Taxes that foreign enterprises must pay

Paying taxes is both a right and an obligation for businesses and individuals doing business and investing in Vietnam. From the time of establishment and operation until dissolution, foreign enterprises must fulfill their tax obligations to the State. Below, iguide.ai would like to present the taxes that foreign enterprises must pay when doing business in Vietnam.

1. Legal basis

• Law on Value Added Tax 2013
• Law on Corporate Income Tax 2013
• Personal Income Tax Law 2014
• Law on Tax Administration 2012
• Circular No. 103/2014/TT-BTC guiding the implementation of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or having needs arising in Vietnam

2. Business license tax

Business license tax is a direct tax and is usually a quota levied on the business license of an enterprise. Business license tax is collected annually, the tax rate is based on the registered capital or annual revenue of the enterprise. From January 1, 2017, "business license tax" is replaced by "business license fee" according to Official Dispatch 5633/TCT-CS issued on December 29, 2015.

The license fee is specified as follows:

Registered business capital is determined based on:

• Charter capital of state-owned enterprises, limited liability companies, joint stock companies, cooperatives
• Investment capital for foreign invested enterprises

3. Corporate income tax

Currently, there is no exact definition of corporate income tax, however, through the Law on Corporate Income Tax as well as circulars and decrees, it can be determined that corporate income tax is a direct tax, levied on taxable income of enterprises, including income from production and business activities of goods, services and other income as prescribed by law.

Corporate income tax payable is equal to revenue minus deductible expenses, tax-exempt income and losses carried forward from previous years multiplied by the tax rate. Tax rates for different areas of activity will be different:

• Oil and gas exploration and exploitation in Vietnam from 32% to 50%
• Searching, exploring and exploiting rare resource mines (including: platinum, gold, silver, tin, tungsten, antimony, precious stones, rare earth except oil and gas) is 50%.
• If 70% or more of the allocated area of rare resources is located in an area with particularly difficult socio-economic conditions on the list of areas with preferential corporate income tax of 40%.
• Other fields are 20%

4. Value added tax

The value added tax payable by an enterprise is calculated according to the method that the enterprise initially chose when establishing the enterprise.

Value added tax deduction method: Value added tax payable is equal to the value of goods and services sold multiplied by the value added tax rate, then minus the deductible input value added tax. Depending on the type of goods and services, the value added tax rate will be different and will be: 0%, 5% and 10%.

The direct calculation method on added value is as follows: VAT payable is equal to revenue multiplied by the percentage to calculate tax. The percentage to calculate tax is calculated as follows:

• Business activities of distribution and supply of goods: 1%
• Construction services not including materials: 5%
• Transportation, goods production services, construction material contracting: 3%
• Other business activities: 2%

5. Import and export tax

In case the goods are subject to tax as a percentage, the import tax payable is equal to the actual quantity of each imported or exported item multiplied by the taxable price and multiplied by the tax rate.

In case of goods subject to absolute tax, import tax payable is equal to the actual quantity of each imported or exported item multiplied by the absolute tax rate multiplied by the tax calculation exchange rate.

6. Resource tax

The subject of application is enterprises exploiting natural resources that are subject to tax. The natural resource tax payable is equal to the taxable natural resource output multiplied by the taxable price multiplied by the tax rate.

7. Special consumption tax

Special consumption tax is equal to the special consumption tax calculation price multiplied by the special consumption tax rate.

8. Land use tax

There are two types of land use tax that foreign enterprises must pay: tax on business land used entirely for business purposes and tax on non-agricultural land used for business purposes of which the area used for business purposes cannot be determined.