How much are preferential corporate income tax (CIT) rates in Vietnam?

Vietnam corporate income tax has regulations on preferential corporate income tax (CIT) rates. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I want to ask what are circumstances applied CIT rates in Vietnam? How much are preferential corporate income tax (CIT) rates? Thanks for answering my questions!”

Legal grounds

• Vietnam law on corporate tax

Regulations on 10% CIT rate for 15 years

10% CIT rate for 15 years shall be applied to:

+ Incomes of an enterprise from execution of new investment projects in extremely disadvantaged areas, economic zones or hi-tech zones;

+ Incomes of the enterprise from execution of new investment projects in the following areas:  scientific research and technology development; application of high technologies given priority according to the Law on High Technology; cultivation of high technology, cultivation of high-tech enterprises; venture capital investment in development of high technologies on the list of high technologies given priority according to the Law on High Technology; investment in construction, operation of facilities for cultivation of high technologies, cultivation of high-tech enterprises; investment in development of particularly important infrastructural works of the State as prescribed by law; software production; manufacture of composite materials, light building materials, rare and valuable materials; production of renewable energy, clean energy, waste-to-energy process; development of biotechnology; investment in environmental protection;

+ Incomes of high-tech enterprises and agriculture enterprises applying high technologies as prescribed by the Law on High Technologies;

+ Incomes of an enterprise from execution of new manufacturing projects (except for manufacturing of products subject to excise tax and mineral extraction projects) that satisfy any of the following criteria:The project’s capital is at least VND 6,000 billion disbursed within 03 years from the date of investment certificate, and total revenue is at least VND 10,000 billion per year after no more than 3 years from the first year in which revenues are generated by the project;The project’s capital is at least VND 6,000 billion disbursed within 03 years from the date of investment certificate, and it uses over 3,000 employees.

+ Incomes of an enterprise for execution of a new investment project for manufacture of products on the list of ancillary products given priority that satisfy any of the following criteria: Ancillary products are meant to support high technologies according to regulations of the Law on High Technologies; Ancillary products are meant to support manufacturing of: textile and garment; leather and footwear; electronics and IT products; manufacturing of cars; fabricating mechanics that, by January 01, 2015, they cannot be manufactured in Vietnam or can be manufactured in Vietnam and satisfy technical standards of EU or equivalent standards.

The list of ancillary products given priority specified in this Point shall be announced by the Government;

+ Incomes of an enterprise from execution of manufacturing projects, except for manufacturing of products subject to excise tax and mineral extraction projects, ) in which investment is at least VND 12,000 billion, using technologies that must be appraised in accordance with the Law on High Technologies, the Law on Science and Technology, and capital is disbursed within 05 years from the date of investment licensing as prescribed in the Law on investment.

Regulations on 10% CIT rate

10% CIT rate shall be applied to:

+ Incomes of an enterprise’s investment in the public sector fields such as education – training, vocational training, healthcare, culture, sports and environment;

+ Incomes of an enterprise from execution of an investment project on construction of social housing for sale, lease or lease purchase to the entities specified in Article 53 of the Law on Housing;

+ Incomes of a press agency from newspapers, including advertisements on newspapers, as prescribed in the Law on Journalism; incomes of a publisher from publishing defined in the Law on Publishing;

+  Incomes of an enterprise from planting, caring and protection of forests; farming, husbandry, aquaculture in disadvantaged areas; forestry in disadvantaged areas; production, propagation and cross-breeding of plant varieties, animal breeds; production, extraction, and refining of salt, except for salt production prescribed in Clause 1 Article 4 of Law on Corportate Income Tax; investment in post-harvest preservation of agriculture products; preservation of agricultural products, aquatic products, and foods;

+ Incomes of a cooperative from agriculture, forestry, aquaculture or salt production in areas other than disadvantaged areas or extremely disadvantaged areas, except incomes of cooperatives in Clause 1 Article 4 of Law on Corportate Income Tax.

Regulations on 20% CIT rate

20% CIT rate for 10 years shall be applied to:

– Incomes of an enterprise from execution of new investment projects in disadvantaged areas;

– Incomes of an enterprise from execution of new investment projects in the following areas:  production of high-class steel; production of energy-saving products; production of machinery and equipment serving agriculture, forestry, aquaculture or salt production; production of irrigation equipment; production of feeds for livestock and poultry; development of traditional trades.

Such an enterprise specified in this Clause may apply 17% CIT rate from January 01, 2016.

15% CIT rate shall be applied to incomes of enterprises from farming, husbandry, processing of agricultural and aquatic products in areas other than disadvantaged areas and extremely disadvantaged areas.

20% CIT rate shall be applied to incomes earned by people’s credit funds and microfinance institutions.

People’s credit funds and microfinance institutions may apply 17% CIT rate from January 01, 2016.

Regulations on the duration of application of preferential tax rates

The duration of application of preferential tax rates may be extended as follows:

With regard to investment projects with large scale and high technologies that need investment, the application of preferential tax rates may be extended but for a maximum period of 15 years;

The projects specified in Point e Clause 1 of this Article that satisfy any of the following criteria:

– The products manufactured are capable of global competition; the revenue exceeds VND 20,000 billion per year after no more than 05 years from the first year in which revenue is generated by the project;

– Over 6,000 employees are hired;

– The project involves economic-technical infrastructure, including: investment in development of water plants, power plants, water supply and drainage system, bridges, roads, railroads, airports, seaports, air terminals, train stations, new energy, clean energy, energy-saving industry or oil refinery.

The Prime Minister shall decide extension of duration for application of preferential tax rates prescribed in this Point provided that the extension shall not exceed 15 years.

With respect to the investment projects specified in Clause 2 Article 20 of the Law on Investment, the Prime Minister shall decide to apply a preferential tax rate reducing by no more than 50% the preferential tax rate specified in Clause 1 of this Article. The duration of application of the preferential tax rate shall not exceed -5 times the duration of application of the preferential tax rate specified in Clause 1 and may be extended for no more than 15 years and must not exceed the duration of the investment project.

The preferential tax rates shall apply from first year in which the enterprise earns revenue from its new investment project. Regarding high-tech enterprises and agriculture enterprises applying high technologies, preferential tax rates shall be applied from the date of the certificate of high-tech enterprise or certificate of agriculture enterprise applying high technologies. Preferential tax rates shall apply to projects applying high technologies from the date of certificate of project applying high technologies.

Please see more:

• Instructions for exclusive registration of company logos in Vietnam
• Service of changing the legal representative of Vietnamese enterprises

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