“Hi Lawyer, my company is a company with 100% foreign capital, so how is the tax declaration for my company regulated? Lawyer let me ask Tax on 100% foreign owned enterprise I would like to thank you very much for answering my question“. Thank you for sending us your question. To be able to provide you with tax information on 100% foreign owned enterprises in Vietnam, Lawyer X invites you to refer to our article below.
Circular 78/2014/TT-BTC on CIT
What is a foreign capital company?
100% foreign-invested company is an enterprise owned by a foreign investor and established by a foreign investor in Vietnam, which is self-managed and self-responsible for business results. 100% foreign-invested company is established according to the type of limited liability company, has legal status under Vietnamese law, is established and operates from the date of issuance of investment registration license.
The legal capital of a company with 100% foreign capital must be at least 30% of the investment capital. For some special cases, the legal capital may be less than 20% of the investment capital and must be approved by the Department of Planning and Investment.
Tax on enterprises with 100% foreign capital
License tax is a direct tax and is usually a quota levied on a business’s business license. The license tax is collected annually, the level of tax is based on the registered capital of the business or the annual turnover of the enterprise. From January 1, 2017, “license tax” was replaced by “license fee” according to Official Letter 5633/TCT-CS issued on December 29, 2015.
Corporate income tax
Currently, there is no exact definition of corporate income tax, however, through the Law on Corporate Income Tax as well as circular decrees that can be determined, corporate income tax is a direct tax. Taxable income of an enterprise includes income from production and trading of goods and services and other incomes as prescribed by law.
Corporate income tax payable is equal to revenue minus deductible expenses, tax-exempt income and carry forward losses from the previous year multiplied by the tax rate. Tax rates for different areas of activity will be different:
Oil and gas prospection, exploration and production in Vietnam from 32% to 50%
Search, exploration and exploitation of precious and rare natural resources (including: platinum, gold, silver, tin, tungsten, antimony, precious stones, rare earth excluding gas head) is 50%.
If rare and precious resources have 70% or more of the allocated area in an area with extremely difficult socio-economic conditions on the list of areas eligible for corporate income tax incentives of 40%
The remaining fields are 20%
The value added tax payable by the enterprise is calculated according to the method initially selected by the enterprise when establishing the enterprise
Method of deduction from value-added tax: Value-added tax payable is equal to the value of sold goods and services multiplied by the value-added tax rate, then minus the deductible input value-added tax amount. . Depending on the object of goods and services, the value-added tax rate will be different and will be: 0%, 5% and 10%.
The method of calculating directly on the added value is as follows, the value added tax payable is equal to the turnover multiplied by the percentage to calculate the tax. The percentage to calculate the tax is calculated as follows:
Distribution and supply of goods: 1%
Construction services excluding raw materials: 5%
Transportation, goods production services, construction of raw materials: 3%
Other business activities: 2%
Import and export tax
In case of goods subject to tax in %, the import and export tax to be paid is equal to the number of units of each item actually imported and exported multiplied by the taxable price and multiplied by the tax rate.
In case of goods subject to absolute tax, the import and export tax payable is equal to the actual number of units of each item actually imported and exported multiplied by the absolute tax rate multiplied by the taxable exchange rate.
Subjects of application are enterprises exploiting resources subject to tax. The royalty payable is equal to the taxable natural resource output multiplied by the taxable price times the tax rate.
Special Consumption Tax
The excise tax is equal to the excise tax calculation price multiplied by the excise tax rate
There are two types of land use tax that foreign enterprises must pay: tax on business land used entirely for business purposes and tax on non-agricultural land used for unspecified business purposes. the area used for business purposes.
Investment incentives for foreign-invested companies
According to Clause 2, Article 15, Article 16 of the Law on Investment 2014, Clause 1, Article 16 of Decree 118/2015/ND-CP. When foreign investors carry out investment projects in Vietnam in industries and areas eligible for investment incentives, they are entitled to tax incentives. Detail:
Investment projects in sectors or trades eligible for investment incentives or industries and trades with special investment incentives in Appendix I of Decree 118/2015/ND-CP
Investment projects in areas with difficult socio-economic conditions or areas with extremely difficult socio-economic conditions in Appendix II of Decree 118/2015/ND-CP
Investment projects with a capital scale of VND 6,000 billion or more, disbursed at least VND 6,000 billion within 3 years from the date of issuance of the Investment Registration Certificate or from the date of issuance of a policy decision. For projects that do not have to carry out the procedures for issuance of an Investment Registration Certificate
Investment projects in rural areas employing 500 or more employees. Part-time workers are not included. And employees with a labor contract of less than 12 months
High-tech enterprises, science and technology enterprises, science and technology organizations
Tax incentives for foreign-invested companies
Corporate income tax
Case 1: Tax rate of 10%
Conditions Applicable to newly established enterprises:
Areas with extremely difficult socio-economic conditions;
Economic zones, high-tech zones;
Newly established enterprises from investment projects in the fields of high technology, scientific research and technological development;
Investment in the development of especially important infrastructure of the State;
Producing software products;
Enterprises operating in the fields of education – training, vocational training, health, culture, sports and environment;
Term of application: 15 years from the first year of having taxable income from the investment project.
Exemption from corporate income tax: 4 years
Corporate income tax reduction: 50% reduction for the next 09 years.
Case 2: Tax rate of 20%
Conditions: Newly established enterprises from investment projects in areas with difficult socio-economic conditions; Agricultural service cooperatives and people’s credit funds.
Term of application: 15 years from the first year of taxable income from the investment project.
Exemption from corporate income tax: 02 years
Corporate income tax reduction: 50% reduction for the next 4 years
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Frequently asked questions
Pursuant to Article 20 of Circular 78/2014/BTC of the Ministry of Finance as amended in Circular 96/2015/BTC:
Tax exemption for 4 years, 50% reduction of payable tax for the next 9 years
Enterprises’ incomes from the implementation of new investment projects are entitled to a tax incentive of 10% for 15 years mentioned in Section 1.1 of this article.
Incomes of enterprises from the implementation of new investment projects in the field of socialization implemented in areas with difficult or extremely difficult socio-economic conditions.
Tax exemption for 4 years, 50% reduction of payable tax for the next 5 years
Incomes of enterprises from implementing new investment projects in the field of socialization implemented in localities that are not on the list of geographical areas with difficult or extremely difficult socio-economic conditions.
Tax exemption for 2 years and 50% tax reduction for the next 4 years
Incomes from the implementation of new investment projects are entitled to a tax incentive of 17% for 10 years mentioned in Section 1.1 above.
Incomes of enterprises from implementing new investment projects in industrial parks (except for industrial parks in the inner city of special-class urban centers, grade-I cities directly under the Central Government, and grade-I cities directly under the province).
Pursuant to Point a, Clause 2, Article 17 of Decree 41/2018/ND-CP stipulates as follows:
“Article 17. Sanctions for violations against regulations on organization of the accounting apparatus, appointment of accountants or hiring accountants
A fine ranging from VND 10,000,000 to VND 20,000,000 shall be imposed for one of the following acts:
a) Failing to organize the accounting apparatus of the accounting unit; failing to assign people to work as accountants or chief accountants or failing to hire organizations or individuals providing accounting services to act as accountants or chief accountants according to regulations;
b) Arranging accountants who are not allowed to work as accountants by law;
c) Arranging accountants, chief accountants or accountants who do not meet the prescribed criteria and conditions;
d) Appointing chief accountant, in charge of accounting not in accordance with the order and procedures as prescribed.
Accordingly, not appointing accountants or chief accountants or hiring organizations and individuals providing accounting services to act as accountants or chief accountants.
Thus, if the position of chief accountant is vacant, a fine of between VND 10,000,000 and VND 20,000,000 may be imposed.
This is an individual fine. For organizations with the same violations, the fine level is 2 times higher than the fine level for individuals (based on the provisions of Clause 2, Article 6 of Decree 41/2018/ND-CP, as amended by Clause 2 Article 5 Decree 102/2021/ND-CP)