A The Vietnamese tax system and its

administration
1. The overall function and purpose of taxation in a modern economy
a) Describe the purpose (economic, social etc) of taxation in a modern economy.
b) Identify the different types of taxes.
c) Explain the difference between direct and indirect taxation.
2. Overall structure of Vietnamese tax system
a) Describe the overall structure of the Vietnamese tax system.
b) Explain the difference between tax avoidance and tax evasion.
c) Explain the need for an ethical and professional approach.
Excluded topics
• Law on investment
• Enterprise law
• Intellectual property and technology transfer regulations (except as detailed in the
study guide)
• Anti avoidance legislation (except as detailed in the study guide)

3. The systems of registration and the making of returns

a) Describe the procedures by which individuals and organisations register with the tax
authorities.
b) Describe the procedures by which registered taxpayers submit returns and declare
and amend their tax liabilities.
c) Explain the obligation of businesses to keep proper books of account and the
consequences of failing to do so.
4. The submission of information and claims and the payment of tax liabilities
a) Describe the procedures by which registered taxpayers pay and finalise their
liabilities.
b) Explain the provisional tax payment system, including the methods of calculation,
amendment, payment dates and system of credits, taking into account the provisional
value added tax (VAT) and corporate income tax (CIT) payment requirements for
geographically dispersed businesses operations.
c) Describe the procedures for the periodic deduction and payment of taxes, clearly
distinguishing the responsibilities of each of the following:
− bodies paying income;
− taxpayers; and
− the tax authorities.
d) Describe the procedures for tax finalisation in the case of tax payers, including tax
audits and inspections by tax authorities at a later stage.
e) Explain how relief is given in respect of taxpayer error.
f) Describe the procedures by which eligible taxpayers may apply for a tax refund or
credit.
5. Transfer pricing
a) Explain and apply the transfer pricing rules (including concepts such as “arm’s length
price”, “transactions between related parties”, “independent transactions”, “substance
over form”) and prepare relevant calculations.
b) Determine when companies are ‘affiliated’ (i.e. ‘related’) and the rights and
responsibilities (especially disclosure responsibilities) of taxpayers who have
transactions with affiliated parties.
c) Explain the powers of the tax office to determine income according to market prices.
d) Describe the methodologies used to determine market price.
e) Describe the declaration obligations and documents required by tax authorities with
regard to related party transactions.
6. The procedures relating to enquiries, appeals and disputes
a) Explain the rights and obligations of taxpayers with respect to tax complaints.
b) Explain the duties, powers and responsibilities of the tax authorities with regard to tax
administration (including tax risk management), tax declarations, the calculation,
assessment and collection/recovery of tax due, tax complaints and tax audit.
7. Penalties for non-compliance
a) State and compute the penalties for non-compliance, under-declaration and late tax
payment.
B Personal income tax
1. The scope of personal income tax (PIT)
a) Identify the individuals, resident and non-resident, liable to pay PIT.
According to Clause 1, Article 2 of No. 68/VBHN-BTC:
 Taxpayers include:
o Resident individuals with taxable income.

o Non-resident individuals who earn income in Vietnam.

Thus, both residents and non-residents are liable to pay PIT if they generate
taxable income in Vietnam, though they are taxed differently.
b) Explain how the tax residence of an individual is determined.
Per Article 3 of No. 68/VBHN-BTC, an individual is tax resident in Vietnam if any of
the following conditions is met:
1. Presence in Vietnam for 183 days or more in a calendar year or 12
consecutive months from the first date of arrival.
2. Has a permanent residence in Vietnam:
o Registered under the permanent residence law; or

o Rents a house in Vietnam for a term of 183 days or more (in this case, tax
residency must be clarified based on actual presence and tax treaty
provisions).
Otherwise, the person is considered a non-resident.

c) Recognise the difference in the tax treatment of a resident individual and a non-
resident individual.
Residents are taxed on worldwide income, using progressive rates (from 5% to
35%) for employment income.
Non-residents are taxed only on Vietnam-sourced income, usually at flat rates:
 Employment income: 20% flat rate
 Other types (business, investment, etc.): specific fixed rates as per law.

d) Recognise the difference in the tax treatment of income sourced from Vietnam or
outside of Vietnam for residents and non-residents.
Residents:
 Pay PIT on both Vietnam-sourced and foreign-sourced income.
 Foreign income is taxed after tax credits for foreign tax paid, if applicable.
Non-residents:
 Taxed only on income sourced from Vietnam.
 Foreign income is not subject to PIT in Vietnam.
e) Understand how a double taxation agreement can affect the liability to taxation of
certain classes of individual and of different types of income.
 Vietnam has signed many DTAs (Double Taxation Agreements) to avoid double
taxation and prevent tax evasion.
 If a taxpayer is a resident of a country that has a DTA with Vietnam, the treaty:
o May limit Vietnam’s taxing rights on certain income types (like
dividends, interest, royalties, or employment income).
o May allow a tax credit or exemption to avoid double taxation.

o May determine residency status in tie-breaker rules if a person is

considered a resident in two countries.
Application of a DTA requires:
 Proper documentation.
 Proof of residency (e.g., Certificate of Residence).
 Applying through Vietnam’s tax authority.
2. Income subject to PIT
a) Explain the basis of assessment for income derived by an individual.
PIT is assessed based on each type of income earned by the individual.
- For residents:
 Worldwide income is subject to PIT.
 Employment income is taxed monthly or annually.
 Other income (e.g., from business, capital, property, etc.) is taxed per
occurrence or annually, depending on the nature.
- For non-residents:
 Tax applies only to Vietnam-sourced income.
 Generally assessed per occurrence or monthly for salaries.

b) Identify exempt income, allowances, benefits and receipts not subject to PIT and
reductions in tax.
Income exempt from PIT (per Article 3 of the Law on PIT and guided in Circular
68/VBHN-BTC):
 Interest from bank deposits or life insurance.
 Compensation for insurance policies (excluding investment-linked insurance).
 Retirement pensions from Social Insurance Fund.
 Foreign aid and charity donations.
 Scholarships from state budget or recognized organizations.
 Overtime/shift pay (to the extent it exceeds standard wage).
 Transfer of real estate between certain family members.
 Inheritances/gifts from family members (spouse, parents, children) within the
legal limit.
Tax reductions:
  Personal deductions:
o 11 million VND/month for the taxpayer.

o 4.4 million VND/month for each dependent.

 Charitable donations (education, healthcare, disasters, etc.) may be deductible.

 Tax relief for those affected by natural disasters or economic hardship (case-by-
case basis).

c) Distinguish between income which is subject to progressive PIT rates and income
which is subject to specific PIT rates.
Progressive PIT rates (for resident individuals – applied to employment income)
Specific flat PIT rates (for other income types or non-residents)
1 Non-resident employment income: 20%
2 Capital investment (dividends, interest): 5%
3 Capital transfer: 20% (for shares/securities); 0.1% on sale price for listed securities
4 Real estate transfer: 2% on transaction value
5 Business income: 0.5% to 5%, depending on business activity
6 Prizes, royalties, franchises: 10%
7 Gifts/inheritances (non-family): 10%

d) Explain how the attribution of income is determined.

• Income is attributed to the individual who earns or legally receives it.

• For joint ownership, each party is taxed based on their share of the income.
• For employment, income is attributed to the month it's earned.
• For gifts/inheritances, attribution is based on the date of legal transfer.
• Attribution also depends on source location, residency status, and type of
income.

e) Explain how the income of individuals in the capacity of producers, traders and
service providers is determined.
 These individuals are considered to be earning business income.
 Tax is based on turnover and a deemed profit rate, unless they maintain
proper accounting books (rare for individuals).
 PIT rates are applied based on business type:
o Commercial/Services without goods: 5%

o Services with goods or construction without materials: 3%

o Goods trading: 1%

o Manufacturing/Transport/Construction (with materials): 1.5%

 If they exceed 100 million VND/year in revenue, they are subject to PIT (below
that, exempt).

f) Explain the treatment of business income, salary income, income from capital
investments, income from capital transfers, income from real property transfers, income
from winnings or prizes, royalty income, income from franchises, income from
inheritances, income from receipt of a gift and other income.
Income Type Tax Treatment

Based on turnover with specific % rates (as

Business income
above)

Residents: Progressive rates (5–35%)

Salary income
Non-residents: Flat 20%

Capital
5% on dividends, interest (not bank interest)
investments

Capital transfers 20% on net gain or 0.1% of sale value (shares)

Real property
2% on transfer price
transfers

Winnings/prizes 10% on value over 10 million VND per prize

Royalties 10% on total amount if over threshold

Franchises 5%–10% depending on type and amount

Inheritances 10% (only taxable if from non-family)

Gifts 10% (non-family); family gifts exempt

Case-by-case, often taxed at 10% or as per

Other income
relevant law

Excluded topics
• Agricultural income of small scale producers
3. The comprehensive computation of monthly and annual taxable income and
tax liabilities
a) Compute business and salary income, including the assessment of employment
benefits in kind.
1. Salary Income (Article 2.2.1, Circular 68/VBHN-BTC)
Taxable salary includes:
 Wages, remuneration, allowances (except exempted ones).
 Benefits in kind: such as house rent, electricity/water paid by employer (Article
2.2.11).
E.g. House rent paid by employer is taxable up to 15% of total taxable income
(excluding rent).

Taxable income = Gross salary + taxable benefits - compulsory contributions

2. Business Income (Article 2.3)

For individuals without accounting books:
 Tax is based on deemed turnover and profit using fixed rates:

PIT
Business Type
Rate

Commerce, goods trading 1%

Services or construction without materials 5%

Construction with materials, manufacturing, 1.5%

 PIT
Business Type
Rate

transport

Applies when revenue > 100 million VND/year (Article 3.4).

b) Compute other taxable income and distinguish its treatment from that of business and
salary income.
Computation of Other Taxable Income and Treatment Differences
According to Article 2 (items 4–11):

Income Type PIT Rate Notes

On interest, dividends (Art.

Capital investment 5%
2.4)

Capital transfer (e.g., 20% on gain or 0.1% on sale

shares) value (Art. 2.5)

Real estate transfer 2% on transfer price (Art. 2.6)

Prizes (lottery, games, etc.) 10% on amount >10 mil (Art. 2.7)

Royalties 10% if >10 mil VND (Art. 2.8)

5% or 10% depending on value

Franchises
(Art. 2.9)

Inheritance/gift (non-
10% (Art. 2.10, 2.11)
family)

➤ Difference: Business/salary income may allow deductions and progressive rates.

Other income → taxed per transaction using flat rates.
c) State the expenses and apply the deductions (if any) that can be used to reduce
taxable income.
Allowable Expenses and Deductions to Reduce Taxable Income
According to Article 9:
Deductions (only for residents):
 Personal deduction: 11 million VND/month.
 Dependent deduction: 4.4 million VND/month/dependent (requires
registration – Art. 9.4).
 Compulsory insurance: Contributions to Social, Health, Unemployment
Insurance (Art. 9.2).
Other deductible expenses:
 Charitable contributions: to approved organizations (Art. 9.3).
 For business individuals with proper accounting, business-related
expenses may be deductible (Article 2.3, point c).

d) Recognise the individual income of non-residents subject to personal income tax

and compute the tax to be withheld.
Non-Resident Individual Income and Withholding PIT
Defined in Article 1.2 and Article 18:
 Non-residents: taxed only on Vietnam-sourced income.
 Flat withholding rates apply:

Income Type Withholding Tax Rate

Salary/wages 20% (Art. 18.1)

Business income Fixed % on revenue (Art. 18.2)

Capital investments 5%

Real estate, securities, prizes, As per Article 2 (see section b

gifts above)

Employer or payer must withhold PIT before payment.

e) Compute the monthly and annual tax liabilities of residents and non- residents
with regard to:
− all types of income whether sourced from Vietnam or overseas.
Computation of Monthly & Annual Tax Liabilities
Residents (Article 1.1):
 PIT applies to worldwide income.
 Computed:
o Monthly (on salaries/wages).

o Per occurrence (for capital transfer, real estate, etc.).

o Annually (if opting for year-end finalization – Article 21.2).

Non-residents:
 Only Vietnam-sourced income.
 PIT = Gross income × flat rate (no deductions or personal allowances).

f) Compute any available tax credit and double taxation relief in respect of foreign
taxes and withholding taxes.
Tax Credit and Double Taxation Relief (Foreign Taxes)
Article 7: Residents are entitled to foreign tax credits for overseas-sourced
income if:
 They already paid PIT abroad.
 Income is declared in Vietnam.
 Documents provided (e.g. foreign tax certificate).
Credit limit:

Tax credit ≤ Vietnamese PIT payable on that foreign income

Example in Article 7.2:

If dividend income from abroad is taxed at 10% in the foreign country, and
Vietnam’s PIT on it is 5%, only 5% is creditable.

4. The use of exemptions and reliefs in deferring and minimising PIT

liabilities
a) Identify, compute and apply the right reduction/relief in given circumstances.
🔹 1. Personal and Dependent Reliefs
📌 Reference: Article 9.1 & 9.4 – Circular No. 68/VBHN-BTC
Applicable only to resident individuals with employment income.
 Type of
Amount Conditions
Relief

Personal
11 million VND/month Automatically applied for residents
relief

Dependent 4.4 million Must register the dependent with the

relief VND/month/dependent tax authority

🔹 2. Compulsory Insurance Deductions

📌 Reference: Article 9.2 – Circular No. 68/VBHN-BTC
Deductible contributions include:
 Social Insurance
 Health Insurance
 Unemployment Insurance
These amounts are deducted from gross salary before PIT is calculated.

🔹 3. Charitable Donations
📌 Reference: Article 9.3 – Circular No. 68/VBHN-BTC
Donations to the following organizations are deductible:
 Approved charitable organizations
 Humanitarian and educational support funds
Note: Only applicable for income from wages/salaries or business income.

🔹 4. Relief for Foreign Tax Paid (Tax Credit) – Giảm trừ thuế nước ngoài đã
nộp
📌 Reference: Article 7 – Circular No. 68/VBHN-BTC
Resident individuals earning foreign income and paying tax abroad can claim a tax
credit:
Maximum credit allowed = Lesser of:
1. Foreign tax actually paid (with proof)
2. Vietnamese PIT calculated on that foreign income
✅ Summary of How to Apply Reductions/Reliefs
 Step 1: Classify the type of income (salary, business, etc.)
 Step 2: Check for residency status
 Step 3: Identify eligible reliefs (personal, dependent, insurance, donation)
 Step 4: Compute net taxable income
 Step 5: Apply PIT rates (progressive or flat depending on income type)

b) Explain how alternative structuring of all types of income can result in different
amounts of taxable income and tax liability.
🔹 1. Salary vs. Allowances and Benefits in Kind
📌 Reference: Article 2.2 – Circular No. 68/VBHN-BTC
Certain allowances or in-kind benefits may be partially or fully exempt:
 Housing paid by employer → taxable only up to 15% of total taxable
income (excluding rent)
 Uniform, phone, lunch allowances → exempt if within legal limits or
paid in-kind
Allowances Exempt from PIT
(Based on Article 2.2.11 – Circular No. 68/VBHN-BTC)
Certain benefits in cash or kind provided by the employer are not subject to
PIT, but only if they meet specific conditions. Here's the breakdown:

✅ 1. Lunch Allowance / Mid-shift Meal

🔹 Exempt if:
 Provided in kind (e.g. employer provides canteen meals).
 Or paid in cash up to a cap: 730,000 VND/month (effective under
Decision No. 595/QĐ-BHXH, and applied in PIT as per Circular 68).
📌 Taxable if the cash allowance exceeds 730,000 VND/month → The excess
amount is subject to PIT.

✅ 2. Telephone Allowance
🔹 Exempt if:
  Paid according to the internal policy of the organization.
 Reasonable and supported by regulations or labor contract.
📌 Note: No fixed cap is specified in Circular 68, but the amount must be
reasonable and based on policy. Excessive or undocumented amounts may be
taxed.

✅ 3. Uniform Allowance
🔹 Exempt if:
 Provided in kind (company gives clothing), or
 Provided in cash up to 5 million VND/year.
📌 Taxable if:
 Cash allowance exceeds 5 million/year → excess is subject to PIT.
 Provided with no proof or policy → whole amount may be taxed.

✅ 4. Other Common Allowances and Benefits

Condition
Allowance/Benefit PIT Treatment
s

Housing provided by Taxable up to 15% of total income Art.

employer (excluding rent) 2.2.11.b

Art.
Per diem/travel allowances Exempt if per actual trip, as per policy
2.2.11.e

Exempt if job-related and paid to training Art.

Training fees
provider 2.2.11.i

School fees for children Art.

Exempt if paid directly to school (K–12)
(expats) 2.2.11.k

📌 Summary Table

Allowance Exempt Limit Taxable If

Lunch (cash) ≤ 730,000 VND/month Excess is taxed

No fixed limit (must be reasonable & in Unreasonable or

Telephone
policy) undocumented

Uniform ≤ 5,000,000 VND/year Excess is taxed

Allowance Exempt Limit Taxable If

(cash)

Uniform (in
Fully exempt —
kind)

🔹 2. Capital Transfer vs. Capital Investment

📌 Reference: Article 2.4 & 2.5 – Circular No. 68/VBHN-BTC

Income Type Tax Rate Note

Capital investment (e.g.

5% On gross income
dividends)

20% on gain or 0.1% on sales May allow loss

Capital transfer (e.g. shares)
value offset

Choosing the form of holding and selling assets (e.g., listed vs. unlisted shares)
may result in lower effective PIT.

🔹 3. Choosing Business Structure

 Individuals with small business turnover (under 100 million/year) are
exempt from PIT.
 Individuals declaring actual expenses may reduce their business taxable
income.
 Choosing between being an employee (with deductions) or an
independent contractor (fixed PIT rate) may change total tax liability.

🔹 4. Timing of Income and Finalization

 Deferring income to a new tax year may change which progressive rate
bracket applies.
 Finalizing tax at the end of the year (Article 21) allows aggregation of
income, which may reduce overall tax due (especially if income is uneven
across months).

✅ Conclusion
The careful use of deductions (Article 9), tax credits (Article 7), and proper
structuring of benefits (Article 2) can significantly reduce or defer an individual’s PIT
liabilities under Vietnam’s tax laws. Circular No. 68/VBHN-BTC provides detailed
guidance on allowable reliefs, benefits treatment, and computation methods.

Excluded topics
• Detailed provisions of individual tax treaties
C Corporate income tax
1. The scope of corporate income tax (CIT)
a) Explain and apply the territorial scope of corporate income taxation in Vietnam.
a) Territorial Scope of Corporate Income Taxation in Vietnam
 Article 2 (66/VBHN-BTC): This article defines the territorial scope of CIT in
Vietnam, stating that domestic enterprises are taxed on their worldwide
income, while foreign enterprises are taxed only on income derived from
Vietnam.
 Article 3 (78/2014/TT-BTC): Specifies that foreign enterprises operating in
Vietnam through a permanent establishment (PE) are liable to CIT on income
derived from Vietnam.

b) Identify the business establishments liable to CIT.

b) Business Establishments Liable to CIT
Article 2 (66/VBHN-BTC): Discusses the entities that are considered business
establishments for CIT purposes, including domestic companies, foreign companies,
and their permanent establishments (PEs) in Vietnam.
1. Domestic Enterprises: These are Vietnamese entities formed under
Vietnamese law, including joint-stock companies, limited liability companies,
and other forms of domestic companies.
2. Foreign Enterprises: Foreign entities that are conducting business in
Vietnam are subject to CIT on income derived from Vietnam. These foreign
entities include branches, subsidiaries, and other forms of permanent
establishments (PE) in Vietnam.
3. Permanent Establishments (PE): If a foreign company has a PE in Vietnam
(such as a branch, office, or factory), it is subject to CIT on the income
derived through that PE in Vietnam.
A Permanent Establishment (PE) in Vietnam is typically established when a
foreign enterprise conducts business activities in Vietnam and has a fixed place of
business that it uses to carry out business operations.
1 Fixed place of business (e.g., office, branch, factory).
2 Duration of activity exceeding a specified period (e.g., 6 months for
construction projects, more than 183 days in a 12-month period for other
business operations).
3 Authority to conclude contracts on behalf of the foreign enterprise.
4 Certain business activities, such as sales, consulting, or the use of facilities.
c) Explain how the tax residence of a company is determined.
A company’s tax residence in Vietnam is determined by the following criteria:
1. Incorporation: A company incorporated under Vietnamese law is a resident
in Vietnam.
2. Management: A foreign company is considered a tax resident if it has its
head office, management, or control in Vietnam, even if it is incorporated
abroad.
If a company meets either of these criteria, it will be taxed as a resident
enterprise, subject to CIT on worldwide income.
Otherwise, it will be treated as a non-resident enterprise and taxed only on
income derived from sources within Vietnam.

d) Understand how a double taxation agreement can affect the liability to taxation
of different types of income.
d) Impact of Double Taxation Agreements (DTA)
Vietnam has signed Double Taxation Agreements (DTAs) with several countries
to avoid double taxation of income. These agreements typically provide for:
 Exemption: Certain income (e.g., dividends, interest, royalties) might be
exempted from tax in one country or taxed at a reduced rate.
 Tax Credit: A foreign tax credit may be available for taxes paid in one
country to reduce the tax liability in the other country.
For instance, if a company in Vietnam earns income from a country with which
Vietnam has a DTA, the company may be able to apply DTA provisions to reduce or
eliminate the double taxation of that income, depending on the specific terms of the
agreement.

e) Understand how companies and institutions in certain specific industries (e.g.

securities, banking, real estate etc.) are taxed.
e) Taxation of Companies and Institutions in Specific Industries
In Vietnam, certain industries benefit from special tax treatments due to their
economic significance.
1. High-Tech Industry (Technology and Innovation)
 Exemption or reduced tax rates for high-tech companies engaged in
research, development, and manufacturing activities related to
technology and innovation.
  These companies can receive tax holidays or reduced CIT rates (as low as
10% for 15 years).
 In some cases, profits from high-tech production may be exempt from tax
for a certain number of years (e.g., 4-8 years) depending on the size of the
company and investment amount.
Key Conditions for Exemptions:
 The company must be certified as a high-tech enterprise by the Ministry of
Science and Technology.
 The company’s activities must align with the government's high-tech
development priorities.
2. Real Estate Industry
 Real estate businesses are generally subject to regular CIT rates. However,
specific exemptions or reductions apply in cases such as:
o Real estate development projects that are aligned with the
government’s urban development plans or that support housing for
low-income populations.
o Tax incentives for real estate projects located in special economic
zones or economic zones (e.g., tax holidays for certain projects in
the first 3-4 years).
o Income from long-term rental properties may be subject to a
reduced CIT rate.
Special Exemptions for Real Estate Projects:
 Certain real estate development projects for affordable housing or
industrial parks may be exempt from CIT for a specific period (e.g., 5-10
years).
 Dividends received from real estate investment trusts (REITs) may also
enjoy favorable tax treatments depending on DTA agreements or local rules.
3. Banking and Financial Services
 Interest income earned by banks or financial institutions on certain
government bonds or highly-regulated investment vehicles may be
exempt from CIT.
 Securities trading income may be exempt or subject to a reduced CIT rate
(especially for transactions within specific securities exchanges).
Conditions:
 The income exemption applies primarily to government bonds or bonds
issued by state-owned enterprises or projects that support national economic
goals.
  Banks and financial institutions investing in high-priority sectors may
also benefit from reduced CIT rates.
4. Export-Oriented Industries
 Businesses engaged in exporting goods and services may receive several
tax incentives to encourage international trade. These include:
o Tax exemptions or reduced rates on income derived from export
sales.
o Certain export processing zones or free trade zones provide CIT
holidays for a specified period (e.g., up to 4 years), followed by a
reduced tax rate.
Examples of Eligible Industries:
 Textiles
 Footwear
 Electronics
 Agricultural products
5. Renewable Energy Industry
 Companies involved in renewable energy production (such as solar, wind,
or biomass) are eligible for tax incentives under the government’s focus on
sustainable energy development.
o Exemption from CIT on income derived from renewable energy
generation for a certain period (e.g., 5-10 years).
o Reduced CIT rates or tax credits may be offered for projects related
to energy efficiency, recycling, and environmental
sustainability.
6. Agriculture and Agribusiness
 Agricultural businesses, including those involved in farming, livestock,
and fisheries, are often granted tax exemptions or reduced CIT rates:
o Tax holidays (typically 3-5 years) for agriculture-focused
businesses.
o Reduced rates for businesses that process agricultural products or
engage in the export of agricultural goods.
Special Provisions for Agriculture:
 Income derived from small-scale agricultural projects (especially in rural
areas) may be exempt from CIT for a period, to support rural development.
  Companies involved in agricultural processing may also benefit from
reduced tax rates.
7. Investment Incentives for Specific Economic Zones (EZs) or Industrial
Parks
 Companies located in special economic zones (SEZs) or industrial parks
may qualify for exemptions or reduced CIT rates.
 Common incentives for companies operating in these zones include:
o Tax holidays for the first few years (e.g., 4-8 years).

o Reduced CIT rates (often 10% for up to 15 years).

o Exemption from tax on export income for specific industries like

electronics manufacturing, textiles, and support industries.
8. Investors in Infrastructure Development Projects
 Infrastructure projects, including those related to transportation,
utilities, and public services, may benefit from:
o Tax holidays or reduced CIT rates for a period.

o Tax exemptions on income derived from certain types of

infrastructure investment, particularly those that are designed to
support economic development or social welfare.
Conditions:
 The projects must contribute to national development priorities and may
need to be approved by the relevant government agencies.

Summary of Specific Exemptions and Incentives:

 High-tech companies: Tax holidays or reduced rates for tech R&D and
manufacturing.
 Real estate: Tax incentives for affordable housing and projects in special
zones.
 Banks and financial services: Exemptions on government bond interest
and securities transactions.
 Export-oriented industries: Tax holidays and reduced rates for export
activities.
 Renewable energy: Exemptions or reductions for green energy projects.
 Agriculture: Tax relief for farming and agribusiness activities.
  Special economic zones: Tax incentives for companies in targeted zones or
parks.
 Infrastructure projects: Exemptions for investments in public
infrastructure.
These incentives are primarily aimed at attracting investment in priority sectors
that align with Vietnam's development goals.

Excluded topics
• Tax exempt income as defined by the law on CIT.
2. Profits subject to CIT
a) Explain the basis of assessment for CIT, including on the commencement and
cessation of an enterprise.
The basis of assessment for CIT in Vietnam is generally based on the accrual
method of accounting. The key points are:
1. Commencement of an Enterprise:
o Taxable Entity: A business is considered to have commenced when it
starts its operations or when it begins to generate income, even if it
hasn’t yet registered for tax purposes.
o First Year of Operation: CIT is applicable from the first year the
business starts generating income.
o Filing: An enterprise must file a CIT registration with the Vietnam Tax
Department within 10 days from its commencement.
2. Cessation of an Enterprise:
o A business is considered to have ceased operations when it stops
conducting any form of income-generating activity, and no longer has
a permanent establishment (PE).
o Upon cessation, the business must file a final CIT return to account
for any remaining liabilities and tax obligations.

b) Define the terms ‘assessable income’, ‘taxable income’ and ‘tax assessment
period’.
1. Assessable Income:
o Assessable income refers to the total income generated by the
enterprise from its business activities, which is subject to tax. This
 includes all forms of income, such as sales revenue, service fees,
interest income, etc.
2. Taxable Income:
o Taxable income is the net income after allowable deductions
(expenses, losses, etc.). This is the income that is subject to corporate
income tax (CIT).
3. Tax Assessment Period:
o The tax assessment period is typically the calendar year from 1
January to 31 December. If a company starts or ceases operations
during the year, the period will be prorated to cover the duration of
business activities.

c) Explain ‘taxable revenue’ and reduction of taxable revenue for enterprises in

specific industries.
1. Taxable Revenue:
o Taxable revenue refers to the total revenue of the business that is
subject to CIT, excluding any exempted or non-taxable income.
2. Reduction of Taxable Revenue:
o Specific industries may enjoy reductions in taxable revenue through
exemptions, tax holidays, or lower CIT rates. For example:
 Export businesses may have tax exemptions for revenue
from export sales.
 High-tech enterprises may be eligible for tax incentives
(e.g., tax holidays or reduced CIT rates).

d) Recognise and compute ‘deductible expenses’.

Deductible expenses are expenses that are directly related to business
operations and can be subtracted from assessable income to calculate taxable
income. These include:
 Salaries, wages, and other employee benefits.
 Office rent, utilities, and supplies.
 Marketing and advertising expenses.
 Depreciation of tangible assets.
Computation of Deductible Expenses:
  Deductible expenses reduce taxable income:
Total income – Deductible expenses = Taxable income.

e) Recognise the items that do not constitute deductible expenses.

Some expenses are not deductible under CIT regulations, including:
1. Personal expenses: Not related to the business.
Salaries and wages of owners of private enterprises or single-member limited
liability companies (owned by an individual)
Salaries paid to Board of Members (BOM) not directly involved in daily
business operation
Salaries, bonus, other benefits not substantiated with proper documents
(labor contract, collective labor agreement, company policy, etc.).
Expenses for employees’ families.
Payment for redundancy /severance allowance not in accordance with labor
regulations.
Accrued salaries and bonus not actually paid before the deadline for
submission of the CIT return unless provisioned for the next year’s salary
fund.
The provisional fund must be used within 06 months after the end of the
fiscal year (if it is not used up, a decrease will be recorded in the deductible
expenses of the next period).
Conditions of Salary provisions: Not exceed 17% of the actual salary fund in
the previous year.
2. Fines and penalties: Imposed by authorities for legal violations.
3. Bribes and illegal payments.
4. Provisions for items like bad debts (unless specifically allowed).
5. The excess of costs of materials, fuel, power and goods over the reasonable
consumption level.
6. Expenses paid without form 01/TNDN and payment vouchers is non-
deductible.
7. Interest loan:

• 1.5 time of State Bank of Vietnam’s interest rate.

• Interest of loan corresponding to the un-contributed portion of charter
capital.
 (If the loan is ≤ the charter capital deficit, the whole loan interest is not
deductible)
• Capped at 30% EBITDA under transfer pricing regulations Generally
deductible

f) Explain and compute the ‘other income’ that should be included in taxable
income.
1. Other income refers to income that is not from regular business operations,
such as:
o Interest income, dividends, gains from asset sales.

o Government grants or subsidies.

o Income from financial restructuring.

2. Computation:
o Other income should be included in taxable income along with
operational income, after applying any exemptions or deductions.

g) Depreciation and amortisation of assets

Cars: Depreciation of cars with 9 seats or fewer is deductible, but there's a
cost limit. The deductible cap is VND 1.6 billion (excluding VAT). If the original cost
exceeds this cap, the excess is not considered for depreciation.
Repair expenses are either fully expensed in the current period or amortized over
a maximum of 3 years.
Improvement expenses are capitalized, meaning they are added to the asset's
historical cost and then depreciated over the asset's remaining useful life

i) State the conditions that must be satisfied for depreciation of a fixed asset to be
included in deductible expenses.
Conditions for Depreciation to be Deductible
To be included as deductible expenses for CIT purposes, depreciation of a fixed
asset must satisfy these conditions:
 Assets must have proper ownership documents.
 Assets must be used for business activities within the tax period. (There
are exceptions for temporary disuse.)
 Depreciation must not exceed regulated levels.
  For land use rights, amortization is not allowed for indefinite-term rights.

ii) Explain the types of qualified fixed assets (for depreciation) and compute the
eligible cost of tangible fixed assets, intangible fixed assets and leased assets.
Types of Qualified Fixed Assets and Eligible Cost
 Tangible Fixed Assets: The depreciation of cars with 9 seats or below is
generally deductible, but with a cap. The deductible cap of the original cost is
VND 1.6 billion (exclusive of VAT).
 Intangible Fixed Assets: Land Use Rights. Finite Land Use Rights can be
depreciated if supported by required documents and used for business
activities.
Infinite Land Use Right is not allowed to be depreciated.
 Leased Assets

iii) Compute the allowable depreciation expense in accordance with Ministry of

Finance decisions.
3 methods for calculating depreciation expense:
 Straight-line Method:
o Level of depreciation = (Historical cost of the fixed assets) / (Duration
of use of the fixed assets)
 Adjusted Reducing Balance Method:
o This method is applicable for enterprises in technology-intensive areas
with rapid changes, newly invested fixed assets (not second-hand), and
machinery and equipment or testing instruments.
o The PDF provides formulas and an example for this method.

 Depreciation based on volume of product:

o This method applies to assets directly related to product making.

o The PDF outlines the conditions and provides an example for this
method.

iv) Distinguish between repairs and improvements and determine the effect of
improvements on the calculation of depreciation.
Distinction Between Repairs and Improvements
  Repairs: Expenses are accounted for fully in the current year or amortized
over a maximum of 3 years.
 Improvements: Expenses are added to the historical cost for depreciation.
v) Explain the treatment of a disposal or part disposal of depreciable assets.
Special Considerations
 Partial Disposal: If only a part of an asset is disposed of, the asset's total
depreciation may need to be apportioned between the part that was disposed
of and the part that remains. The depreciation expense on the remaining part
of the asset continues to be deducted as per the asset's useful life.
 Adjustments to Taxable Income: In some cases, if the asset is disposed of
before the depreciation reaches its full expected life, the business may need
to adjust its taxable income accordingly. This ensures that tax benefits are
not overstated in cases where an asset is sold before its full depreciation
potential has been realized.

h) Capital Assignments and Transfer of securities and projects

i) Explain the treatment of transfers of projects, shares, bonds and other securities
by business enterprises (including “indirect offshore transfers”).

ii) Explain and apply the reliefs available to an investor transferring the whole or
part of their capital investment to a third party.

i) Taxation of real property transfers

i) Explain the circumstances in which the transfer of real property is liable to

corporate income tax.

ii) Compute the taxable income (turnover less expenses) on the transfer of real
property.

j) Losses and carry forward losses

i) Explain and apply the relief available for losses against income in the year of loss
(current year) and in subsequent years.

k) Welfare expenses

i) State the types of deductible welfare expenses, distinguish from other categories
of expenses and state the conditions for additional deduction of welfare expenses.

ii) Calculate deductible welfare expenses (taking into account the cap).
l) Science and technology funds
i) State how the additional deduction operates.
ii) Calculate the tax arrears and other amounts payable for cases of non-
compliance.
m) Provisions for doubtful debts, investments, inventory, warranty and severance
allowance
i) Describe the tax treatment of these provisions.
ii) Calculate the tax implications of these provisions.
n) Understand the implications of capital versus debt financing, the non-
deductibility of interest expenses under various circumstances, and compute
relevant amounts 2]
o) Understand the implications of related party transactions (including imposition of
taxable revenue, deductible expenses and/or taxable income by the tax authorities),
and perform simple estimates of relevant tax amounts.
3. The comprehensive computation of CIT liabilities
a) Prepare a CIT computation, including the standard CIT declaration forms, taking
into account the tax regulations.
b) Compute the CIT liability at non-reduced rates.
c) Tax incentive exemptions and reductions
i) Describe the general application of CIT incentives applicable to investment
projects under the tax regulations.
ii) Explain the general qualifying conditions that must be satisfied, the nature of the
incentive and the duration of application in each case.
iii) Compute the CIT liability at reduced rates (where applicable), including the
treatment of tax losses.
d) Overseas aspects
i) Business structure, representative offices, branch or subsidiary
− Define ‘permanent establishment’.
− Apply the concept of permanent establishment to determine the taxability of
income in Vietnam.
− Explain and distinguish between the CIT implications of a representative office,
branch and subsidiary of a foreign corporation.
ii) Recognise the circumstances in which income earned by foreign organisations
without presence in Vietnam, or income earned by a Vietnamese organisation in a
foreign country, is regarded as being taxable in Vietnam.
iii) Double taxation relief
− Explain and apply the available forms of double taxation relief:
− treaty relief (of double tax agreeements as provided); and
− unilateral tax credit relief
− Compute the double taxation relief available in respect of foreign withholding and
underlying taxes.

Excluded topics
• Detailed lists of provinces or geographical locations etc for the purposes of tax
incentives
• Detailed provisions of individual tax treaties

4. The use of exemptions and reliefs in deferring and minimising CIT

liabilities
a) Identify, compute and apply the right reduction/relief and tax saving/deferral
arrangement in given circumstances.
D Taxation of foreign contractors
1. The scope of the foreign contractor tax (FCT) regime
a) Identify applicable and non-applicable subjects/transactions.
✅ FCT Applies to:
 Foreign entities (with or without PE in Vietnam) doing business with
Vietnamese parties or earning income from Vietnam
 Typical transactions:
o Construction and installation

o Equipment with associated services

o Software licensing

o Digital services (e.g. cloud, e-commerce platforms)

o Interest, royalties, service fees

❌ FCT does NOT apply to:

 Pure goods trading (if no associated service)
 Purely reimbursed costs
 Services used entirely outside Vietnam
 Non-taxable income under a Double Tax Agreement (DTA)

b) Explain the inter-relationship between the FCT regime and CIT, VAT and PIT.
 FCT is not a separate tax, but a combination of CIT and VAT applied to
foreign contractors.
 CIT component of FCT = tax on net income/profit
 VAT component of FCT = tax on gross contract value
 PIT applies separately if foreign individuals are involved (not part of FCT)
📌 FCT = CIT + VAT (on specific payments to foreign companies)

c) Define the terms ‘foreign contractor’; sub-contractor’; ‘income arising in

Vietnam’; income from providing e-commerce platforms, income from providing
digital servies without a permanent establishment, income from the transfer of
ownership of or right to use assets; ‘royalty’; and ‘loan interest’.
Term Definition

A foreign business earning income from providing

Foreign contractor
goods/services in Vietnam (with or without PE)

Any foreign party contracted by the main foreign

Sub-contractor
contractor to perform part of the work

Income arising in Income derived from business conducted in or linked to

Vietnam Vietnam, including cross-border e-services

Income from e- Income from selling digital products or platforms (e.g.

commerce/digital ads, subscriptions, cloud services) to Vietnamese
services customers

Transfer of Includes income from leasing or selling software,

ownership/use rights trademarks, copyright, etc.

Income from granting the right to use intellectual

Royalty
property (trademarks, patents, software, etc.)

Income from lending capital, usually subject to 5% FCT

Loan interest
withholding

Excluded topics
• Definition of intellectual property rights and technology transfer in accordance
with the Civil Code

2. The computation of FCT liabilities

a) Compute the VAT and CIT liabilities, and state the responsibilities for filing and
payment for foreign contractors adopting the Vietnamese accounting system (VAS)
(i.e. the actual method) and simplified VAS (i.e. hybrid method).
a) Actual Method (VAS method)
Applies when:
 Foreign contractor registers under Vietnamese Accounting System
(VAS) and maintains full books
FCT = CIT + VAT
 CIT = taxable income × 20% (normal CIT rate)
 VAT = output VAT – input VAT (credit method)
Responsibility:
  The foreign contractor files and pays

b) Hybrid Method (Simplified VAS)

Applies when:
 Foreign contractor registers for VAT and CIT, but does not maintain full
VAS books
**CIT and VAT are calculated on a deemed revenue rate depending on the service

CIT
Activity VAT %
%

Services 5% 5%

Exemp
Interest 5%
t

Royalties 10% 5%

Construction (with supply of

2% 3%
materials)

Digital services 5% 5%

Responsibility:
 A Vietnamese party withholds and pays on behalf of the foreign
contractor.

b) Compute the VAT and CIT liabilities, and state the responsibilities for filing and
payment for foreign contractors not adopting the Vietnamese accounting system
(VAS) (i.e. deemed method).
c) Deemed Method (No VAS)
 Most common method for foreign digital service providers or one-off
contractors
 Use prescribed withholding rates
Example:
If a foreign company provides digital ads to Vietnam:
 CIT = 5% of gross revenue
 VAT = 5% of gross revenue
Responsibility:
 Normally Vietnamese party withholds
  BUT for e-commerce and digital services, the foreign party may self-
register for direct filing (see next)

c) Compute the VAT and CIT liabilities, and state the responsibilities for direct filing
and payment for foreign contractors operating and earning income from Vietnam in
e-commerce and digital services without a Permanent Establishment (i.e. direct
filing method)
Direct Filing for E-Commerce / Digital Without PE
Applicable to:
Foreign companies like Google, Facebook, etc.
Methods:
1. Direct registration and payment to General Department of Taxation (GDT)
2. Through an authorized representative in Vietnam
3. Vietnamese buyers withhold and remit tax
4. Vietnamese banks are required to withhold and remit FCT on behalf of foreign
contractors

d) Identify, compute and compare FCT implications between different arrangements.

e) Apply the double taxation relief provisions in the context of the FCT regime.

Metho
Arrangement CIT Rate VAT Rate Responsibility
d

Construction VAT credit Foreign

Actual 20%
contract with PE method contractor

Online platform Deeme Buyer/foreign

5% 5%
(e.g. Zoom) d co.

Deeme
Software license 10% 5% Buyer
d

Loan from foreign Deeme

5% 0% Buyer
bank d

DTA with Deeme May reduce CIT or exempt VAT still Apply DTA
Singapore d interest/royalty applies certificate

✅ To apply DTA relief:

 Submit Form 02/HTQT
 Provide Certificate of Residence (COR) from home country
 Tax authority may reduce or exempt withholding
E Value added tax
1. The scope of value added tax (VAT)
a) Describe the scope of VAT.
 VAT is a broad-based consumption tax applied on the value added at
each stage of the supply chain.
 Applied to:
o Goods and services consumed in Vietnam

o Imports into Vietnam

o Some exports, depending on classification

b) State who is and who is not a VAT taxpayer.

VAT taxpayers include:
 Businesses and individuals producing/trading VAT-liable goods and
services in Vietnam
 Organizations importing/exporting goods
 Entities engaging in real estate, leasing, consulting, and services
Non-taxpayers include:
 Households and individuals with revenue under VND 100 million/year
 Entities conducting only exempt activities

c) Identify the taxable and non-taxable (exempt) objects.

Taxable:
 Most goods and services used for production, business, and consumption in
Vietnam
Exempt (non-taxable):
 Health care, education
 Financial services (e.g. loan interest, insurance)
 Land use rights transfer
 Public transport
 Goods under humanitarian aid
  Some agricultural products and services

d) Understand the principal zero-rated supplies and supplies for which VAT
calculation and declaration is not required.
Zero-rated (0% VAT):
 Exported goods and services
 International transport
 Exported processing goods
 Construction/installation abroad
Not required to declare:
 Individuals/firms with < VND 100 million/year
 Certain VAT-exempt services (e.g. medical exams)
 Pure compensation payments

2. Bases and methods of VAT calculation

a) Explain the principles that apply to the valuation of supplies and imports.
VAT base = selling price (excluding VAT) + surcharges and additional fees
For imports:
VAT base = CIF price + import duties + other taxes (if any)

b) Explain and apply the accepted methods of tax calculation:

− tax credit; and
− directly on the basis of added value.
1. Credit method (deduction method):
 VAT payable = Output VAT – Input VAT
 Applies to businesses with proper accounting & VAT invoices
2. Direct method (on value added):
 VAT = Revenue × VAT rate (applied to small businesses)
 Used by:
o Individuals
 o Firms not maintaining full books

o Certain sectors like trading, services

c) Explain and apply the time of supply rules.

Goods: when ownership is transferred
Services: when service is completed
Payment in advance: when invoice is issued or payment is received (whichever
comes first)

d) Determine the taxable revenue in specific cases.

 Installment sales: full sale value excluding interest
 Barter or gifting: market price of the goods
 Real estate: contract price or price list from provincial authorities

e) Explain the treatment of financial services, including credit, securities trading,

capital transfers and derivatives.
Exempt from VAT:
 Loan interest
 Insurance premiums
 Capital transfers (e.g. shares, bonds)
 Derivative trading (depends on transaction nature)
These do not generate input VAT credit

f) Explain the treatment of free goods and internally consumed goods.

• Free goods: still subject to VAT (taxable value = cost or market value)
• Internally consumed goods (not for business): taxable
• Goods for in-house use for production/business: not taxable

g) State the circumstances in which input VAT may be credited and/or refunded.
Creditable if:
 Has proper VAT invoice
  Used for VAT-liable activities
 Payment made via bank transfer if invoice ≥ 20 million VND
Refundable if:
 Excess input VAT for 3 months in a row
 Exporters with large input VAT
 Investment projects with large initial outlay

h) Explain the categories and forms of invoices, the mandatory contents in invoices,
and usage of invoices (in particular: requirements for issuance of invoices, point of
time for issuing invoices, handling invoices with errors, reporting usage of invoices).
Types:
 Electronic invoices (e-invoices)
 Paper invoices (less common now)
Mandatory contents:
 Buyer/seller info
 Goods/services, quantity, unit price
 Tax rate, VAT amount
 Signature or e-signature
Issuance requirements:
 Upon transfer of ownership or service completion
 Before delivery if prepayment received
Handling errors:
 Issue a corrective invoice
 Notify tax authority if already declared
Invoice reporting:
 Monthly/quarterly declaration
 Invoice usage report must be submitted

i) Explain the invoicing treatment in special cases, for example: discounts / rebates,
goods for promotional purposes, goods returned to seller, invoices lost, transactions
in disputes.
(Note: the term “invoices” covers both paper invoices and electronic invoices.
Where ‘treatment’ is mentioned in E2. above, this includes calculations).

Case VAT Treatment

Discounts/rebates VAT applies on net value after discount

Promotions/gifts VAT applies on cost or market price

Goods returned Issue debit note or correction invoice

Must notify tax authority, may still declare based on digital

Lost invoices
copy

Disputed VAT still declared unless transaction is fully reversed or

transactions legally cancelled