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Corporate Income Tax in Vietnam (CIT)

Corporate Income Tax in Vietnam (CIT) is a tax imposed on the profits of businesses operating within the country. This includes both local and foreign enterprises that have a permanent establishment in Vietnam. In order to provide other important information, Apluslaw would like to provide the content below.

What’s Corporate Income Tax (CIT) in Vietnam?

Corporate Income Tax (CIT) is a direct tax levied on the taxable income of organizations engaged in the production and trading of goods and services. Taxable income includes income as prescribed in Article 3 Law on Corporate Income Tax:

“Article 3. Taxable incomes

1. Taxable incomes include income from goods and service production and business activities and other incomes specified in Clause 2 of this Article.

2. Other incomes include: income from transfer of capital, transfer of the right to capital contribution; income from real estate transfer, transfer of construction projects, transfer of the right to participate in construction projects, transfer of the right to mineral exploration, mineral extraction, and mineral processing; income from the right to enjoyment of property, right to ownership of property, including income from intellectual property rights defined by law; income from transfer, lease, liquidation of assets, including valuable papers; income from deposit interest, loan interest, sale of foreign exchange; collection of debts that were cancelled; receipts from debts without creditors; incomes from business operation in previous years that were committed, and other incomes.”

In conclusion, organizations involved in the production and trading of goods and services must pay CIT on the income they receive from their business activities, as well as other specified incomes.

Who has to pay corporate income tax?

Currently, the government has just revised and supplemented a number of tax in Vietnam for businesses, one of which is the regulation on corporate income tax in Vietnam Article 2 of Circular 78/2014/TT-BTC. Taxpayers are organizations engaged in the production and trading of goods or services with taxable income, including:

• Enterprises established and operating under Vietnamese law.
• Public non-business units.
• Organizations established and operating under the 2012 Cooperative Law.
• Foreign enterprises with a permanent establishment in Vietnam.
• Other organizations engaged in the production and business of goods or services generating taxable income.”

Note: Foreign organizations conducting business in Vietnam but not under Investment Law 2020 or Enterprise Law 2020, or generating income in Vietnam, must follow specific guidance from the Ministry of Finance. These organizations, if involved in capital transfer activities, must comply with tax payment guidelines as stipulated in Article 14 of Circular 78/2014/TT-BTC.

Corporate tax rates in Vietnam

Corporate income tax rates is one of the important information that a business needs to pay attention to, we would like to clarify below:

	Type of business	Tax rate	Time application	Note
1	Regular business	22%	Previous 01/01/2016
2	Regular business	20%	After 01/01/2016
3	Enterprises with total annual revenue not exceeding VND 20 billion	20%		The revenue used as a basis for determining the eligibility of an enterprise for the 20% tax rate under this provision is the revenue of the preceding year.
4	Enterprises engaged in oil and gas activities.	25-50% depending on each oil and gas contract.
5	Enterprises involved in the exploration, exploitation, and processing of other precious and rare resources in Vietnam.	32-50% depending on each project or business establishment.		– The corporate income tax rate for activities involving the exploration, exploitation, and processing of precious and rare resource mines (including platinum, gold, silver, tin, tungsten, antimony, gemstones, and rare earths excluding oil and gas) is set at 50%. – For precious and rare resource mines where 70% or more of the allocated area is located in regions with particularly difficult socio-economic conditions, listed in the regions eligible for corporate income tax incentives, a 40% corporate income tax rate applies.

Note: The above data is extracted from Article 10 of the Consolidated Document of the Law on Corporate Income Tax.

In general, tax rates set by the state are mandatory for businesses to comply with, except in cases where those businesses are eligible for incentives or tax exemptions according to the provisions of law.

Industries receive corporate tax incentives

In order to promote business development among enterprises, the State has issued specific corporate income tax rates for specific cases of corporate income according to Article 13 of the Corporate Income Tax Law as follows:

• 10% for 15 years: For new projects in challenging areas, high-tech zones, high-tech enterprises, and large-scale investments.
• 10%: For social activities in education, healthcare, culture, sports, environment, and social housing projects.
• 20% (before 2016) and 17% (from 2016) for 10 years: For new projects in difficult areas, high-grade steel, energy-saving products, and traditional industries.
• 15%: For agricultural activities outside difficult areas.
• 20% (before 2016) and 17% (from 2016): For people’s credit funds and microfinance institutions.

In conclusion, businesses need to pay attention to corporate income tax incentives because they can significantly reduce operating costs, improve cash flow, and increase competitiveness. Lower tax rates mean more funds available for reinvestment, expansion, and innovation. Additionally, understanding these incentives helps businesses remain compliant and avoid legal issues.

Corporate Income Tax Exemption

Currently, the government has been implementing many reforms in corporate income tax exemption policies. This is a point that businesses need to pay attention to before starting a business. We would like to list the tax-exempt income from  Article 14 of the Corporate Income Tax Law as follows:

• Income from crop production, livestock farming, aquaculture, and processing agricultural and aquatic products, and salt production by cooperatives.
• Income of cooperatives from agricultural, forestry, fishery, and salt production activities in economically difficult or especially difficult areas.
• Income of businesses from crop production, livestock farming, aquaculture, and processing agricultural and aquatic products in economically difficult or especially difficult areas.
• Income from fishing activities.
• Income from providing direct technical services for agriculture.
• Income from scientific research contracts, technology development, trial production, or products from new technologies first applied in Vietnam.
• Income from production and business activities of enterprises with an average of 30% of employees being disabled, rehabilitated drug addicts, or HIV/AIDS infected individuals.
• Income from vocational training for ethnic minorities, people with disabilities, children in difficult circumstances, and social evils.
• Income shared from capital contributions, joint ventures, and associations with domestic businesses after paying corporate income tax.
• Donations or funds used for education, scientific research, charity, humanitarian, cultural, artistic, and other social activities in Vietnam.
• Income from the transfer of certified emission reductions (CERs) by businesses awarded these certificates.
• Income of the Vietnam Development Bank when performing State tasks related to investment credit activities, export credit.
• Income from credit activities for the poor and other policy beneficiaries of the Social Policy Bank.
• Income of non-profit state funds as per the law.
• Income of 100% state-owned organizations established to handle bad debts of Vietnamese credit institutions.
• Non-distributed income of socialized institutions in education, healthcare, and social sectors, used for reinvestment and development.
• Non-distributed income forming assets of cooperatives established and operating under the Cooperative Law.
• Income from transferring prioritized technology to organizations and individuals in especially difficult economic areas.

In conclusion, these exemptions under the Corporate Income Tax Law of 2008, as amended and supplemented through various years, support diverse sectors such as agriculture, technology development, social welfare, and environmental initiatives, fostering economic growth and societal development across Vietnam.

How to calculate corporate tax?

Based on Article 3, Section 1 of Circular 78/2014/TT-BTC, as amended and supplemented by Article 1 of Circular 96/2015/TT-BTC. The corporate income tax payable for the tax period is calculated by deducting the reserve for scientific and technological development fund (if any) from the taxable income, and then applying the corporate income tax rate.

The formula for calculating corporate income tax (CIT) is as follows:

CIT = (Taxable income – Reserve for scientific and technological development fund (if any)) x Corporate income tax rate.

Where to pay corporate tax?

According to Article 12 of Circular 78/2014/TT-BTC, currently, businesses must pay taxes where their main office is located. If a business has production facilities (including processing or assembly facilities) operating in a province or centrally-run city different from where its main office is located, taxes are calculated and paid both at the main office and at the production facility location.

The tax allocation rule mentioned in this article does not apply to businesses with dependent construction projects or building bases.

Corporate income Tax in Vietnam consulting lawyer service

Navigating corporate income tax regulations in Vietnam can be challenging. Our expert tax lawyers specialize in corporate income tax and offer comprehensive services to help your business comply and optimize its tax strategy.

Services Offered:

• Corporate Income Tax Planning: Minimize corporate income tax liabilities with tailored solutions.
• Corporate Income Tax Compliance: Ensure adherence to Vietnamese corporate income tax laws, assist with corporate income tax returns and documentation.
• Corporate Income Tax Risk Management: Identify and mitigate corporate income tax risks, handle audits and disputes.
• Corporate Income Tax Incentives: Explore and apply for corporate income tax incentives and exemptions.
• Corporate Income Tax International Advisory: Manage cross-border transactions and transfer pricing for corporate income tax.

A+ lawyers provide tax legal advice

With a team of experienced, talented, enthusiastic and dedicated lawyers, A+ Law is proud to be the leading unit in consulting and resolving tax issues for foreign investors including the following services:

• Consulting on determining tax obligations: tax amount payable, tax exemption, tax reduction, tax deduction, tax calculation price, tax rate.
• Consulting on procedures: registration, declaration, tax payment, tax settlement, inspection and handling of violations, tax complaints.
• Consulting on accounting regimes: accounting standards, invoices, documents.
• Consulting on cooperation and business plans: forecasting arising tax obligations
• Authorized representative to carry out tax procedures.

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Corporate income tax is a mandatory tax for all businesses operating in the country. If you still have any questions related to this issue, please contact lawyer A+ via email: contact@apluslaw.vn or via phone number: 0899511010 for support and advice.