Summary of basic taxes small and medium businesses must pay in Vietnam: VAT, CIT, business license tax, PIT, and accounting regulations.
Understanding taxes is essential for every business. This guide summarizes main tax types, rates, and incentives for SMEs in Vietnam. Particularly useful for foreign founders unfamiliar with Vietnam's tax system.
1. Value Added Tax (VAT)
1.1. Tax Rates
- 10%: default for most goods, services
- 5%: food, clean water, books, medical, education services
- 0%: export goods, some international services
- Non-taxable: some specific services (financial, basic medical)
1.2. Declaration Methods
- Credit method: VAT payable = Output VAT - Deductible input VAT
- Direct method: VAT payable = revenue × percentage rate. For businesses with low revenue
1.3. Declaration and Payment
- Monthly declaration (revenue over VND 50 billion/year) or quarterly (under VND 50 billion/year)
- Pay before 20th of next month (monthly) or 30th of next month (quarterly)
2. Corporate Income Tax (CIT)
2.1. Tax Rates
- 20%: default
- 17%: SMEs (revenue under VND 200 billion/year)
- 10-15%: incentives for priority industries/areas
- Tax exemption: some special cases
2.2. Calculation
Taxable income = Revenue - Deductible expenses - Carried losses - Tax-exempt income. CIT = Taxable income × Tax rate.
2.3. Deductible Expenses
Must meet: directly related to business operations, valid documentation, bank payment if over VND 20 million/instance.
2.4. Non-Deductible Expenses
- Administrative violation fines
- Cash expenses over VND 20 million
- Interest expenses exceeding 20% EBITDA (for related-party businesses)
- Lease payments without documentation
3. Business License Tax
Paid annually by charter capital:
- Capital over VND 10 billion: VND 3,000,000/year
- Capital VND 10 billion or under: VND 2,000,000/year
- Branch, representative office: VND 1,000,000/year
New businesses exempt first year.
4. Personal Income Tax (PIT)
Business is withholding agent. Progressive tax schedule from 5% (up to VND 5 million/month) to 35% (over VND 80 million/month).
Deductions: Self VND 11 million/month, Dependent VND 4.4 million/person/month, Social/health/unemployment insurance paid.
5. Social Insurance Contributions
Rates on basic wage: BHXH 25.5% (Employer 17.5% + Employee 8%), BHYT 4.5% (3% + 1.5%), BHTN 2% (1% + 1%), Trade union fee 3% (2% + 1%). Total 35% (Employer 23.5% + Employee 11.5%).
6. Financial Reporting
Mandatory for all businesses:
- Annual financial statements: file within 90 days of fiscal year end
- Monthly/quarterly tax reports: per schedule
- Labor reports: every 6 months
- Invoice reports: monthly
7. SME Tax Incentives
- CIT 17% (3% lower than large businesses)
- Business license tax exemption first year of establishment
- Incentives for high-tech, high-tech agriculture businesses
- Incentives in economic zones, industrial zones
- Preferential loan support
8. Accounting Software and Services
Options for SMEs:
- DIY + accounting software: MISA, FAST, BRAVO (VND 3-15 million/year)
- Part-time accountant: VND 5-15 million/month
- Full accounting service: VND 2-8 million/month
- In-house accountant: from VND 15 million/month + insurance
9. Common Tax Mistakes to Avoid
- Invalid invoices: missing information, no digital signature
- Cash payments over VND 20 million: not tax-deductible
- Non-business expenses
- Late declarations: penalty 5-25% of tax payable
- Inadequate accounting records: tax assessment imposed
10. Special Considerations for FDI Enterprises
- Transfer pricing: high-risk audit area, need contemporaneous documentation
- Foreign contractor tax: applies to payments abroad
- Tax treaty benefits: utilize DTAs for reduced rates
- Profit repatriation tax: 0% if from after-tax profits
This article is for reference only. Please contact a lawyer or accountant for accurate advice.
Frequently Asked Questions
New business — must pay tax immediately?
Yes. Must declare and pay tax from first operating month, even without revenue. "No activity" report still due on time.
Can self-declare tax without accountant?
Possible for very small business. High risk due to complex regulations. Recommend minimum basic accounting service VND 2-3 million/month.
Cash payment expenses count as expenses?
Yes, but only under VND 20 million/instance with full documentation. Over VND 20 million must pay through bank for tax deduction.
Business losses carried to following year?
Yes, losses can be carried forward 5 consecutive years. Must declare in annual finalization.
Tax audit — what to prepare?
Full accounting books, original invoices/documents, contracts and appendices, bank statements. Can hire lawyer/accountant to consult before audit.