Personal taxation in Ho Chi Minh City
Effective personal income tax rate
Teleport city rankings for personal income tax
Vietnamese residents are taxed on their worldwide income; nonresidents are taxed only on Vietnamese-source income.
An individual is resident if he/she: (1) spends 183 days or more in the aggregate in a 12-month period in Vietnam, starting from the date the individual arrives in Vietnam; (2) maintains a residence in Vietnam; or (3) has leased a residence for 183 days or more in a tax year, unless he/she stays in Vietnam less than 183 days and can prove residence in another country.
Individuals must file separate returns; joint filing is not permitted.
For employment income, progressive rates ranging from 5% to 35% apply to residents, while nonresidents are subject to a flat rate of 20%.
Deductions and allowances
Subject to certain restrictions, deductions are granted for compulsory social security, i.e. the SI, HI, and UI. Severance allowances and redundancy compensation are not taxable. Other deductions include a personal deduction, a dependent deduction, a deduction for voluntary retirement fund contributions and charitable contributions.
Employment income, including most employment benefits (whether in cash or in kind), is fully taxable. Dividends, interest (except for interest on bank deposits, life insurance and government bonds), capital gains derived from securities trading, private business income with annual revenues exceeding VND 100 million and other income from franchising, inheritance, the transfer of land use rights and gifts/winnings or prizes (excluding casino winnings) also are taxable. Profits derived from the carrying on of a trade or profession generally are taxed in the same way as profits derived by companies.
Capital gains derived from the sale of shares and the transfer of immovable property are taxable.
Other taxes on individuals
Real property tax
The municipal authorities levy a tax on real estate.
Inheritances and gifts above VND 10 million are subject to income tax at 10%.
Vietnamese employees are required to make SI, HI and UI contributions at rates of 8%, 1.5% and 1% of the employee’s salary, respectively. Expatriates are subject only to HI.
A stamp duty at rates of 0.5% to 2% applies on the
Compliance for individuals
Taxpayers are subject to an extra 0.05% penalty per day for the late payment of tax, 20% on underreported amounts and more stringent penalties for tax evasion.
Filing and payment
Tax on employment income is withheld by the employer and remitted to the tax authorities. An individual must file a tax return and make a final tax payment by 30 March in the year following the assessment year.
Corporate taxation in Ho Chi Minh City
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Residents are taxed on worldwide income; nonresidents are taxed only on Vietnamese-source income. Foreign-source income derived by residents is subject to corporation tax in the same way as Vietnamese-source income.
Taxation of dividends
Dividends paid by a company in Vietnam to its corporate shareholders are not subject to tax.
Residence is not defined, but a corporation generally is considered to be resident if it is incorporated in Vietnam.
Losses may be carried forward to offset taxable income for up to five years after the year in which the losses are incurred. The carryback of losses is not permitted. Losses from transfers of real
Preferential tax rates of 10% for 15 years and 17% are available for taxpayers engaged in encouraged investment projects or in socio-economically disadvantaged locations, respectively, as stipulated by the government. A tax holiday of up to four years and a 50% tax reduction for up to nine years are available from the first profit-making year or the fourth revenue-generation year, whichever comes first. Current taxpayers with new projects from 1 January 2014 also are entitled to tax incentives, subject to certain conditions. Tax incentives for business expansion have been re-introduced.
The standard corporate rate is 20% (from 22%) as from 1 January 2016. The rate for enterprises operating in the oil and gas and natural resource sectors ranges from 32% to 50%, depending on the project.
Foreign tax credit
Foreign tax paid may be credited against Vietnamese tax but must be determined based on pretax income. The credit is limited to the amount of Vietnamese tax payable on the foreign income.
Tax is imposed on a company’s profits, which include the profits of affiliates and branches (dependent units). Taxable revenue includes income from the sale of goods; the provision of services; the leasing or sale of assets; the transfer of property, shares or a business; joint venture operations with other economic entities; and financial operations.
There is no separate capital gains tax; gains are taxed at the standard corporate tax rate of 20%. The transfer value is based on the actual price in the transfer contract, although a deemed fair market value will be used if no contract price is available or if the price stated in the contract is deemed not to be on arm’s length terms.
Other taxes on corporations
Real property tax
The municipal authorities levy tax (e.g. land rental tax, land use fees, etc.) on the use of real property.
Foreign contractor withholding tax is imposed on income from the provision of goods and services from overseas organizations (except for pure trading transactions), which comprises corporate income tax and VAT at a total combined rate of 0.1% to 15%.
A stamp duty of 0.5% to 20% is levied on certain types of assets, including real property.
Compliance for corporations
Consolidated returns are not permitted; each company with independent legal status is required to file a separate return.
Penalties apply for failure to file, late filing or the filing of a fraudulent return. Taxpayers are subject to an extra 0.05% penalty per day of late tax payment, 20% on underreported amounts and more stringent penalties for evasion (up to 300%).
A taxpayer can request a tax ruling from the local or the national tax authorities to clarify its specific tax concerns.
The tax year is the fiscal year. A company must notify the tax authorities if its fiscal year differs from the calendar year, and in such a case, only a quarter-end fiscal year is allowed.
Provisional quarterly corporate income tax returns are not required as from 1 January 2015. Instead, a company is required to make quarterly provisional corporate income tax payments based on estimates. An annual declaration/filing must be made within 90 days after the fiscal year-end date. Any shortfall in excess of 20% between provisional corporate income tax payment and annual corporate income tax liability is subject to late payment penalty.
Other taxation in Ho Chi Minh City
Value added tax
Filing and payment
Monthly filing and payment of outstanding VAT must be made by the 20th day of the following month. Quarterly VAT filing and payment is allowed for certain taxpayers, which are due by the 30th day of the following quarter.
Rates are 0%, 5% and 10% for VAT and from 10% to 70% for SST.
VAT and Special Sales Tax (SST) are levied on the sale of goods and the provision of services.
All organizations and individuals carrying on the production or trading of taxable goods and services in Vietnam must register for VAT purposes. Each branch or outlet of an enterprise must register separately and declare tax on its own activities. Transfers of goods between branches may be subject to VAT. Registration for tax payment is required within 10 days of the date a corporation is established.
Vietnam has transfer pricing rules that generally follow the OECD guidelines. The following methodologies are permitted: comparable uncontrolled price, resale price, cost plus, comparable profit and profit split, although no priority of methods exists. The taxpayer must establish that it is using the “best” method appropriate under the circumstances. Contemporaneous documentation is required. The tax authorities can adjust profits if the pricing strategy is found not to be at arm’s length. Advance pricing agreements are possible.
Foreign exchange control
VND must be used in transactions between Vietnamese entities and individuals, unless specifically allowed under the foreign exchange control regulations. A foreign currency can be used as the functional currency for accounting and reporting purposes, subject to certain conditions. Both residents and nonresidents can hold bank accounts in any currency. Foreign currency may be remitted overseas, although registration and/or tax requirements may need to be met.
Accounting principles/financial statements
Vietnamese Accounting Standards and the Vietnamese accounting system apply. Statutory financial statements must be prepared, audited and submitted annually, except for listed companies whose financial statements are required to be audited and submitted on a semi- annual basis.
Principal business entities
These are the joint stock company, limited liability company and private enterprise. Branches of foreign corporations are limited to certain industries.
No tax is imposed on dividends remitted overseas unless paid to an individual, where a 5% withholding tax is imposed.
Technical service fees
A withholding tax of 5% (corporate tax) and 5% (VAT) generally applies to technical service fees paid to a nonresident. The corporate tax may be exempt under a tax treaty.
Interest paid to a nonresident is subject to a 5% withholding tax, unless the rate is reduced under a tax treaty.
Royalties paid to a nonresident are subject to a 10% withholding tax, unless the rate is reduced under a tax treaty.
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