Taxes that foreign companies must pay under Vietnamese law

Following the tax, duties are enterprises’ rights and responsibilities in Vietnam. Indeed, many different types of taxes may confuse the investors; and make it harder to obey the regulations. Therefore, in today’s topic, LSX will introduce you to every “Taxes that foreign companies must pay under Vietnamese law”.

Legal grounds

• 2013 Law on Value Added Tax
• 2013 Law on Corporate Income Tax
• 2014 Law on Personal Income Tax
• 2012 Law on Tax Administration
• Circular No. 103/2014/TT-BTC

License tax

Accordingly, license tax is a direct tax and is usually a quota levied on a business’s business license. The enterprise must pay annually with the amount basis is the capital of the business or the annual turnover of the enterprise. Thus, the register capital of the business will contain:

• Charter capital of state-owned enterprises, limited companies, joint-stock companies, cooperatives
• Investment capital for foreign-invested enterprises

On that basis, license fees are set out as follows:

NO.	Register capital of the business	License tax
1	Over 10 billion VND	VND 3,000,000
2	From 5 to 10 billion VND	VND 2,000,000
3	From 2 to 5 billion VND	VND 1,500,000
4	Under 2 billion VND	VND 1,000,000

Profit tax

Hence the law, corporate income tax is a type of direct tax, levied on taxable income of enterprises, including income from production and trading of goods and services and other incomes. Corporate income tax payable is equal to revenue less deductible expenses, tax-exempt income and carried forward losses from the previous year multiplied by the tax rate. Consequently, 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 rare and precious 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%

Value added tax (VAT)

Basically, VAT is an indirect tax, calculated on the added value of goods and services from the process of production, circulation to consumption. The enterprise must pay the VAT according to the method initially selected by the enterprise when establishing the enterprise. There are two method to pay for VAT:

• Firstly, value-added tax deduction method: 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.
• Secondly, the method of calculating directly: the value added tax payable is equal to the turnover multiplied by the percentage to calculate the tax.

Import and export tax

In case of goods subject to tax in %, the import and export tax 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.

On the other hand, in the case of goods subject to absolute tax, the import and export tax payable is equal to the number of units of each item actually imported and exported; multiplied by the absolute tax rate and multiplied by the taxable exchange rate.

Resource tax

Specifically, 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.

Land use tax

Lastly, land use tax is a tax that foreign businesses must pay. In fact, this tax is on business land used entirely for business purposes and on non-agricultural land used for business purposes; for which the area used for business purposes cannot be determined.

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