Understanding Tax and Accounting in Vietnam
Introduction to Tax and Accounting
The tax and accounting landscape in Vietnam is notably well-structured. Compared to many emerging markets, Vietnam’s economic environment features a clear framework that evolves with periodic revisions to align with the nation’s growth and development objectives. Tax revenue plays a vital role in Vietnam’s state budget and applies to both business and individual taxpayers. Here, the onus is on taxpayers to self-assess their liabilities, while tax authorities perform audits to ensure compliance with Vietnamese Accounting Standards (VAS) and other policies.
General Accounting Requirements in Vietnam
Vietnam mandates several core accounting requirements aimed at industry uniformity and financial transparency. Below are essential aspects:
| Requirement | Description |
|---|---|
| Compliance Standard | Businesses are required to primarily comply with VAS. Some firms may voluntarily apply IFRS until 2025, with certain companies becoming mandatory IFRS adopters as delineated by Decision 345/QĐ-BTC. |
| Accounting Record | All accounting records must be kept in Vietnamese. If financial statements are presented in a foreign language, Vietnamese translations are required upon request from authorities. |
| Monetary Unit | Enterprises should use the Vietnamese Dong (VND) for bookkeeping, although entities frequently transacting in foreign currencies may opt for those currencies while adhering to legal standards. |
| Reporting Frequency | Accounting reports must be generated in accordance with VAS regulations, on a monthly, quarterly, or yearly basis as required by management decisions. |
Accounting & Compliance Finalization Procedures
The finalization of accounting and compliance in Vietnam follows a structured process:
| Step | Process |
|---|---|
| Step 01 | Audit – Conduct an audit of financial statements to verify compliance. |
| Step 02 | CIT Finalization – Finalize Corporate Income Tax. |
| Step 03 | PIT Finalization – Finalize Personal Income Tax. |
| Step 04 | Social Insurance Finalization – Finalize contributions to social insurance. |
Vietnam’s Major Taxes
Vietnam’s taxation system includes several key tax types, each with unique implications for businesses:
| Tax Type | Description |
|---|---|
| Business License Tax (BLT) | An indirect tax incurred by entities operating within Vietnam, paid annually. |
| Corporate Income Tax (CIT) | A direct tax on profits with a standard rate of 20%. |
| Value-Added Tax (VAT) | Applied to goods and services at rates of 0%, 5%, and 10%. |
| Special Consumption Tax (SCT) | An excise tax on selected imports/exports. |
| Custom Duties | Applicable on most imported and exported goods crossing Vietnam’s borders. |
| Foreign Contractor Tax (FCT) | A hybrid of VAT and income tax on payments to foreign contractors for services or goods consumed in Vietnam. |
Summary of Tax Rates
| Tax | Standard Rate | Variation | Abbreviation |
|---|---|---|---|
| Corporate Income Tax | 20% | 0% to 20%* | CIT |
| Value-Added Tax | 10% | 0% or 5% | VAT, Sales tax |
| Foreign Contractors Tax | Varied | 2% to 10% | FCT, Withholding tax |
| Personal Income Tax | Varied | 0% – 35% | PIT or IIT |
*Note: Certain sectors may experience differing rates, and a 2% VAT reduction has been temporarily extended until December 31, 2026.
Corporate Income Tax in Vietnam
The standard corporate income tax (CIT) in Vietnam is set at 20% for most business types. This tax applies to profits defined as gross revenue minus expenses and targets all business entities, including foreign corporations with activities in Vietnam. Individual business operators are also liable for personal income tax.
Tax Incentives
Tax incentives play a crucial role in Vietnam’s investment environment. The government extends tax breaks for projects in specific sectors or economic zones to stimulate growth, especially in high-tech areas. Under Resolution 198/2025/QH15, the Vietnamese National Assembly has introduced advantageous mechanisms to bolster private sector development.
Vietnam’s Value-Added Tax
The Value-Added Tax (VAT) in Vietnam is imposed on goods and services at three rates: 0%, 5%, and a standard rate of 10%. This indirect tax is highly applicable and affects any organization or individual deriving income related to goods or services in Vietnam, whether or not they maintain a permanent establishment.
International Taxation
Profit Repatriation
To repatriate profits, companies must certify that their corporate income tax for the relevant financial year has been declared and audited. They should report their intention to repatriate profits to tax authorities. Should no objection arise within seven days, profits can typically be remitted.
Foreign Contractor Withholding Tax
The withholding tax rates applicable to foreign contractors are:
- CIT: 0.1% – 10%
- VAT: 2% – 5%
- PIT: 0.1% – 5%
Customs Duties
Most goods crossing Vietnam’s borders are subject to customs duties, governed by Decree 26/2023/NĐ-CP, which defines tax calculation based on each item listed in the tariff.
Transfer Pricing
Vietnam’s regulations on transfer pricing require that companies engage in intra-group transactions adhere to the “arm’s length standard,” comprising guidelines set forth by the OECD. Companies must document their compliance with these measures rigorously.
Personal Income Tax
Vietnam’s personal income tax (PIT) framework features a progressive tax rate ranging from 0% to 35%. Tax residents, defined as those residing over 183 days within a calendar year, owe tax on global income, while non-residents face a flat rate of 20% on their Vietnam-sourced earnings.
Audit and Compliance
Vietnam’s Accounting Law governs audit principles and organizational structures for compliance management. Audits are mandatory, and financial reports must be provided to local tax authorities, the Ministry of Finance, and other institutions 90 days before the fiscal year’s end.
Vietnamese Accounting Standards
All enterprises and organizations must comply with the Vietnamese Accounting Standards (VAS) established by the Ministry of Finance. These guidelines outline the necessary procedures for bookkeeping, reporting, and preparation of financial statements.
More Guides for Taxation and Accounting
For more detailed information on taxation and accounting practices in Vietnam, additional resources and guidelines can be found to assist investors and businesses in navigating this evolving landscape.