1. Corporate Income Tax (CIT)
The corporate income tax (CIT) rate in Vietnam is set at 20% for 2025, applicable to most resident companies on their worldwide income. Non-resident companies are generally taxed only on Vietnam-sourced income, such as profits generated from a permanent establishment (PE) within Vietnam.
| Corporate Tax Rate | Rate (%) | Details |
|---|---|---|
| Standard CIT Rate | 20% | Applied to resident companies on worldwide income. |
| Non-Resident Companies | 20% | Taxed only on Vietnam-sourced income. Income generated through a PE in Vietnam is subject to local tax. |
Key Compliance Factors:
- Resident Corporations: Taxed on all global income.
- Non-Resident Corporations: Only taxed on income derived from Vietnam. Income generated through a PE in Vietnam is subject to local tax.
Tax Deductions & Incentives:
- R&D Deductions: Companies investing in research and development activities may qualify for deductions.
- Green Investment Incentives: Certain energy-efficient and renewable energy projects may benefit from reduced tax rates.
2. Individual Income Tax (PIT)
Vietnam’s Individual Income Tax (PIT) is progressive, with rates ranging from 5% to 35% based on annual income. Deductions are available for dependents, charitable donations, and medical expenses.
| Income Range (VND) | Tax Rate (%) | Description |
|---|---|---|
| Up to VND 11 million | 5% | Base tax rate for lower income bracket. |
| VND 11,001,000 – VND 18 million | 10% | Moderate-income range. |
| VND 18,001,000 – VND 32 million | 15% | Higher income bracket. |
| VND 32,001,000 – VND 52 million | 20% | High-income bracket. |
| VND 52,001,000 – VND 80 million | 25% | Very high-income bracket. |
| Over VND 80 million | 35% | Highest income bracket. |
Key PIT Compliance:
- Deductions: Individuals can deduct expenses related to healthcare, dependents, and certain charitable contributions.
- Expatriates: Foreign nationals working in Vietnam for over 183 days per year are typically considered tax residents and subject to local taxation.
3. Value Added Tax (VAT)
The standard VAT rate in Vietnam is 10%, applying to most goods and services. Reduced rates of 5% apply to essential goods and services, such as food, pharmaceuticals, and certain medical services.
| VAT Rate | Rate (%) | Applicable Goods/Services |
|---|---|---|
| Standard VAT Rate | 10% | Most goods and services |
| Reduced Rate | 5% | Certain food items, pharmaceuticals, medical services |
VAT Compliance:
- Registration: Businesses generating over VND 1 billion annually must register for VAT.
- Filing: VAT returns are generally filed monthly or quarterly, depending on the company’s turnover.
4. Withholding Tax
Vietnam imposes withholding tax on specific payments made to non-residents, including dividends, royalties, and interest. These rates can vary depending on tax treaties.
| Income Type | Withholding Tax Rate | Notes |
|---|---|---|
| Dividends | 5% | Standard rate, potentially lower with tax treaties. |
| Interest | 10% | May be reduced under specific treaties. |
| Royalties | 10% | Applicable to intellectual property royalties. |
5. Social Security Contributions
Social security contributions in Vietnam cover pensions, health insurance, and unemployment insurance. Both employers and employees contribute to these schemes, with rates dependent on the employee’s earnings.
| Contribution Type | Employer Contribution | Employee Contribution | Coverage |
|---|---|---|---|
| Pension Fund | 14% | 8% | Retirement and pension coverage |
| Health Insurance | 3% | 1.5% | Health benefits and services |
| Unemployment Insurance | 1% | 1% | Unemployment benefits |
Filing and Payment Deadlines:
- Social security contributions are generally due monthly, with deadlines falling on the last day of the month for contributions from the prior month.
6. Business Tax Incentives
Vietnam offers several incentives aimed at promoting business investment and sustainable growth, particularly in sectors like renewable energy, technology, and manufacturing.
| Incentive | Benefit | Details |
|---|---|---|
| R&D Tax Credits | Reduces tax liability | Tax deductions for R&D expenditures |
| Green Energy Tax Exemptions | Reduces taxable income | Businesses investing in renewable energy benefit from reduced tax rates |
| Export and Regional Incentives | Special deductions | Businesses in specific economic zones or those engaged in export activities may qualify |
7. Additional Considerations
Tax Residency:
- Corporate Tax Residency: Companies are tax-resident in Vietnam if they are incorporated there or have their management located within Vietnam.
- Individual Tax Residency: Individuals residing in Vietnam for over 183 days in a tax year are generally considered residents and are taxed on worldwide income.
Filing Deadlines:
- Corporate Tax Returns: Due by the 30th day of the fourth month after the fiscal year’s close.
- Individual Tax Returns: Due by the end of March of the following year.
Penalties for Late Filing:
Late submissions may incur penalties up to 20% of the owed tax, plus interest based on the rates set by Vietnam’s central bank.
Final Thoughts
Understanding Vietnam’s tax regulations for 2025 provides essential insights for effective workforce management and compliance. Businesses that recognize both national and local tax obligations are better equipped to manage their Vietnamese operations, especially with the support of EOR/PEO services. This strategic approach ensures alignment with Vietnam’s tax laws, optimizes financial planning, and enables a positive employee experience.