As a business operating in Vietnam, it is your legal obligation to maintain full tax compliance. You must ensure timely registration, accurate filings, payments, and documentation to mitigate financial risk which can have heavy penalties and late payment interests.
With significant regulatory shifts in 2025, you need to make sure you are following new regulations to maintain a spotless tax record. You need to navigate through new mandates such as tiered CIT rates for SMEs, mandatory e-invoicing, and 10% VAT on digital services as a company in Vietnam.
In this guide, we will outline your core tax obligations as a business and practical steps to maintain a high level of tax compliance.
Corporate Income Tax (CIT): Structure and Rates
The scope of your Corporate Income Tax liability is fundamentally determined by the legal origin of your business entity. Resident enterprises are subject to CIT on their worldwide income, meaning any profit generated both within Vietnam and abroad must be declared and taxed at the standard rate. Conversely, foreign enterprises (non-residents) are only liable for tax on income sourced within Vietnam.
If you’re a foreign entity, being a "Permanent Establishment" (PE) is a critical factor in determining how your local income is reported and taxed. Without a PE, a foreign company is generally only subject to Foreign Contractor Tax (FCT) on a withholding basis (often a flat percentage of revenue) which we will discuss later.
Tiered CIT Rates for 2026
Vietnam’s new Corporate Income Tax Law 2025 (enacted as Law No. 67/2025/QH15) has shifted to tiered rates based on annual revenue. This progressive structure is a central part of the 2025 tax mandate designed to protect Small and Medium Enterprises (SMEs). By moving away from a one-size-fits-all 20% rate, the government provides immediate cash-flow relief to smaller players, allowing them to reinvest profits back into their operations.
Eligibility is generally determined by the revenue of the preceding tax period:
- 15% CIT: For micro-enterprises with annual revenue not exceeding VND 3 billion (~USD 125,000).
- 17% CIT: For small enterprises with annual revenue between VND 3 billion and VND 50 billion (~USD 2.1 million).
- 20% CIT: The standard rate for all other enterprises.
Important Note: To prevent large corporations from artificially splitting into smaller entities to exploit these lower rates, the tiered structure does not apply to subsidiaries or affiliates of larger groups that do not meet the SME criteria.
How to Calculate CIT in Vietnam?
To calculate CIT, you need to determine your taxable income. This is derived by subtracting your deductible expenses from your gross revenue. To arrive at the final assessable income, you then deduct any eligible tax losses carried forward from the previous five years.
The formula is straightforward:
Taxable Income = Gross Revenue - Deductible Expenses Assessable Income = Taxable Income - Losses Carried Forward
Here is an example of how your CIT is calculated:
| Calculation Step | Description | Amount (VND) |
|---|---|---|
| Total Revenue | All business income and interest | 20,500,000,000 |
| Business Expenses | Total valid deductible costs | (14,000,000,000) |
| Taxable Income | Profit subject to adjustment | 6,500,000,000 |
| Loss Utilization | Previous losses (max 5 years) | (500,000,000) |
| Assessable Income | Final amount used for tax calculation | 6,000,000,000 |
| Tax Due (17% Rate) | Applied to Assessable Income | 1,020,000,000 |
The 20 Million Rule: to be deductible, expenses must be business-related and supported by valid electronic invoices. Any invoice exceeding VND 20 million (including VAT) must be paid via bank transfer. Cash payments for amounts above this threshold will disqualify the expense from CIT deduction and VAT credit.
Value-Added Tax (VAT) Rates in Vietnam
VAT is a broad-based consumption tax assessed on the value added to the goods and services you offer to your clients/customers. While the actual economic burden is borne by the consumer, you are still responsible for declaring and paying VAT to the General Department of Taxation (GDT).
The Amended VAT Law and Resolution 204/2025/QH15 has introduced major changes starting July 2025:
- VAT Exemption Threshold: VAT exemption has been raised from VND 100 million to VND 200 million (with further proposed increases to VND 500 million under Law 149 for 2026). This is beneficial for micro-sellers, the annual revenue threshold is less than VND 100 million.
- 2% VAT Reduction (from 10% to 8%): the government has officially extended the 2% VAT reduction (to 8%) until December 31, 2026. This VAT reduction had also expanded to transportation, logistics, and most IT services.
- Reclassification for Input Tax Credits: Previously "VAT-exempt" items like fertilizers, specialized agricultural machinery, and offshore fishing vessels have been moved to a 5% VAT rate.
- VAT for E-commerce: e-commerce platforms now act as tax agents. They are required to withhold 1% VAT for goods and 5% for services from the gross transaction value of individual/household sellers.
- VAT for Foreign Digital Service Providers (Without PE): increased from 5% to 10%. These entities are now required to register for VAT and charge the standard rate to level the playing field with domestic providers.
How to Calculate VAT in Vietnam?
There are two ways you can calculate VAT in Vietnam:
- The Deduction Method (Tax Credit Method): This is the standard method for companies with an annual revenue of VND 1 billion or more. You pay the difference between the VAT you collected from customers (Output VAT) and the VAT you paid to suppliers (Input VAT).
- The Direct Method: Generally used by smaller businesses or those without standard accounting systems. Tax is calculated as a fixed percentage of total revenue.
To put things into perspective, consider a distribution company operating at the standard 10% rate. Because the company has more than 1 billion revenues, we are going to use the Deduction method:
| Item | Calculation | Amount (VND) |
|---|---|---|
| Total Sales (Excl. VAT) | Revenue from goods sold | 5,000,000,000 |
| Output VAT (10%) | Tax collected from customers | 500,000,000 |
| Input Purchases (Excl. VAT) | Cost of goods/services bought | 3,200,000,000 |
| Input VAT (10%) | Tax paid to suppliers (with E-invoices) | (320,000,000) |
| Net VAT Payable | Output VAT minus Input VAT | 180,000,000 |
Withholding Tax for Companies in Vietnam
Personal Income Tax (PIT) Calculation for Employees
As a business, you are legally required to act as a withholding agent for all compensation paid to your employees. This responsibility includes several critical steps:
- Tax Registration: ensure all employees are registered for a unique Tax Identification Number (TIN) before the first salary payment or tax finalization.
- Monthly/Quarterly Withholding: calculate and withhold PIT based on the relevant rates:
- Resident Employees: A progressive scale (5% to 35%) applied to "Taxable Income" after statutory deductions (SHUI) and family/personal reliefs.
- Non-Resident Employees: A flat 20% rate on Vietnam-sourced income, without any deductions or reliefs.
- Resident Employees: A progressive scale (5% to 35%) applied to "Taxable Income" after statutory deductions (SHUI) and family/personal reliefs.
- Non-Resident Employees: A flat 20% rate on Vietnam-sourced income, without any deductions or reliefs.
- Filing & Payment Deadlines: Withheld taxes must be declared and remitted to the State Treasury by the 20th day of the following month (for monthly filers) or the 30th day of the month following the quarter (for quarterly filers).
- Annual Finalization: Even if you have zero tax to pay, you must still perform an annual PIT finalization for all employees on your payroll within 90 days of the year-end.
If you fail to withhold the correct amount of PIT, the tax authorities will hold the business directly liable for the shortfall, plus late payment interest and administrative fines.
2026 Reforms: A significant PIT overhaul will take effect on July 1, 2026. This reform will condense the current seven tax brackets into five, offering relief to middle-income earners and providing specific incentives for professionals in high-tech and digital sectors.
Foreign Contractor Tax (FCT)
If you pay a foreign company for services (including technical fees, royalties, consulting, software licenses, or digital advertising) you are legally mandated to withhold and remit Foreign Contractor Tax (FCT). Think of it as a hybrid of VAT and CIT.
You need to pay and declare FCT by withholding the tax amount from the payment before it is remitted offshore. Failure to correctly withhold and remit FCT can result in liabilities for the unpaid tax plus significant interest and fines.
However, you can reduce or be exempt from FCT if the foreign contractor is a tax resident of a country that has a Double Taxation Agreement (DTA) with Vietnam. This is to prevent the same income from being taxed in two jurisdictions.
However, this relief is not granted automatically. You must submit a formal DTA application dossier to the local tax office to prove the contractor's eligibility and obtain official approval for the exemption or reduction.
Business License Tax (BLT)
The Business License Tax (also known as the Licensing Fee) is an annual indirect tax imposed on all entities conducting business activities in Vietnam. It is essentially a "right to operate" fee that businesses must pay at the beginning of each year.
The fee amount is determined by the entity's registered charter capital (as stated in the Business Registration Certificate) or investment capital. The current rates are structured as follows:
| Level | Charter Capital | Rates per Year |
|---|---|---|
| 1 | For entities with charter capital over VND 10 billion | VND 3,000,000 |
| 2 | For entities with charter capital of VND 10 billion or less | VND 2,000,000 |
| 3 | For branches, representative offices, and business locations | VND 1,000,000 |
Exemptions: Under current regulations, newly established enterprises (including those formed from the transformation of household businesses) are exempt from the Business License Tax for their first year of operation. If your business is founded in 2025, your first payment obligation will typically arise in January 2026.
Administrative Compliance Calendar
Together with accurate calculations, you must also adhere to strict filing deadlines to avoid costly tax liabilities. Missing a deadline, even by a single day, can trigger automated fines and daily interest charges.
Here are key dates you should take note of to maintain good standing with the GDT:
| Period/Deadline | Requirement | Key Action/Note |
|---|---|---|
| Jan 30 | Business License Tax (BLT) | Pay fixed fee based on registered charter capital.Newly established businesses must pay this within 30 days of receiving their business license |
| Quarterly | VAT & PIT Filings | Due on the 30th day of the month following the quarter. |
| Quarterly | Provisional CIT Payment | Pay tax based on current quarter profits (No return required). |
| Jan 30 (Post Q4) | The 80% CIT Rule | Cumulative 4-quarter payments must reach 80% of total tax. |
| 90 Days Post Year-End | CIT & PIT Finalization | Submit formal annual reconciliation (typically by March 31). |
Formal reconciliation reports for CIT and PIT must be submitted within 90 days from the end of the fiscal year (typically March 31 for those on a calendar year). Filing these tax reports on time is essential, as delays are frequently interpreted as "red flags" by authorities.
The 80% Rule: By the 30th day of the month following the 4th quarter (January 30), the cumulative total of your four provisional CIT payments must equal at least 80% of your final annual CIT liability. If your final year-end audit reveals a shortfall, a daily late payment interest penalty of 0.03% is applied to the underpaid amount, which can become a significant financial drain over time.
How Emerhub Supports Your Tax Compliance in Vietnam
With new CIT tiers and VAT changes, navigating Vietnam’s evolving tax landscape requires deep local expertise. Emerhub provides end-to-end tax and accounting solutions designed to protect your business from the operational and financial risks of non-compliance.
Our team can help manage your monthly and quarterly VAT, PIT, and CIT provisional filings, ensuring the "80% payment rule" is met to avoid costly interest penalties. We make sure we follow Vietnam’s strict tax deadlines to minimize your tax liabilities and maintain good standing with the GDT.
Want to know more about tax compliance in Vietnam? Talk to our local experts by filling out the form below.
Disclaimer: This guide is for informational purposes and does not constitute legal or tax advice. We recommend consulting with a professional advisor for specific compliance matters.
Frequently asked questions
What happens if I pay less than 80% of my total CIT via quarterly provisional payments?
You will be charged a late payment interest penalty of 0.03% per day on the difference between the amount paid and the 80% threshold. This interest is calculated from the day following the Q4 payment deadline until the date the tax is fully paid.
Is the 2% VAT reduction (from 10% to 8%) permanent?
No. This is a temporary stimulus measure. Under Resolution 204/2025/QH15, the reduction is currently scheduled to expire on December 31, 2026, after which rates are expected to return to the standard 10%.
How do I handle expenses that don't have a red invoice (VAT invoice)?
In Vietnam, "no invoice = no deduction." Expenses without a valid E-invoice are generally treated as non-deductible for CIT purposes. Furthermore, remember that any payment over VND 20 million must be made via bank transfer; cash payments for large invoices will also lead to disqualification of the expense.
Does a foreign parent company providing IT support to its Vietnam branch trigger FCT?
Yes. Services provided by a foreign entity (even a parent company) to a Vietnamese entity are subject to Foreign Contractor Tax. This typically includes a VAT component (usually 5%) and a CIT component (usually 5% for services), which must be withheld before the payment is sent abroad.
Can individual staff members finalize their own PIT, or must the company do it?
If an employee has only one source of income and authorizes the company, the business handles the finalization. However, if they have multiple income sources (e.g., rental income or secondary employment), they are legally required to finalize their own tax directly with the authorities.