If you are a U.S. citizen or a U.S. permanent resident, under the taxation law of the United States, it is compulsory for you to file your tax returns in the United States every year, even if you have been residing and paying taxes in Vietnam.
In this case, you will have to be extra careful as the fact that you are a resident in Vietnam might complicate your Internal Revenue Service (IRS) taxation compliance or miss out some of the tax benefits and deductions you can enjoy, such as foreign tax credit.
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Therefore, if you are an American and have recently relocated to Vietnam, it is important to get yourself familiar with the IRS tax requirements.
As an American living in Vietnam, you will get a tax filing extension until June 15. However, it is advisable to pay your tax due by April 15 as interest and penalties may apply after that.
In this article, Cekindo will go into detail about the tax system in Vietnam for U.S. citizens residing in the country.
Tax Forms Required in Vietnam
If you have a foreign bank, a foreign investment company or more than 10% shares in a foreign company, you are required to file your tax together with specific tax forms.
If these tax forms are not submitted on time, you will be fined a minimum of US$10,000 for each form.
Personal Income Tax for Americans in Vietnam
All non-residents and residents need to pay their personal income tax in Vietnam.
For residents, a progressive personal income tax rate to 35% applies. For non-residents, a flat tax rate of 20% will be imposed.
For non-employment, the tax rates range from 0.1% to 25%. Below are the different tax rates for residents in accordance to the taxable income per year:
- VND 0 – VND 60,000,000: 5%
- VND 60,000,000 – VND 120,000,000: 10%
- VND 120,000,000 – VND 216,000,000 : 15%
- VND 16,000,000 – VND 384,000,000: 20%
- VND 384,000,000 – VND 624,000,000: 25%
- VND 624,000,000 – VND 960,000,000: 30%
- VND 960,000,000 or more: 35%
It is compulsory for the residents to pay taxes on income generated in Vietnam as well as overseas.
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Deductions is possible for tax residents who have unemployed parents or spouse, or children who are under the age of 18. For non-residents, they are only taxed on their income earned in Vietnam.
Tax allowance and deductions in Vietnam are subject to certain restrictions. Mandatory health and social security insurance are qualified for deductions, as well as redundancy compensation and severance allowances.
However, for all cash benefits from employers, employees will have to pay the relevant tax as well.
Based on Resolution 954/2020/UBTVQH14 on June 2, 2020 about the Increases in family circumstance-based deduction for Personal Income Tax, take note of the following:
- Increase Individual Deduction from VND 9 million (US$385) per month to VND 11 million (US$471) per month.
- Increase Family Deduction from VND 3,6 million (US$154) per month to VND 4,4 million (US$188) per month.
- These increases will reduce the accessible income for PIT treatment.
- These changes are applied for monthly PIT treatment valid from July 1, 2020 and PIT finalisation for 2020.
Corporate Income Tax for U.S. Companies in Vietnam
Corporate revenues that are taxable include service provision, product sale, asset leasing or sale, joint venture with financial operations and share transfer.
Dividends allocated to the shareholders of the company will not be taxed.
In general, the corporate income tax rate in Vietnam is 20%.
As for companies involved in certain industries such as oil, gas, and precious natural resources, they are required to pay corporate income tax ranging from 32% to 50% based on the type of the project.
For firms participating in mineral resources prospecting, exploration and exploitation, the corporate income tax rate is 40% or 50% based on the location of the project.
Tax incentives are available for foreign corporate in Vietnam.
For taxpayers participating in projects in socioeconomically disadvantaged areas as specified by the government, or the investment projects encouraged by the Vietnamese government, can enjoy preferential tax rates of 10% for 15 years and 20% for 10 years.
How Cekindo can Help with Taxation
In this swift changing taxation environment in Vietnam, it is important that American investors are aware of potential tax benefits available, as well as tax restrictions.
Cekindo is a leading consulting company with a group of highly experienced legal consultants and taxation experts with proven track records, aiming to assist your business in tax planning, filing, reporting and other taxation matters in Vietnam.
Contact us today for all your taxation needs to optimise your business competencies by filling in the form below.