Download overview Vietnam here - Vietnam Guide (source HSBC)

Personal Income Tax (’PIT’) - Vietnam

Scope

For individual tax purposes, Vietnam residents are those individuals residing in Vietnam for 183 days or more in a calendar year, or in 12 consecutive months from the first date of arrival.
Vietnam residents also include those having a permanent residence in Vietnam (including, in the case of foreigners, a registered residence which is recorded on the permanent or temporary residence card).
Where an individual stays in Vietnam for more than 90 days but less than 183 days in a tax year, the individual will be treated as a tax non-resident if he or she can prove that they are tax resident of another country.
Tax residents are subject to Vietnamese PIT on their worldwide taxable income, wherever it is paid or received. Employment income is taxed on a graduated tax rates basis. Non- employment income is taxed at a variety of different rates.
Individuals not meeting the conditions for being tax residents are considered tax non-residents.
Non-residents are subject to PIT at a flat tax rate of 20% on the income received as a result of working in Vietnam in the tax year, and at various other rates on their non-employment income. This may be affected by an applicable DTA.

Tax declarations and payment

For employment income, tax has to be declared and paid provisionally on a monthly basis by the 20th day of the following month.
The amounts paid are reconciled to the total tax liability at year-end.
Expatriate employees are also required to carry out a PIT finalisation on termination of their Vietnamese assignments before exiting Vietnam. Tax refunds due to excess tax payments are only available to those who have a tax code.
For non-employment income, the individual is required to declare and pay PIT in relation to each type of taxable non- employment income. The PIT regulations require income to be declared and tax to be paid on a regular basis, often each time income is received.

Taxable Income

Employment income
The definition of the taxable employment income is broad and includes all cash remuneration and benefits- in-kind. However, there are a limited number of items that are not subject to tax.
Non-employment income
Taxable non-employmentincome includes:

• Business income (e.g. rental income);
• Investment income (e.g. interest, dividends);
• Gains on sale of shares;
• Gains on sale of real estate; and
• Inheritances in excess of VND10 million.

Tax deductions
Tax deductions include:
1. Contributions to mandatory social, health and unemployment insurance schemes;
2. Contributions to certain approved charities;
3. Tax deduction:

• Personal allowance: VND48 million/year,
• Dependant deduction: VND1.6 million/month. The dependant allowance is not automatically granted, and the taxpayer needs to register qualifying dependants and provide supporting documents to the tax authority

Social, Health and Unemployment Insurance

Social Insurance (’SI’) and Unemployment Insurance (’UI’) contributions are applicable to Vietnamese individuals only. Health insurance (’HI’) contributions are required for Vietnamese and foreign individuals that are employed under Vietnam labour contracts.
The regulated salary to be used to calculate for Social Insurance, Health Insurance and Unemployment Insurance contribution is the basic salary stated in labour contract, capped at 20 times the minimum salary (current minimum salary for the purpose of calculating SI, HI and UI is VND1,050,000 per month).
Statutory SI, HI and UI employer contributions do not constitute a taxable benefit to the employee. The employee contributions are deductible for PIT purposes.
SI/HI/UI contributions are as follows:

Import and Export Duties

Import and export duty rates are subject to frequent changes and it is always prudent to check the latest position.
Import duty rates are classified into three categories:
1. Ordinary rates;
2. Preferential rates – applicable to imported goods from countries that have Most Favoured Nation (MFN, also known as Normal Trade Relations) status with Vietnam. The MFN rates are in accordance with Vietnam’s WTO commitments and are applicable to goods imported from other member countries of the WTO; and
3. Special preferential rates applicable to imported goods from countries that have
a special preferential trade agreement with Vietnam (e.g. ASEAN countries, China, Korea, Japan, Australia and New Zealand).
To be eligible for preferential rates or special preferential rates, the imported goods must be accompanied by an appropriate Certificate of Origin (’C/O’). Without such a C/O, or when goods are sourced from non- preferential treatment countries, the ordinary rate (being the MFN rate with a 50% surcharge) is imposed.

Special Sales Tax (’SST’)

SST is a form of excise tax that applies to the production or import of certain goods and the provision of certain services. Goods and services that are subject to SST are also subject to VAT.
The Law on SST classifies objects subject to SST into two groups:
1. Commodities – cigarettes, liquor, beer, automobiles having less than 24 seats, motorcycles, airplanes, boats, petrol, air- conditioners up to 90,000 BTU, playing cards, votive papers.
2. Service activities – discotheque, massage, karaoke, casino, gambling, golf clubs, entertainment with betting and lotteries.

Natural Resources Tax

Natural Resources Tax is payable by industries exploiting Vietnam’s natural resources such as petroleum, minerals, forest products, seafood and natural water.
The tax rates vary depending on the natural resource being exploited and are applied to the production output at a specified taxable value per unit.
Various methods are available for the calculation of the taxable value of the resources, including cases where the commercial value of the resources cannot be determined.

Property Tax

Land in Vietnam is owned by the state, meaning that users of land are required to acquire or rent land use rights from the government.
Foreign investors requiring land for their operations in Vietnam will pay a rental fee to the government, which is in effect a form of property tax.
The rental fees for land use rights vary depending upon the location, infrastructure and the industrial sector in which the business is operating.
In addition, land users (including owners of houses and apartments) have to pay land tax from 2012 onwards under the law on non-agricultural land tax. The tax is charged with progressive tax rates ranging from 0.03% to 0.15% on the taxable price determined by the local authority from time-to-time based on the location and use of the land.

Environmental Protection Tax

The Law on Environment Protection Tax took effect from 1 January 2012.
The environment protection tax is an indirect tax which is applicable to the production and importation of certain goods including petroleum products.

Other Taxes

Numerous other fees and taxes can apply in Vietnam, including business license tax and stamp duty or registration fees.

Tax Audits and Penalties

Tax audits are carried out regularly and often cover a number of tax years. Prior to an audit, the tax authorities send the taxpayer a written notice indicating the time and scope of the audit inspection.
There are detailed regulations setting out penalties for various tax offences. These range from relatively minor administrative penalties through to tax penalties amounting to various multiples of the additional tax assessed.
The general statute of limitations for posing penalties is five years. The tax authorities can collect under-declared and unpaid tax at any time.

Audit and Accounting

Foreign-invested business entities are generally required to adopt the Vietnamese Accounting System (’VAS’). If a company strictly follows the VAS, registration with the Ministry of Finance (’MoF’) is not required. However, if the VAS is modified, a written approval from the MoF is required before implementation.
Accounting records are required to be maintained in VND. A foreign-invested business entity can select a foreign currency to be used for its accounting records and financial statements in limited circumstances (per Circular 244 issued by the Ministry of Finance). Accounting records are required in Vietnamese, although a commonly used foreign language can be used along with Vietnamese. At the end of the financial year, the entity must perform a physical count of its fixed assets, cash and inventory.
The annual financial statements of all foreign-invested business entities must be audited by an independent auditing company operating in Vietnam. Audited annual financial statements must be completed within 90 days from the end of the year. These financial statements should be filed with the applicable licensing body, Ministry of Finance, local tax authority, Department of Statistics, and other local authorities as required by law. Vietnam has issued 26 accounting standards and 37 auditing standards which are primarily based on international standards, but with some local modifications.

Source: https://globalconnections.hsbc.com