Each country has a unique system that works for their economy. While some countries are more progressive than the others, it cannot be mistaken that these respective countries are doing their maximum capabilities to ensure that taxes are properly collected and utilized. Compared to other countries’ tax laws, Vietnam’s tax system is unique and strong. While the general idea for collecting taxes is the same for all countries, Vietnam’s way of operating has characteristics that stand out from the rest.
When you try to understand Vietnam’s tax system, you will realize that the country has laws that support economic growth by attracting potential investors with the country’s tax framework. The framework created allows the nation to be competitive within the region. Here’s Taxation in Vietnam: Complete Guide to encourage you to invest in this progressive and booming country.
- Application of Corporate Income Tax (CIT)
Vietnam has a standard 20% Corporate Income Tax (CIT) rate. This percentage is competitive with the other countries within the region. However, there is something more unique about this rate since the country also offers preferential rates and tax holidays for businesses that are operating in certain niches. High-tech, education, and renewable energy niches are given preferential treatment for their income tax payments.
These preferential treatments will help entice businesses to invest in the country since they have lowered or waived taxes.
- Enactment of Value Added Tax (VAT)
The country’s 10% standard value-added tax, with a reduced rate of 5% for essential goods and 0% for exports, is moderate compared to other countries. With some operating within the range of 7%-20%, you are confident that your consumers, together with your business, can fully maximize your earning capacity and buying power.
- Progressive Personal Income Tax (PIT)
Residents of the country are charged with a personal income tax rate that ranges from 5% to 35%; non-residents are taxed at a flat rate of 20%. While some countries do not impose PIT, the same cannot be said for Vietnam.
- Foreign Contractor Tax (FCT)
A distinctive tax feature in Vietnam is the Foreign Contractor Tax (FCT). This system is specially applied to foreign entities that are conducting their business in the country without any permanent establishment. This feature is a combination of the CIT and VAT, and this ensures that tax is duly collected across borders.
- Existence of Tax Incentives and Holidays
Tax incentives and holidays are what can essentially attract investors to do business in the country. In Vietnam, companies can enjoy exemption from taxes for four years as well as a 50% reduction for up to nine years. While some criteria such as the nature of business and location are in play, this incentive scheme is considered as investment-friendly in the global setting.
Starting a Business in Vietnam
Whether you are starting a business in Vietnam or in any other country, one of your primary considerations is the country’s tax system. While it can get complicated and tedious, you just need to have the right support to help you comply with the requirements and avail of the incentives. Acclime Vietnam assists businesses as they operate in the country. As an established company, Acclime Vietnam has a team of experts ready to help you manage your business operations while complying with the requirements set by the government. Get in touch with Acclime Vietnam today to get started with your business!