Vietnam Tax & Business Guide - Deloitte

Basic facts
Population 84.9m Inflation 7.4% (2006)*
Main languages Vietnamese, English GDP per head US$726*
Currency Dong (VND) GDP growth 8.2% (2006)
Economic communities Asia Pacific Economic Co-operation, Association of South-East Asian Nations, WTO
GDP sources 20.1% agriculture, 41.8% industry, 38.1% services
*Economist Intelligence Unit estimates.
Political environment

Vietnam is a one-party state, run by a collective leadership comprising the Communist Party general secretary, Nong Duc Manh, the prime minister and the president. Nguyen Minh Triet is the president and Nguyen Tan Dung the prime minister.
Foreign trade and investment
Exports US$39.9bn (2006)* Imports US$40.6bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: The US, Japan and the EU.

Major exports: Crude oil, garments and textiles, seafood, electric cables and wires, footwear and rice.

With its accession to the World Trade Organisation (WTO) in January 2007, Vietnam is committed to opening a range of services to foreign investment. Generally permissible forms for new investment in the services sector are business co-operation contracts, which are agreements in which foreign partners contribute capital and managerial control remains in the hands of the local investors; joint ventures; and 100% foreign-investment entities. Tax and other incentives are available, but performance-related incentives tied to local content or exports are to be terminated as part of WTO accession.
Business and financing
Business forms Wholly foreign-owned companies, joint ventures, BCC

Foreign investors may operate as wholly foreign-owned companies, joint ventures or through business co-operation contracts (BCCs), and they may establish a representative office or branch in Vietnam.

The Uniform Enterprise Law (UEL) and Common Investment Law (CIL) regulate foreign-invested and Vietnamese enterprises, albeit with rules that differ based on nationality of firm ownership.
Labour environment
Unemployment rate 4.4% (2006)* Minimum wage Varies by employee category
*Economist Intelligence Unit estimate.

Unions are a powerful political and economic force.

All employees are eligible for social insurance and health insurance, payable by the employer and generally 17% of total salary or basic salary. From January 1st 2007, the salary base to calculate social and health insurance is capped at 20 times the minimum monthly wage applicable to the state-owned enterprise sector (currently, VND 9m).

The minimum monthly wage at Vietnamese firms, both private and state-owned, is VND 350,000. This is lower than for foreign-investment enterprises (FIEs).

Although FIEs must give recruitment priority to local over foreign personnel, they may hire foreign workers if local workers do not have the requisite skills. However, the number of foreign workers is limited to 3% of the total employees of a company. Where it is required to have foreign workers numbering more than 3% of total employees, the company must obtain approval from the local PeopleÌs Committee.
Taxation
Corporate tax
Main rate 28%

Resident companies are taxed on their worldwide income; non-resident companies are subject to tax only on Vietnamese-source income. Residence is not defined in the tax law, but the place where the business actually operates is important. The corporate tax rate is 28% for both local and foreign-investment enterprises (FIEs).
Individual tax
Progressive rates to 40%

Resident individuals are taxed on their worldwide income; non-residents are taxed only on Vietnamese-source income at a flat rate of 25%. Expatriates present in Vietnam for 183 days or more in a 12-month period are considered to be resident. Individual income tax is charged at progressive rates to 40%, but the tax bands differ for resident expatriates and local employees. Resident expatriates begin paying the 40% rate of tax on average monthly income over VND 80m, while for local employees the threshold is lower.
Capital gains
Company gains taxed as income

Capital gains of companies are generally taxed at the corporate tax rate. Gains by foreign investors on the transfer of an interest in a foreign-invested or Vietnamese enterprise are taxed at 28%. Gains by individuals on the transfer of the right to use land are taxed at progressive rates to 60%.
Indirect tax
VAT standard rate 10% Other rates 0%, 5%

Value-added tax (VAT) applies to most transactions at the standard rate of 10%. A lower rate of 5% applies to various items, including machinery, computers and accessories, coal, chemicals and metallurgy products. A zero rate applies to export goods, exports of software and services to firms in export processing zones (EPZs).

Registration is compulsory for businesses.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Companies must file a quarterly provisional return based on the previous quarterÌs declaration. An annual tax return must be filed within the first 90 days following the end of their accounting period. If the actual tax liability is greater than the provisional tax already paid, the company must remit the difference within ten days of the final date for filing the return.

Employment income of individuals is taxed by withholding. Provisional tax payments may be required for income other than employment income.
Additional tax information
Withholding taxes Dividends 0%, Interest and Royalties 10%, General services 10%.
Tax treaties Vietnam has concluded more than 40 tax treaties.
Dividends Dividends are not subject to taxation.
Revenue protection There is transfer-pricing legislation.
Groups There is no provision for group taxation.
Incentives New enterprises; export processing zones; industrial zones; high-technology zones; foreign investors.
Other taxes Capital transfer tax, ContractorsÌ tax, Import and export duties, Land and housing tax, Land-use right assignment tax, Land, water and sea surface rents, Natural resource tax, Special consumption tax, Technology transfer fees.