TAX

Tax is a compulsory contribution to state revenue as well as a tool for economy management. Tax
is also an obligation of enterprises to repay society.

Basically, a foreign enterprise in Vietnam have to pay the following taxes:

License tax:

License tax is a kind of tax which is paid per year. Besides increasing state revenue, it helps state
agencies create data for managing business entities. License tax is regulated in Circular No.
43/2003/TT-BTC issued by the Ministry of Finance on May 7, 2003.

License tax of a foreign enterprise shall be determined according to registered capital (investment
capital). License tax level is based on capital level, as showed in the table below:

The amount of lic

License tax level Registered capital
per year

Level 1 More than 10 billion VND 3.000.000 VND

Level 2 From 5 billion VND to 10 billion VND 2.000.000 VND

Level 3 From 2 billion VND to under 5 billion VND 1.500.000 VND

Level 4 Under 2 billion VND 1.000.000 VND

Enterprise income tax:

Enterprise income tax is a kind of tax calculated based on incomes form business activities of
enterprises and other incomes, which are often incomes earned from property transfer.

Formula:

Payable enterprise income tax = [Taxable incomes (Tax-exempt incomes + Losses carried
forward from the previous year)] Tax rate

Taxable incomes = Revenue Deductible expense + Other incomes

From January 1, 2016, enterprise income tax rate is 20%.

Value-added tax (VAT):

Value-added tax is a kind of tax calculated based on the additional value of goods and services
during the process of production and distribution. However, not all of goods and services are
subject to VAT. Goods and services at Article 5 of the Law of value-added tax:

There are two calculating methods:

Tax credit method:

Payable VAT = Output VAT Deducted input VAT

Direct calculation on additional value method:

Payable VAT = Additional value of sold goods and services VAT rate

There are three VAT rate levels: 0%, 5% and 10%, depending on each group of goods and services
as regulated in Article 10 of the Law on value-added tax.

Excise tax:

Excise tax is an indirect tax passed on to consumers consuming luxury goods or services. The
State also use excise tax as a tool to limit some business sectors. If a foreign enterprise purchase
or sell goods or services regulated in Article 2 of the Law on Excise tax shall have to pay it.

Calculating method:

Payable excise tax = Taxed price Tax rate

Taxed price of a good or service is the selling price or service charge without excise price,
environment tax, value-added tax. Excise tax rate fluctuates from 15% 65%, depending on each
kind of goods or services.

Export and import taxes:

If a foreign enterprise import and/or export goods, it has duties to pay export and/or import taxes.

There are three calculating methods:

Proportional method: calculating tax as a percentage of the taxable value of imported/exported

goods.

Payable import/export tax = Taxable value Tax rate

Preferential rates and special preferential rates are regulated in tax commitment tables between
Vietnam and other countries (if any). Ordinary rates are regulated in detail in Decision No. 36/2016.
If a good is not belong to the ordinary rate table, the applied rate shall be 150%.

Fixed method: calculating tax as a certain amount of tax imposed upon a unit of
imported/exported goods.

Payable import/export tax = Actual quantity of imported/exported goods and the amount of
duty per unit of goods at the time of tax calculation

Mixed method: using the two methods above.

Payable import/export tax are the sum of payable import/export tax calculated by proportional
method and fixed method.
Investment policies
1. Investors may invest in domains, branches and trades not banned by law; have the right
to autonomy and decide on their investment activities in accordance with the provisions of
Vietnamese law.
2. The State shall treat equally before law investors of all economic sectors, as between
domestic investment and foreign investment; shall encourage and create favorable
conditions for investment activities.
3. The State shall recognize and protect the right to ownership of assets, investment capital
and incomes as well as other legitimate rights and interests of investors; shall recognize the
long-term existence and development of investment activities.
4. The State shall undertake to implement investment-related treaties to which the Socialist
Republic of Vietnam is a contracting party.
5. The State shall encourage and adopt investment preferential policies for domains and
geographical areas entitled thereto.

(Article 4. Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam, which was amended and
supplemented under Resolution No. 51/2001/QH10 of December 25, 2001, of the Xth National Assembly, the
10th session;)

INVESTMENT SECURITY

Article 6.- Security for capital and assets

1. Investment capital and lawful assets of investors shall not be nationalized or confiscated through
administrative measures.

2. Where it is really necessary for defense, security and national interests, if the State acquires
compulsorily or requisitions assets of an investor, such investor shall get paid or be compensated at the
market prices at the time of announcement of compulsory acquisition or requisition.

The payment or compensation must ensure the legitimate interests of investors and must not
discriminate between investors.

3. For foreign investors, the payment or compensation for assets specified in Clause 2 of this Article
shall be made in a freely convertible currency and may be transferred abroad.

4. Procedures and conditions for compulsory acquisition and requisition shall comply with the
provisions of law.