1. What Is Corporate Income Tax (CIT) in Vietnam?
Corporate Income Tax (CIT) in Vietnam is a direct tax levied on the net taxable profits of enterprises operating within Vietnamese territory. The standard statutory CIT rate is 20%. Taxable profits include income from production, trade in goods, provision of services, and other financial or capital activities.
Under Vietnamese tax legislation (Law on Corporate Income Tax and guiding decrees), business organizations must calculate their own tax liabilities, submit payments electronically, and bear legal responsibility for accuracy. Foreign investors establishing a Limited Liability Company (LLC) or a Joint Stock Company (JSC) face immediate CIT filing obligations from their incorporation date.
Who Must Pay Corporate Income Tax?
Vietnamese law defines four main categories of CIT taxpayers:
- Domestic and Foreign-Invested Enterprises: Enterprises established under Vietnamese law (such as 100% foreign-owned LLCs and JSCs). These entities pay CIT on all taxable income earned both inside and outside Vietnam.
- Foreign Enterprises with a PE: Foreign enterprises with a Permanent Establishment (PE) in Vietnam (such as operational branch offices). They pay tax on income generated in Vietnam, plus overseas income connected to that PE.
- Foreign Enterprises without a PE: Foreign enterprises without a PE in Vietnam. These entities pay tax on Vietnam-sourced income, typically withheld through the Foreign Contractor Tax (FCT) regime for cross-border digital services and tech platforms.
- Other Commercial Organizations: Cooperatives, non-business units, and licensed e-commerce platforms authorized to withhold taxes on behalf of merchant businesses.
2. How to Calculate Corporate Income Tax in Vietnam
To calculate your CIT liability in Vietnam.
Multiply your Assessable Income (less any contribution to the Science and Technology Fund) by the applicable tax rate. Enterprises can deduct up to 10% (and up to 20% for qualifying innovative enterprises) of assessable income into their corporate Science and Technology Development Fund.
CIT Payable = (Assessable Income – Science & Technology Fund Contribution) x Tax Rate
Accountants determine Assessable Income through two sequential steps:
Step 1: Calculate Taxable Income = Total Revenue – Deductible Business Expenses + Other Income.
Step 2: Determine Assessable Income = Taxable Income – (Tax-Exempt Income + Carried-Forward Losses).
Key terms in the calculation:
- Total Revenue: Gross invoices and sales value earned from selling products, delivering services, and financial activities (including interest and foreign exchange gains).
- Deductible Expenses: Actual business expenses supported by legitimate electronic tax invoices and lawful non-cash banking payment vouchers.
- Other Income: Earnings from asset liquidations, capital transfers, interest on deposits, penalty receipts from supplier breaches, and foreign exchange gains.
- Loss Carry-Forward: Taxpayers can carry forward audited tax losses continuously for a maximum period of 5 consecutive years from the year following the loss year.
Practical CIT Calculation Example
Consider Company A, a 100% foreign-owned software enterprise in Ho Chi Minh City applying the standard 20% CIT rate.
In the financial year, the company had a carried-forward loss of 100,000,000 VND from the previous year. The annual figures are:
– Total Gross Revenue (Sales + Financial income): 610,000,000 VND
– Total Legitimate Deductible Expenses: 373,000,000 VND
– Net Other Income: 2,000,000 VND
– Science & Technology Fund Contribution: 0 VND
Calculation breakdown
1. Taxable Income = 610,000,000 – 373,000,000 + 2,000,000 = 239,000,000 VND.
2. Assessable Income = 239,000,000 – 100,000,000 (loss carried forward) = 139,000,000 VND.
3. CIT Payable = 139,000,000 x 20% = 27,800,000 VND.
Result: Company A pays exactly 27,800,000 VND in CIT for the financial year.
3. What Are the CIT Rates and Incentives in Vietnam?
The standard CIT rate in Vietnam is 20%. Preferential rates of 10% and 17% apply to projects in encouraged sectors and socio-economically disadvantaged regions. Natural resource exploitation projects (oil, gas, and rare minerals) face rates between 25% and 50%.
| Category | Applicable CIT Rate | Eligibility Criteria & Sectors |
|---|---|---|
| Standard Rate | 20% | Applies to all normal commercial, manufacturing, service, and trading businesses. |
| High-Tech Incentive Rate | 10% for 15 years | High-technology enterprises, software development, AI, semiconductor chips, R&D, data centers, environmental tech, and mega-projects exceeding 12,000 billion VND. |
| Regional Incentive Rate | 17% for 10 years | Projects operating in areas with difficult socio-economic conditions, agricultural machinery manufacturing, or certified startup incubators. |
| Extractive Industries | 25% to 50% | Exploration and extraction of petroleum, gas, and precious mineral resources, determined per project contract. |
Tax Holidays vs. 0% Tax Rate: Clearing a Common Misconception
Foreign founders frequently ask if their company can enjoy a 0% CIT rate.
In Vietnamese tax law, a 0% rate exists solely for Value Added Tax (VAT) on export transactions. CIT has no 0% rate.
How Tax Holidays Work
Vietnam provides incentives through Tax Holidays (full exemption) and Tax Reductions (50% reduction).
For example, a certified high-tech venture can receive 4 years of complete tax exemption followed by 9 years of 50% tax reduction on its 10% preferential rate.
The tax holiday clock starts from the first year the company generates taxable income, or from the fourth operational year if it has no taxable income during its first three years.
4. Filing Deadlines and the Statutory 80% Provisional Tax Rule
Vietnam enforces a self-assessment tax regime. Companies do not file quarterly CIT returns. Instead, companies must calculate their quarterly profit, estimate the provisional tax, and pay the tax directly into the State Treasury through the national eTax portal.
| Period | Payment / Filing Obligation | Statutory Deadline |
|---|---|---|
| Quarter 1 | Provisional tax payment based on Q1 net profits | April 30 |
| Quarter 2 | Provisional tax payment based on Q2 net profits | July 30 |
| Quarter 3 | Provisional tax payment based on Q3 net profits | October 30 |
| Quarter 4 | Provisional tax payment based on Q4 net profits | January 30 (following year) |
| Annual Finalization | File Form 03/TNDN + Audited Financial Statements + Pay remaining tax | Last day of the 3rd month after fiscal year end (March 31 for calendar year) |
| Enterprise Dissolution | Submit final tax closing documents and clearance | Within 45 days of dissolution decision |
The 80% Provisional Rule – the total provisional CIT paid across all four quarters must equal at least 80% of the final audited CIT payable for the entire tax year. If your provisional payments total less than 80%, the tax authority assesses late payment interest of 0.03% per day on the shortfall, calculated from the January 30 Q4 deadline until the date the deficit is paid.
5. Annual Tax Finalization Package for Foreign-owned Companies
Mandatory Submission: By March 31 (for companies operating on a calendar fiscal year ending December 31), foreign-invested companies must submit their complete annual tax finalization package via the General Department of Taxation portal (thuedientu.gdt.gov.vn).
The compliance dossier must contain:
1. Annual CIT Finalization Return: Form 03/TNDN: The official annual corporate income tax return.
2. Annual Financial Statements: Includes the Balance Sheet, Income Statement, Cash Flow Statement, and Notes to the Financial Statements compiled under Vietnamese Accounting Standards (VAS).
3. Independent Audit Report: Under Vietnamese law, 100% of Foreign-Invested Enterprises (FIEs) must have their annual financial statements audited by an independent licensed audit firm before submitting to tax authorities.
4. Loss Carry-Forward Schedule (Form 03-2/TNDN): Required if the company carries forward previous years’ audited losses to offset current year profit.
5. Transfer Pricing Disclosure Forms: Mandatory under Decree 255/2026/ND-CP for companies engaging in transactions with parent entities or affiliated sister companies.
6. Non-Deductible Costs, Transfer Pricing, and VAS 17
Disciplined tax compliance directly protects shareholder value and operating cash flow. Foreign managers must manage three technical areas to prevent tax disallowances during audits.
Common Non-Deductible Expense Traps
Vietnamese tax inspectors systematically review 23 non-deductible expense categories. The most common errors include:
1. Cash Payments Exceeding Thresholds: Purchases of goods or services from 5 million VND upward must be paid via non-cash bank transfer. Cash payments disqualify the entire expense from CIT deduction.
2. Employee Welfare Cap: Total direct welfare expenditures (team building, condolences, weddings, medical allowances) cannot exceed one month of actual average salary paid during the tax year.
3. Voluntary Insurance Limits: Voluntary pension and life insurance contributions funded by employers are capped at 1,000,000 VND per employee per month.
4. Incomplete Travel Expense Vouchers: Business travel expenses must include travel authorization decisions, lodging electronic invoices, airline tickets, and commercial boarding passes. Missing boarding passes frequently lead to travel cost disallowance.
Transfer Pricing Controls and the 30% EBITDA Loan Interest Cap
Under Decree 132/2020/ND-CP, companies engaging in transactions with related parties (including loans, IP royalties, management fees, or cross-border procurement) must prepare transfer pricing documentation (Local File, Master File, and Country-by-Country report).
The 30% EBITDA Rule: Under this decree, total net loan interest expense deductible for CIT purposes is capped at 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA). Any interest expense exceeding 30% of EBITDA is disallowed in the current year, but can be carried forward to offset future interest within the next 5 consecutive years.
Accounting for Deferred Tax (VAS 17)
Vietnamese Accounting Standard 17 (VAS 17) governs Deferred Corporate Income Tax. Timing differences between accounting profit and tax regulations create Deferred Tax Assets (Account 243) or Deferred Tax Liabilities (Account 347). Accurately accounting for deferred tax ensures your group financial statements reflect true shareholder equity and prevents conflicting audits between local tax teams and group auditors.
7. Build an Audit-Proof Tax Structure with VNBG
Managing corporate tax compliance in Vietnam requires localized expertise, precise documentation, and disciplined deadline management. A single missed deadline or misclassified deduction can trigger 0.03% daily interest penalties, tax code freezes, and delays in remitting legal profits back to your parent company.
VNBG provides an end-to-end corporate services solution for international businesses entering and growing in Vietnam. From company incorporation and VAS accounting to monthly payroll, e-invoicing management, transfer pricing compliance, and annual audit coordination, our bilingual tax specialists protect your business from regulatory liabilities.
8. Book a Free Meeting with VNBG
Schedule a Free 30-Minute Tax Diagnostic Session with VNBG senior consultants today. We will review your current corporate structure, verify your deduction eligibility, and ensure your business stays fully compliant with Vietnamese tax laws.
9. Frequently Asked Questions About Vietnam Corporate Income Tax
Q1: What happens if my company pays CIT after the deadline?
The tax authority applies a daily late payment interest of 0.03% on the overdue tax amount. If you under-declare your tax base during an audit, you also face an administrative fine of 20% on the underpaid tax amount, plus potential evasion penalties.
Q2: Can foreign companies carry forward tax losses in Vietnam?
Yes. Enterprises can carry forward audited tax losses continuously for up to 5 consecutive years, starting from the year immediately following the loss year. Losses cannot be carried backward.
Q3: Do FDI companies need an independent financial audit?
Yes. Under the Law on Independent Audit, 100% of foreign-invested enterprises in Vietnam must have their annual financial statements audited by an independent licensed audit firm before submitting tax finalization returns.
Q4: Is there any 0% Corporate Income Tax rate in Vietnam?
No. In Vietnamese tax law, a 0% tax rate applies only to Value Added Tax (VAT) on exports. In CIT, eligible businesses receive tax holidays (100% exemption for a specified number of years) followed by 50% tax reductions, rather than a permanent 0% rate.
Q5: What is the deadline for filing annual CIT finalization?
The deadline is the final day of the third month following the close of your fiscal year. For enterprises using the standard calendar fiscal year (ending December 31), the mandatory submission deadline is March 31.
