Vietnam’s booming economy and strategic location make it an attractive destination for foreign investors. For businesses entering the market, understanding Corporate Income Tax in Vietnam is critical for compliance and financial planning.
This guide offers a clear and comprehensive overview of Vietnam’s corporate income tax system, including tax rates, incentives, deductible expenses, and filing requirements. Read on to learn everything your business needs to know to navigate Corporate Income Tax (CIT) effectively in Vietnam.
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Vietnam Corporate Income Tax Rate
CIT Standard Rates
Corporate Income Tax in Vietnam is imposed at the national level. The standard rate is 20%, applicable to both local and foreign enterprises. Preferential rates apply based on revenue: 15% for businesses with annual revenue up to VND 3 billion, and 17% for revenue between VND 3 billion and 50 billion, calculated based on the previous tax period in accordance with government regulations.
Companies in the oil and gas sector are taxed at 25% to 50%, depending on contract terms. Enterprises involved in the prospecting, exploration, or extraction of certain minerals face CIT rates ranging from 40% to 70%, depending on the project.
Vietnam does not apply a tax residency concept for Corporate Income Tax. All entities established under Vietnamese law are taxed on their worldwide income, including foreign-sourced income at 20%, with no special incentives for such income.
Foreign organizations operating in Vietnam without a local legal entity or generating Vietnam-sourced income are considered foreign contractors. Payments to these entities are subject to Foreign Contractor Tax (FCT), which includes both VAT and CIT components.
Preferential CIT Rates
Reduced Corporate Income Tax (CIT) rates of 10%, 15%, and 17% are available to businesses that meet specific criteria. Special incentives are also offered for research and development (R&D) activities and large-scale investment projects as outlined in the Law on Investment.
With the implementation of global minimum tax rules, the eligibility and application of these incentives may be affected. In 2024, a draft CIT law was published for public consultation, proposing changes to eligible sectors, incentivized locations, and simplified rules for business expansion. The amended law is expected to be enacted during the 9th session in May 2025.
Read Related: Vietnam VAT Registration and Refunds: A Step-by-Step Guide for Expats
Which Enterprises Are Subject to Corporate Income Tax in Vietnam?
In Vietnam, both local and foreign enterprises are subject to Corporate Income Tax (CIT). This includes businesses established under the Law on Enterprises, Law on Investment, Law on Credit Institutions, Law on Securities, and Commercial Law, such as:
- Foreign companies, with or without a permanent establishment (PE) in Vietnam
- Cooperatives and cooperative unions
- Public service units
- Other income-generating organizations
These enterprises pay tax on income generated in Vietnam, and in some cases, also on income generated abroad.
Foreign Companies and Permanent Establishments
- With a permanent establishment in Vietnam: taxed on income earned in Vietnam and income generated abroad that is related to their Vietnamese operations.
- Without a permanent establishment in Vietnam: taxed only on income earned in Vietnam, including e-commerce and digital services.
What Counts as a Permanent Establishment (PE)?
A Vietnam-based PE is any fixed place or activity through which a foreign enterprise carries out business operations. Common forms include:
- Branches, representative offices, factories, workshops, or natural resource extraction sites
- Construction sites
- Service-providing centers (e.g., consulting) if the work is related to a Vietnam-based project and lasts over 183 days in 12 months
- Agents or representatives authorized to sign contracts or provide goods and services regularly in Vietnam
If a Double Taxation Avoidance Agreement (DTAA) between Vietnam and the foreign company’s home country defines PEs differently, the DTAA rules take precedence.
Deductible and Non-Deductible Expenses for CIT in Vietnam
Deductible Expenses
To qualify as deductible for Corporate Income Tax (CIT) purposes, expenses must meet all of the following criteria:
- Related to revenue generation – the expense must be directly tied to earning income.
- Within the business license scope – the expense must relate to activities permitted under the company’s business license.
- Supported by documents – proper invoices or receipts must back the expense.
- Non-cash payment for large expenses – for expenses of VND 20 million or more, payment must be made via bank transfer.
Expenses that do not meet these requirements are considered non-deductible.
Non-Deductible Expenses
The following expenses are not deductible for Corporate Income Tax purposes:
- Depreciation not in compliance with regulations
- Labor costs recorded but not actually paid, or exceeding amounts in labor contracts or company policies
- Staff welfare expenses above one month’s average salary
- Raw materials, fuel, power, or goods costs exceeding reasonable consumption levels
- Interest on non-bank loans exceeding 1.5× the State Bank of Vietnam rate
- For related-party transactions, interest exceeding 30% of EBITDA (can be carried forward 5 years)
- Interest on loans corresponding to un-contributed charter capital
- Research & development costs not following regulations
- Accrued expenses not fully paid at period-end
- Provisions for financial investment losses, inventory devaluation, bad debts, product warranties, or construction work not in line with regulations
- Unrealized foreign exchange losses on revaluation of foreign currency items, except accounts payable
- Overhead costs allocated to a PE exceeding revenue-based ratios
- Contributions to voluntary pension or life insurance exceeding VND 3 million per person/month
- Administrative penalties, fines, and late payment interest
- Donations except for approved causes (education, healthcare, natural disasters, scientific research, charitable housing)
- Certain costs related to issuing, buying, or selling shares
- Service fees to related parties that don’t meet specific conditions
Tax Incentives in Vietnam
Vietnam offers tax incentives to encourage investment in certain sectors, locations, and large-scale projects. These incentives are mainly available for new investment projects.
Sectors eligible for incentives include:
- High-tech enterprises and software development
- Education, healthcare, and environmental protection
- Scientific research and agricultural/aquatic product processing
- Renewable energy and infrastructure development
Incentives are available for projects located in:
- Areas with difficult socio-economic conditions
- Certain economic zones
- Approved high-tech parks and industrial parks
Large manufacturing projects meeting one of the following criteria qualify:
- Total capital ≥ VND 6,000 billion, fully disbursed within 3 years, with:
- Minimum annual revenue of VND 10,000 billion by the fourth year
- More than 3,000 employees regularly by the fourth year
- Total capital ≥ VND 12,000 billion, disbursed within 5 years, using approved technologies
Vietnam provides incentives in two main forms, which can be applied together:
- Tax holidays and exemptions
- Tax exemption for a specified period (often 2–4 years) from the first profit-making year or the fourth revenue year
- Possible 50% tax reduction for a certain period
- Preferential tax rates
- Reduced CIT rates ranging from 10% to 17%
- Duration can be 10 years or more, sometimes indefinite, for certain projects
Additionally, the government occasionally introduces incentives for SMEs, which can lower the standard Vietnam Corporate Income Tax rate during specified tax years.
Read Related: Personal Income Tax in Vietnam for Expats: Key Insights about Expat Salary
Provisional CIT and Finalisation
Corporate Income Tax (CIT) in Vietnam must be paid provisionally on a quarterly basis, with payments due by the 30th of the month following each quarter. At the end of the financial year, businesses must submit their annual CIT return, calculate the final tax payable, and remit any remaining balance by the last day of the third month after the year ends—for most taxpayers, this is 31 March.
If the total provisional CIT paid over the four quarters is less than 80% of the final annual CIT, the shortfall will incur late payment interest from the due date of the fourth-quarter payment. For companies with branches in multiple provinces, CIT can be declared at the head office level, but payments must be allocated and made directly to each relevant province.
CIT Exemptions
Certain types of income in Vietnam are eligible for corporate income tax (CIT) exemptions:
- Employment incentives: Manufacturing, construction, and transport companies that hire a significant number of female or ethnic minority workers can reduce their CIT by the additional costs spent on these employees.
- Technology transfer: Companies transferring technology in priority sectors to individuals or public units in disadvantaged areas can receive a 50% CIT reduction on income from these transfers or public services.
- New businesses: Newly established companies converted from household businesses are exempt from CIT for two years from the date they first earn taxable income.
- Non-profit institutions: Public science and higher education institutions enjoy CIT exemptions according to government regulations.
Conclusion
Corporate income tax plays a crucial role for businesses operating in Vietnam, affecting both local and foreign enterprises. Understanding corporate income tax in Vietnam—including standard rates, preferential rates, deductible and non-deductible expenses, and available tax incentives—is essential for proper financial planning and compliance.
By staying aware of the Vietnam corporate income tax rate and related regulations, companies can optimize their tax obligations, benefit from available incentives, and avoid penalties. A clear grasp of corporate income tax in Vietnam ensures businesses can operate efficiently and sustainably while taking full advantage of the country’s growing investment opportunities.
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