Frequently Asked Questions (FAQ)
Value Added Tax (VAT)
What is value added tax (VAT)?
Value Added Tax (VAT) is an indirect tax levied on the added value of goods and services throughout the process from production to consumption. Although consumers are the ultimate tax payers, businesses or business organizations are the ones who directly declare and pay taxes to the tax authorities. VAT is currently regulated by the Law on Value Added Tax and its implementing documents.
Which businesses must declare and pay VAT?
Most organizations and individuals trading in goods and services in Vietnam are subject to declaring and paying VAT. This includes enterprises applying the tax deduction method, individual households doing business using the direct method, and foreign organizations without a permanent establishment in Vietnam but having tax obligations. Some special cases will be exempted or not subject to VAT according to regulations.
How is VAT calculated by deduction and direct methods different?
The deduction method is usually applied to businesses that meet the conditions of legal documents and invoices. Accordingly, the VAT payable is calculated by subtracting the input tax from the output tax. Meanwhile, the direct method is applied to individuals or units that do not meet the conditions of deduction. The VAT payable is calculated by multiplying revenue by the percentage depending on the industry, then multiplying by the tax rate. Each method has its own advantages and disadvantages and is applied depending on the business model.
What is the deadline for filing and paying VAT?
The deadline for submitting a VAT return depends on the reporting period that the business is applying. If the return is filed monthly, the deadline is the 20th of the following month. If the return is filed quarterly, the deadline is the 30th of the first month of the following quarter. For example, the second quarter return must be submitted by July 30th. This is the deadline for both submitting the return and paying the corresponding tax.
What are the current VAT rates?
Currently, VAT in Vietnam is applied at three main tax rates: 0%, 5% and 10%. Of which, rate 0% applies to exported goods and services; rate 5% applies to some essential groups such as clean water, medical equipment, education; and the most common rate is 10% applied to most common goods and services. In addition, according to the economic recovery support policy, some groups of goods have their tax rates temporarily reduced to 8% during the period from July 1, 2023 to December 31, 2024.
Personal income tax (PIT)
What is personal income tax (PIT)?
Personal income tax (PIT) is a direct tax, levied on the taxable income of individuals residing and non-resident in Vietnam. Employees with income from salaries, wages, capital investment, property transfer and other legal sources of income may be subject to PIT. The purpose of this tax is to regulate income, contribute to social equity and increase revenue for the state budget.
Who must settle personal income tax?
Resident individuals with income from salaries and wages must make tax finalization if they fall into one of the following cases: having overpaid or underpaid taxes during the year, having income from multiple sources and not authorizing the paying organization to make the finalization on their behalf, or having changes in family deductions. Enterprises and organizations paying income are also obliged to make the finalization on behalf of employees if legally authorized. Foreigners residing in Vietnam for 183 days or more during the year must also make tax finalization like domestic individuals.
How long is the personal income tax settlement deadline?
According to the current Law on Tax Administration, the deadline for submitting personal income tax finalization dossiers is April 30 of the following year. For example, if income arises in 2024, the deadline for submitting finalization dossiers is April 30, 2025. In case the organization pays the finalized income on behalf of the employee, the deadline for submitting dossiers is also March 31 of the following year. If the individual is not obliged to make finalization, then it is not required to submit.
How to calculate personal income tax on income from salaries and wages?
Personal income tax on income from salaries and wages of resident individuals is calculated according to the progressive tax table. First, determine the total taxable income in the year, then subtract deductions such as family allowances, compulsory insurance, voluntary pension funds, etc. to get taxable income. This taxable income will be subject to a tax rate from 5% to 35% depending on the income level. For non-resident individuals, tax is calculated at a fixed rate of 20% on total taxable income in Vietnam.
What is the current family deduction?
From July 1, 2020 to present, the family deduction for individuals is 11 million VND/month, equivalent to 132 million VND/year. For each eligible dependent, taxpayers are entitled to an additional reduction of 4.4 million VND/month. To enjoy the deduction for dependents, individuals must register and be approved by the tax authority according to regulations. Correct and complete declaration of dependents will significantly reduce tax obligations.
Value Added Tax (VAT)
What is value added tax (VAT)?
Value Added Tax (VAT) is an indirect tax levied on the added value of goods and services throughout the process from production to consumption. Although consumers are the ultimate tax payers, businesses or business organizations are the ones who directly declare and pay taxes to the tax authorities. VAT is currently regulated by the Law on Value Added Tax and its implementing documents.
Which businesses must declare and pay VAT?
Most organizations and individuals trading in goods and services in Vietnam are subject to declaring and paying VAT. This includes enterprises applying the tax deduction method, individual households doing business using the direct method, and foreign organizations without a permanent establishment in Vietnam but having tax obligations. Some special cases will be exempted or not subject to VAT according to regulations.
How is VAT calculated by deduction and direct methods different?
The deduction method is usually applied to businesses that meet the conditions of legal documents and invoices. Accordingly, the VAT payable is calculated by subtracting the input tax from the output tax. Meanwhile, the direct method is applied to individuals or units that do not meet the conditions of deduction. The VAT payable is calculated by multiplying revenue by the percentage depending on the industry, then multiplying by the tax rate. Each method has its own advantages and disadvantages and is applied depending on the business model.
What is the deadline for filing and paying VAT?
The deadline for submitting a VAT return depends on the reporting period that the business is applying. If the return is filed monthly, the deadline is the 20th of the following month. If the return is filed quarterly, the deadline is the 30th of the first month of the following quarter. For example, the second quarter return must be submitted by July 30th. This is the deadline for both submitting the return and paying the corresponding tax.
What are the current VAT rates?
Currently, VAT in Vietnam is applied at three main tax rates: 0%, 5% and 10%. Of which, rate 0% applies to exported goods and services; rate 5% applies to some essential groups such as clean water, medical equipment, education; and the most common rate is 10% applied to most common goods and services. In addition, according to the economic recovery support policy, some groups of goods have their tax rates temporarily reduced to 8% during the period from July 1, 2023 to December 31, 2024.
Personal income tax (PIT)
What is personal income tax (PIT)?
Personal income tax (PIT) is a direct tax, levied on the taxable income of individuals residing and non-resident in Vietnam. Employees with income from salaries, wages, capital investment, property transfer and other legal sources of income may be subject to PIT. The purpose of this tax is to regulate income, contribute to social equity and increase revenue for the state budget.
Who must settle personal income tax?
Resident individuals with income from salaries and wages must make tax finalization if they fall into one of the following cases: having overpaid or underpaid taxes during the year, having income from multiple sources and not authorizing the paying organization to make the finalization on their behalf, or having changes in family deductions. Enterprises and organizations paying income are also obliged to make the finalization on behalf of employees if legally authorized. Foreigners residing in Vietnam for 183 days or more during the year must also make tax finalization like domestic individuals.
How long is the personal income tax settlement deadline?
According to the current Law on Tax Administration, the deadline for submitting personal income tax finalization dossiers is April 30 of the following year. For example, if income arises in 2024, the deadline for submitting finalization dossiers is April 30, 2025. In case the organization pays the finalized income on behalf of the employee, the deadline for submitting dossiers is also March 31 of the following year. If the individual is not obliged to make finalization, then it is not required to submit.
How to calculate personal income tax on income from salaries and wages?
Personal income tax on income from salaries and wages of resident individuals is calculated according to the progressive tax table. First, determine the total taxable income in the year, then subtract deductions such as family allowances, compulsory insurance, voluntary pension funds, etc. to get taxable income. This taxable income will be subject to a tax rate from 5% to 35% depending on the income level. For non-resident individuals, tax is calculated at a fixed rate of 20% on total taxable income in Vietnam.
What is the current family deduction?
From July 1, 2020 to present, the family deduction for individuals is 11 million VND/month, equivalent to 132 million VND/year. For each eligible dependent, taxpayers are entitled to an additional reduction of 4.4 million VND/month. To enjoy the deduction for dependents, individuals must register and be approved by the tax authority according to regulations. Correct and complete declaration of dependents will significantly reduce tax obligations.
Corporate income tax (CIT)
Is income from activities outside Vietnam subject to corporate income tax in Vietnam?
Yes. If a business residing in Vietnam generates income from production and business activities outside the territory, it must still declare and pay corporate income tax in Vietnam on all such income. However, to avoid double taxation, the business can deduct the tax paid abroad from the corporate income tax payable in Vietnam if it has full legal documents as prescribed in Article 11 of Circular 78/2014/TT-BTC. The business should note to provide the original or certified copy of the invoice and receipt for tax payment abroad to be approved by the Vietnamese tax authority for deduction.
Are expenses with invoices under 20 million but not transferred counted as expenses?
Yes. From 2022 onwards, according to Circular 78/2021/TT-BTC, the mandatory non-cash payment for expenses of VND 20 million or more will no longer apply to determine deductible expenses when calculating corporate income tax. Therefore, expenses paid in cash will still be included in expenses if there are full invoices, valid documents and serve the production and business activities of the enterprise. However, enterprises need to pay attention to internal documents and the reasonableness and validity of the transaction.
Is it mandatory to make quarterly provisional corporate income tax payments?
According to the Law on Tax Administration, enterprises are not required to declare corporate income tax quarterly, but they must still make provisional quarterly tax payments based on estimates. The total amount of provisional tax paid for 4 quarters must not be less than 80% of the corporate income tax payable according to the annual settlement. If the provisional payment is lower than this amount, the enterprise will be charged a late payment fee on the shortfall. Therefore, even if they do not declare quarterly, enterprises should still forecast their income relatively accurately to avoid being fined.
Do newly established businesses have to pay corporate income tax immediately?
Newly established enterprises are still obliged to declare and pay corporate income tax if they generate income during the tax period. However, if the enterprise has no revenue or is at a loss in the first year of operation, it must still submit a tax finalization declaration so that the tax authority can monitor its operations. In addition, some newly established enterprises eligible for investment incentives may be exempt from corporate income tax for the first few years, but they still need to declare on time to enjoy incentives according to regulations.
Can businesses transfer losses to deduct from corporate income tax?
Yes. According to the provisions of the Law on Corporate Income Tax, enterprises are allowed to carry forward losses for up to 5 consecutive years starting from the year following the year in which the loss occurred. The loss is gradually offset against the taxable income of the following years and must be monitored in detail for each year of loss. The transfer of losses must be carried out in accordance with the correct procedures and declared in the tax settlement dossier, with full valid documents and accounting books. This is an important support mechanism to help enterprises reduce financial pressure after a difficult period.
When are businesses exempted or reduced from corporate income tax under current regulations?
Enterprises can be exempted or reduced from corporate income tax if they operate in investment incentive sectors or areas as prescribed by the Government. For example, newly established enterprises from investment projects in economically disadvantaged or extremely disadvantaged areas; high-tech enterprises, software production enterprises; or small and medium-sized enterprises converted from business households can be exempted from tax for 2 to 4 years, then reduced by 50% for the next 4 to 9 years depending on each case. In addition, social enterprises, creative startups, or enterprises with educational, medical, environmental activities, etc. are also considered for tax incentives. Conditions and procedures must be clearly demonstrated in the annual tax settlement dossier.
When is the deadline for declaring and paying corporate income tax?
Corporate income tax is declared annually. However, enterprises must still make provisional payments quarterly, no later than the 30th day of the following quarter. For example, provisional payments for the second quarter must be completed by July 30. For the full-year corporate income tax settlement, the deadline for submitting the settlement dossier is March 31 of the following year. If the enterprise has a fiscal year other than the calendar year, the deadline will be calculated according to 90 days from the end of the fiscal year. Late payment of tax or incorrect declaration may result in penalties under the current Tax Administration Law.
Which costs are included in reasonable expenses when calculating corporate income tax?
Reasonable expenses deducted when determining taxable income for corporate income tax are actual expenses incurred in connection with production and business activities, with full legal invoices and documents and not included in the list of controlled or excluded expenses as prescribed in Circular 78/2014/TT-BTC, Circular 96/2015/TT-BTC. Some typical examples include salary expenses, depreciation of fixed assets, office rental expenses, reception expenses, advertising expenses, interest expenses (not exceeding the ceiling)... Enterprises need to pay attention to strictly controlling input documents, clearly classifying to ensure that expenses are accepted when settling taxes.
What is the current corporate income tax rate?
According to current regulations in the Law on Corporate Income Tax No. 14/2008/QH12 and guiding documents, the general tax rate applicable to enterprises is 20%. Some special cases such as oil and gas exploitation, rare resources may be subject to higher tax rates, from 32% to 50%. For small and micro enterprises, if they meet specific conditions on revenue and number of employees, they may enjoy lower tax incentives according to separate regulations. In addition, enterprises investing in preferential sectors or in difficult areas may also be subject to a preferential tax rate of 10% for a certain period of time.
What is corporate income tax (CIT) and who has to pay it?
Corporate income tax (CIT) is a direct tax, levied on the taxable income of organizations producing and trading goods and services. Enterprises of all types, from limited liability companies, joint stock companies, private enterprises, cooperatives to revenue-generating public service units are all subject to CIT if they generate income from business activities in Vietnam or outside the territory of Vietnam but have a permanent establishment in Vietnam. In addition, foreign organizations with income in Vietnam not through a permanent establishment are also obliged to pay tax according to regulations.
Tax reporting
Is tax reporting service legal and which unit should I choose?
Outsourced tax reporting services are legal if the provider is registered in the tax consulting industry, has professional staff (with practice certificates), and signs a clear service contract. Businesses should choose an experienced, reputable unit that publicly discloses its working process and is legally responsible for any errors that arise. Outsourcing not only saves costs but also reduces legal risks if done properly.
What are common mistakes when preparing tax reports?
Some common errors include: under- or over-declaration of invoices, incorrect tax period, incorrect tax code, mismatched data between tax reports and accounting books, failure to update new tax policies. If these errors are not detected and corrected promptly, they will affect reputation, tax refund ability and may result in penalties.
Are tax reports and financial reports the same?
No. Tax reports reflect obligations to the state budget and comply with tax regulations. Meanwhile, financial reports reflect the financial situation and business performance of enterprises according to accounting standards. These two types of reports are related but have different purposes and preparation methods. Each type of report serves different users: tax authorities, banks, investors, etc.
Can an incorrect tax return be corrected?
Yes. If a business declares incorrect data, omits invoices or records the wrong tax period, it can submit a supplementary adjustment declaration. However, the business must clearly explain the reasons and submit additional appendices as prescribed in Circular 80/2021/TT-BTC. If errors are discovered before being inspected by the tax authority, administrative penalties can be avoided.
What software to use to submit electronic tax reports?
Nowadays, businesses use software HTKK of the General Department of Taxation to prepare declarations and software iHTKK to submit electronic tax reports. In addition, integrated accounting software such as MISA, FAST, or online tax filing platforms such as EasyInvoice, Etax also support automatic report submission, connecting directly to the tax authority's portal.
If there is no revenue, do I need to submit a tax report?
Yes. Even if a business has no revenue during the period, it must still submit a tax return with a zero value. The fact that no tax is incurred does not mean that it is exempt from the obligation to file a tax return. If the business fails to submit a tax return on time, it may still be subject to a late filing penalty and be placed on a tax risk watch list.
Do newly established businesses have to submit tax reports immediately?
Yes. Immediately after being granted a tax code and operating, the enterprise must register its tax calculation method and begin declaring and submitting tax reports monthly or quarterly depending on the scale of revenue. If there is no business activity, it must still submit a tax declaration with a figure of 0 to avoid being penalized.
When are the deadlines for filing tax reports?
The deadline for submitting VAT, personal income tax and invoice usage declarations is the 20th of the following month if declaring monthly, or the 30th of the first month of the following quarter if declaring quarterly. For corporate income tax and personal income tax finalization, the deadline is March 31 of the following year. Late or untimely submission will be subject to administrative penalties and late payment fees according to the provisions of the Law on Tax Administration.
What types of periodic tax reports must businesses submit?
Typically, businesses must submit the following types of tax reports: value-added tax (VAT) reports, corporate income tax (CIT) reports, personal income tax (PIT) reports, invoice usage reports, and year-end tax settlement reports. In addition, there may be additional reports on contractor tax, special consumption tax, or resources if the business is in a specific field.
What is a tax report? Are businesses required to file tax reports?
Tax reporting is a collection of tax declarations, schedules and related documents reflecting the tax obligations of an enterprise during the tax period. This is a mandatory responsibility for all organizations and enterprises operating in Vietnam, including newly established enterprises or enterprises that are temporarily suspended but have not officially notified the tax authorities.