I. Tax
- Taxes that enterprises must pay
Legal regulations and policies on tax in Vietnam are applied generally to all businesses established under Vietnamese law, but there are also some specific regulations for enterprises with foreign investment capital.
a. License fee
License fee applies to all enterprises and business lines. License fee is classified into tiers depending on the registered charter capital. For foreign-invested companies, the license fee is based on the total registered investment capital. Specifically:
- Level 1: 2,000,000 VND 01 year (total investment capital of less than 10 billion VND).
- Level 2: 3,000,000 VND/01 year (total investment capital of over 10 billion VND).
- Level 3: 1,000,000 VND/01 year (applicable to dependent units such as business locations and branches).
If the enterprise registers its establishment on the day after June 30, it must pay 50% of the license fee.
b. Corporate income tax
Corporate income tax applies to income from production and business activities and other incomes of enterprises. Other incomes are usually from the transfer of property and property rights.
Tax calculation method: The tax rate for calculating corporate income tax is 20%.
Foreign-invested companies can get incentives or exemptions from corporate income tax. This incentive policy is regulated in the Investment Registration Certificate. The entitlement of incentives is usually determined based on the investment location and the investment field. Before making investment registration, foreign-invested companies need to carefully study tax policies applicable to their business lines to enjoy maximum tax benefits and incentives for businesses.
c. Value Added Tax
Value Added Tax applies to the added value of goods and services during their production, circulation, and distribution. However, not all goods and services are subject to tax. Goods and services specified in Article 5 of the Law on Value-Added Tax in 2008, as amended and supplemented in 2016, are not subject to tax. There are two methods of tax calculation:
- Deduction method.
- Direct method.
Value-added tax rates have three levels: 0%, 5%, and 10% depending on the group of goods and services specified in Article 10 of the Law on Value-Added Tax 2008, as amended and supplemented in 2016.
On January 11, 2022, the National Assembly passed Resolution No. 43/2022/QH15 on fiscal and monetary policies to support the socio-economic recovery and development program, reducing the value tax rate by 2% in 2022, applicable to groups of goods and services currently applying the value-added tax rate of 10% (to 8%).
d. Special consumption tax
Special consumption tax is an indirect (excise) tax applied to consumers of luxury products and services, which are not essential for daily life, or fields that government intends to restrict. If foreign-invested enterprises trade in products and services specified in Article 2 of the Law on Special Consumption Tax, they must pay this tax.
e. Import and export tax
If a foreign-invested company performs the act of exporting or importing goods, it is obliged to pay import-export tax.
There are three methods of calculating import and export tax:
- The percentage method.
- The absolute method.
- The mixed method.
- Deadline for tax report submission
a. Time period for submitting VAT, personal income, corporate income declarations and report on the use of invoices
In case of monthly tax reporting, the deadline is the 20th of the month following the month in which the tax liability arises.
In case of quarterly tax reporting, the deadline is the last day of the first month of the quarter following the quarter in which the tax liability arises.
In case of annual tax reporting:
- For annual tax finalization records, the deadline is the last day of the 3rd month from the end of the calendar year.
- For annual tax returns, the deadline is the last day of the first month of the calendar year.
- For personal income tax finalization records of individuals who directly make tax finalization, the deadline is the last day of the 4th month from the end of the calendar year.
- For flat tax returns of business households, individuals doing business or paying tax by the flat method, the deadline is December 15 of the preceding year (in case of new business, the time period is 10 days from the date of starting the business).
The deadline for submitting tax returns for taxes declared and paid for each time a tax obligation arises is the 10th day from the date of arising of the tax obligation.
The deadline for filing tax returns in the case of termination of operation, contract termination, or business reorganization is 45 days from the date of the event.
b. Deadline for filing license tax returns
– For newly established businesses:
- The enterprise that has started production and business activities, no later than the last day of the month of operation.
- The enterprise that has not had production or business activities, within 30 days from the date of receipt of the business registration certificate.
– For existing businesses
- If there is no change in charter capital or increase/ decrease in branch, the license fee return is not required, only the fee must be paid no later than January 30 of each year.
- If there is no change in charter capital or increase/ decrease in branch, the license fee return is required, and the fee must be paid no later than January 30 of the year the change arises.
c.Deadline for filing annual financial statements
The deadline is March 31, for which all businesses must submit financial statements.
II. Audit
Foreign-invested enterprises are required to have their annual financial statements audited before submitting them to competent state agencies. Auditing contributes to publicity and transparency, and also to the detection and prevention of illegal acts. Audited financial statements shall be submitted to the Department of Planning within the time limit prescribed by law.
Penalties for administrative violations in the field of independent accounting and audit:
“A fine ranging from VND 40,000,000 to VND 50,000,000 shall be imposed on the audited entity that fails to perform the mandatory audit of financial statements, finalization reports of completed projects, consolidated financial statements, general financial statements, and other audit work following the provisions of the law on independent audit and other relevant laws”.
(Article 53 of Decree No. 41/2018/ND-CP, dated March 12, 2016 of the Government on Regulations on sanctioning of administrative violations in the field of independent accounting and auditing
Therefore, foreign-invested enterprises need to pay special attention to the sufficient and timely auditing of financial statements to limit possible risks when investing in Vietnam.