is 20%.

Tax Holidays

Businesses may qualify for tax holidays, which means they are exempt from paying CIT for a specified period. This may include an exemption for up to 4 years and a 50% reduction for the subsequent 9 years. The availability of tax holidays and preferential rates depends on factors like industry, location, and investment capital.

Incentives Based on Location

Additional tax incentives are offered based on where a business operates:

• Economic Zones (EZs) and High-Tech Zones (HTZs): Businesses in these zones may enjoy preferential CIT rates as low as 10% for 15 years, plus 4-year tax holidays and 50% reductions for the following 9 years.
• Areas with Difficult Socioeconomic Conditions: Companies in these areas might qualify for a 10% CIT rate for 15 years, including a 4-year tax holiday and a 50% reduction for the subsequent 9 years.

Incentives Based on Investment Size

Large-scale investment projects may be eligible for special incentives, including preferential CIT rates, extended periods of tax exemption and reduction, and land and water rental fee reductions.

Import Duty Exemptions

Businesses may be exempt from import duties on fixed assets used to create a project and raw materials and supplies for manufacturing products within certain incentivized sectors or locations.