Vietnam Tax System Demystified for Global Businesses: 2025 Legal Guide

Confounded by cross‑border tax rules? As a global CFO or business leader, managing compliance risk in dynamic ASEAN markets, especially Vietnam’s evolving tax laws, is likely at the top of your mind. As an FDI specialist with twenty years’ experience advising in Vietnam, China, and Malaysia, I know Vietnam’s tax system—though generally stable—hides pitfalls for the unprepared. Yet with the right legal roadmap, it needn’t feel like a black box. Achieving tax clarity is the foundation that enables confident market entry and sustainable growth.

Vietnam’s tax system is also evolving in response to shifts in the global economy, particularly as international tax reforms and digitalization trends reshape how multinational businesses operate.

Key Takeaways for 2025:

• Four Core Taxes: Corporate Income Tax (CIT), Value‑Added Tax (VAT), Personal Income Tax (PIT), and the composite Foreign Contractor Tax (FCT) on cross‑border services—each with distinct filing rules and calculation methods.
• Incentives are a Game-Changer: Preferential CIT rates (as low as 10% for high‑tech or SEZs, per Investment Law 2020 amended 2025), extended tax holidays, and VAT exemptions—leveraged through targeted project classification.
• VAT Relief Extended: The 8% preferential VAT rate (down from 10%) on qualifying goods and services now applies through December 31, 2025, under Decree 15/2024/NĐ‑CP, offering cash‑flow relief for exporters and manufacturers.
• Compliance is Non-Negotiable: Monthly VAT, quarterly CIT/PIT provisional returns, and annual finalizations are mandatory via the eTax portal—penalties up to 20% of the tax due for late or incorrect filings under the Law on Tax Administration.
• Key Deadlines: Business License Tax (annual by Jan 31), VAT (20th of each month/quarter), CIT/PIT provisional (last day of quarter) and finalization (April 30). Missing them triggers surcharges and interest under Circular 80/2024/TT‑BTC.
• FCT Pitfalls: FCT combines VAT and CIT on payments to non‑resident contractors. Rates differ by service type—consulting (3% VAT + 5% CIT) vs. royalties (0% VAT + 10% CIT)—per Decree 122/2024/NĐ‑CP. Misclassification is costly.

Vietnam Tax System Structure 2025

Three Pillars: Direct, Indirect, Withholding Taxes

Vietnam’s tax architecture rests on three pillars:

1. Direct Taxes: CIT (20% standard, preferential rates available) and PIT (5–35% progressive for residents; 20% flat for non‑residents).
2. Indirect Taxes: VAT at 0%, 5%, or 10% (8% reduced rate extended to 2025).
3. Withholding Taxes: FCT on cross‑border dividends, royalties, and services—computed as combined VAT+CIT under Decree 122/2024/NĐ‑CP.

The General Department of Taxation (GDT)—supported by provincial Tax Departments—administers tax registration, returns, audits, and enforcement under the Law on Tax Administration 2019 (amended 2024), including e‑filing mandates and risk‑based audit protocols.

• Corporate Income Tax (CIT): 20%. 10-17% for incentivized sectors.
• Value-Added Tax (VAT): 10% (8% for some sectors through 2025). 5%. 0% for exports.
• Personal Income Tax (PIT): 5-35% for tax residents.
• Foreign Contractor Tax (FCT): A combination of VAT and CIT, rates vary by service type.

Vietnam offers a transparent and moderate tax system with significant incentives for investment, especially if you hold an IRC for high-tech, export, or strategically located projects.

Key Regulatory Sources and Tax Frameworks

The system is governed by a hierarchy of legal documents, including the Law on Tax Administration and specific laws for CIT and PIT. A major strategic advantage for international businesses is Vietnam’s network of over 80 Double Taxation Agreements (DTAs), which prevent the same income from being taxed in two countries. Upon incorporation, securing a tax code is one of the first and most critical steps for any new enterprise. Businesses can also apply for tax relief under Vietnam's DTAs to avoid double taxation.

Vietnam Corporate Income Tax (CIT): A Deep Dive for Foreign Businesses

CIT Rates, Filing, Sector Variations

The standard CIT rate in Vietnam is 20%. But that’s just the beginning. The government offers rates as low as 10% for 15 years or more for high-tech, renewable energy and special economic zones. Businesses make provisional CIT payments quarterly and file an annual finalization at the end of the financial year. In Vietnam, the tax year is usually the calendar year unless a different fiscal year is approved by the authorities.

Deductions, Non-Deductions and Strategic Traps

Most legitimate business expenses like salaries, rent and raw materials are deductible for CIT purposes. But you need to be strategic to avoid common traps. There are caps on certain promotional and advertising expenses and incomplete documentation is a common reason for expenses to be disallowed during an audit. Transfer pricing rules are also getting stricter, requiring foreign-invested enterprises (FIEs) to justify their transactions with related parties based on arm’s length principle.

Tax Implications for Foreign-Invested Enterprises (FIEs)

The tax treatment for different legal structures like Limited Liability Companies (LLCs) and Joint Ventures (JVs) is generally the same but the risk profile can be different. FIEs are often audited within their first few years of operation. Tax inspections are also a part of the compliance process for FIEs, focusing on transfer pricing and service charges. The main focus of these audits is intercompany service charges and royalties, so robust documentation is key to your risk-proof strategy.

Value-Added Tax (VAT) and Special Sales Tax (SST)

VAT in Vietnam: Rates, Refunds and Input Credits

VAT is a consumption tax applied at three main rates: 0% for exported goods and services, 5% for essential goods and 10% for standard goods. In a major policy move to boost the economy, Reuters reported in June 2024 that Vietnam’s parliament approved the extension of VAT reduction from 10% to 8% for applicable goods and services until the end of 2025. Businesses can claim credits for the “input VAT” they pay on their purchases against the “output VAT” they collect on sales. Exporters are often eligible for VAT refunds, a big cash flow advantage.

SST: Which Goods and Services Are Affected

A Special Sales Tax, or Special Consumption Tax (SCT), is applied on certain non-essential or luxury goods and services such as spirits, automobiles and certain entertainment services. This tax is on top of VAT so you need to know if your products fall into this category.

Vietnam Personal Income Tax for Executives and Expats

Residency-Based PIT Structure

Vietnam’s PIT system is based on tax residency. If you are present in Vietnam for 183 days or more in a calendar year, you are considered a resident and taxed on your worldwide income. A non-resident is taxed at 20% on Vietnamese-sourced income. Both residents and non-residents are taxed but on different income scopes. PIT is calculated based on monthly taxable income which is determined by the individual’s monthly salary or wages. Income received by non-residents from Vietnam sources is taxed regardless of where it is paid.

PIT Rates, Allowances and Employer Withholding

For tax residents, personal income tax rates are applied using progressive tax rates from 5% to 35%. Employers are required to withhold PIT from employee salaries and remit it to the tax authorities. There are standard deductions for the taxpayer including a personal deduction of VND 4 million per month and for qualified dependents. Employees must pay tax on their taxable income according to the applicable rates.

PIT Planning for Expat Packages

Strategic planning can make a big difference to the total cost of an expat package. Certain benefits may be tax exempt under Vietnamese law or relevant Double Taxation Agreements (DTAs). Structuring benefits like housing, relocation costs and school fees correctly can minimize the tax burden. Using the provisions within a DTA can also relieve double taxation so your key personnel are not unfairly penalized.

Withholding Tax, Foreign Contractor Tax (FCT) and Cross-Border Payments

Understanding FCT: When and Why It Applies

The Foreign Contractor Tax is one of the most unique features of Vietnam’s tax system. Individuals performing contractual work for Vietnamese entities, such as foreign contractors or sub-contractors, may also be subject to FCT. It is designed to tax payments made from a Vietnamese entity to an offshore contractor for services performed for the Vietnamese entity, regardless of where the service is physically performed. As stated in Deloitte’s “Vietnam Tax Highlights 2025”, FCT is a composite tax comprising both a CIT and a VAT portion, with rates varying depending on the nature of the service, such as consulting, royalties or software licensing.

Tax Treatment of Dividends, Interest and Royalties

Dividends, interest and royalties paid from Vietnam to an offshore entity are subject to withholding tax. Certain types of income paid to non-residents, such as these, may be taxed at a flat tax rate rather than progressive rates. Other income, such as service fees or capital gains, may also be subject to withholding tax. The rates can often be reduced through the application of a DTA, which is a key piece of international tax planning.

Global Minimum Tax: Impact on Multinational Enterprises

The introduction of global minimum tax (GMT) is a game changer in international taxation, especially for multinational enterprises (MNEs) with operations in Vietnam. GMT is designed to ensure that large MNEs pay a minimum level of tax on their income, regardless of where profits are made. For businesses in Vietnam, this means tax liability will be more closely scrutinized and opportunities for profit shifting to low-tax jurisdictions will be significantly reduced.

As Vietnam aligns its tax system with global standards, MNEs need to be ready for increased transparency and more rigorous taxation of their worldwide income. The implementation of GMT will change how income is taxed, so companies need to review their tax strategy and ensure compliance with both local and international tax obligations.

Vietnam’s Approach to OECD Pillar Two Rules

Vietnam is preparing to implement the OECD Pillar Two rules which form the foundation of the global minimum tax. Under these rules, MNEs with global turnover of at least EUR 750 million will be subject to a minimum effective tax rate of 15% on their income in every country where they operate. To comply, Vietnam will amend its domestic tax laws, introducing new mechanisms for calculating the effective tax rate and applying top-up taxes when the local tax rate is below the global minimum.

This will ensure MNEs pay tax on their income at a fair tax rate, regardless of local incentives or preferential regimes. As these changes take effect, companies should monitor updates to Vietnam’s tax laws to understand how their tax rates and overall tax burden may be impacted.

Compliance and Planning

The rollout of global minimum tax in Vietnam will present both challenges and opportunities for multinational enterprises. On the compliance side, MNEs will need to upgrade their internal systems to calculate their effective tax rate and pay tax on time in line with the new rules. This may require significant investment in tax technology and staff training.

However, GMT also opens up new planning opportunities. Companies can review their global structure to optimize the use of tax incentives and exemptions still available under Vietnamese law while ensuring they meet the minimum tax rate requirements. Expert guidance will be key to navigating these complex changes, minimizing tax risk and leveraging available tax incentives to stay competitive in Vietnam’s evolving tax landscape.

Double Taxation Agreements and International Tax Coordination

Double Taxation Agreements (DTAs) are the foundation of Vietnam’s international tax system, providing relief from double taxation and facilitating cross-border trade and investment. These agreements ensure that income such as employment income, business profits and capital gains are not taxed twice – once in Vietnam and again in another country.

DTAs also play a crucial role in combating tax evasion by enabling cooperation and information exchange between tax authorities. For global businesses, understanding how DTAs interact with Vietnam’s tax system is key to tax planning and compliance, reducing overall tax liability and avoiding unnecessary taxation.

Vietnam’s DTA Network

Vietnam has DTAs with over 80 countries including major trading partners such as the US, China and Japan. These agreements set out rules for taxation of various types of income including employment income, capital gains and other cross-border income. DTAs allocate taxing rights between Vietnam and the treaty partner, ensuring the same income is not taxed in both jurisdictions.

They also provide procedures for resolving disputes and mechanisms for exchange of information between tax authorities which is crucial in preventing tax evasion and ensuring compliance with international tax standards. For businesses and individuals with international operations, leveraging Vietnam’s DTA network can result in significant tax savings and greater certainty in tax treatment, making it an essential component of any cross-border tax strategy.

Compliance, Filing and Risk Management in Vietnam

Monthly, Quarterly and Annual Tax Filing

Businesses must file tax returns according to the specified schedule to comply.

Tax Filing Calendar for Vietnam-Based Entities

Annual tax finalization returns must be submitted by the last day of the 4th month after the end of the tax year.

Common Traps for Foreign Firms

Simple mistakes are common pitfalls. Misclassifying non-taxable income as taxable can lead to unnecessary tax payments and compliance issues. These include delays in tax code registration for new employees, misclassifying services under FCT, or failing to keep detailed supporting documents required by auditors.

Tax Technology and Advisory

Vietnam has gone digital. E-invoicing is mandatory for almost all businesses. Using modern accounting software and external tax advisors is not a luxury; it’s a part of a good risk management strategy.

Industry-Specific Incentives and Tax Planning

Strategic Industries: Manufacturing, Tech and Renewables

To achieve its economic development goals, Vietnam offers tax incentives for investment in key sectors. Ho Chi Minh City as a major economic hub plays a key role in attracting foreign investment and providing tax incentives for foreign investors and expats. If you are in high-tech manufacturing, software development or renewable energy, you may be eligible for extended tax holidays (e.g. 4 years of 0% CIT) followed by periods of reduced rates.

Restructuring, M&A and Exit Scenarios

Tax is critical in any corporate restructuring, M&A deal or exit. Vietnam does not have a separate capital gains tax; capital gains from transfer of shares or assets are included in overall taxable income. Strategic planning is required to structure the transaction in the most tax efficient way possible.

Conclusion: Turn Vietnam’s Tax Complexity into Your Advantage

Navigating Vietnam’s tax landscape with confidence gives you a competitive edge. By understanding the rules, leveraging the incentives and keeping compliance tight, you can turn what seems like a complex challenge into a strategic advantage. This clarity allows you to focus on what you do best: grow your business.

Ready to unlock your growth today? Partner with us to align your tax and business strategy for a sustainable future in Vietnam.

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