This article has been updated to reflect the 2022 annual tax return, known in Vietnam as “Tax Finalization” for complete accuracy. In this article, we will refer to Annual Tax Return as Tax Finalization.
If you are still confused and wonder how to go about this time-consuming task of navigating and understanding Vietnam’s annual tax returns you are not alone. With the pains of growth and quick growth at that, the government is updating its tax codes on a year-to-year basis.
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According to the World Bank’s Ease of Doing Business, the administrative requirements of Paying Taxes in Vietnam are some of the more demanding in the region and the world. Although with the advent of digitalizing much of the tax processes, such as the implementation of E-invoices, have improved procedures.
The consequences of making mistakes on your annual tax return, or submitting late can be severe and affect business operations. In this article, you will learn some essential information for annual corporate income tax and annual filing obligations in Vietnam as well as all the deadlines.
VAT Tax Finalization in Vietnam
The deadline for filing your VAT finalizations is the 60th day of the following fiscal year. You have to declare and pay the VAT every quarter. Furthermore, if the total revenue of the previous year was greater than 50 Billion VND then you have to declare your VAT declaration on a monthly basis.
You can calculate your VAT Tax Finalization with the following methods:
- The direct method: VAT payable = turnover x VAT rate
- The indirect method: VAT payable (deductible) = output VAT – input VAT
What is Personal Income Tax (PIT)?
Finalization Deadline: March 31st of the following year
This is a tax paid by taxpayers in Vietnam on the income earned by individuals. Taxpayers pay their personal income tax based on different rates according to their annual earnings in Vietnam.
The progressive tax rates for tax residents of Vietnam range from 5% to 35%.
These individual taxpayers in Vietnam are eligible for tax refunds on the personal income tax.
Fuels for foreigners in Vietnam. If a foreigner is a tax resident, which means he/she has stayed in Vietnam for more than 183 days and they have all their immigration paperwork in order, such as Visa, Work Permit, TRC, etc then their PIT rates are the same as Vietnamese people. Otherwise, you will be taxed at higher rates.
Personal Income Tax Declaration of your Employees
If you are a business owner and employ people in Vietnam, you should be aware of the following:
Employers shall finalize taxes on behalf of their employees, whether taxes are deducted or not. Tax finalization is not required if an individual does not earn any income. In case an employee is re-assigned to a new organization after the old organization is acquired, consolidated, divided or converted, or to a new organization that is in the same system as the old organization, the new organization shall finalize the taxes as authorized by such employee. This includes the income paid by the old organization, and collecting documents about the deduction of personal income taxes issued by the old organization to the employee (if any).
What is Corporate Income Tax (CIT)?
Corporate income tax in Vietnam, also known as corporation tax or company tax, is levied on both foreign as well as domestic companies. Just like personal income tax, businesses are required to pay taxes for their income earned in the companies.
Corporate Income Tax Rates
The corporate taxes can be computed and paid on a quarterly basis based on the estimated profits of that quarter. The deadline is the 30th day of the next quarter.
The standard corporate income tax rate is 20%. It is paid every quarter. For overpayments it can be refunded after 6 months.
Foreigners and investors shall take note that tax incentives are available when registering a company in Vietnam depending on the industry, especially information technology.
Tax rates become much higher and more complicated for companies in the extractive industries like mining, gas, and oil.
Corporate Tax Return in Vietnam
Companies in Vietnam are able to get a tax refund on corporate income tax as well after 6 months if they overpaid . The reimbursement is on an annual basis.
Reporting Corporate Income Tax (CIT) in Vietnam
Deadline: 31st of March of the following year
The tax compliance deadline for all tax individuals and companies to remember is not later than 90 days from the fiscal year-end (31st of March). Most companies use the western calendar year (January-December) as it is a standard tax year in Vietnam and businesses are obliged to notify the tax authorities if a different tax year is used rather than the calendar one. For example, in Australia its common for companies to measure the calendar year from July to June.
Companies that fail to report their taxes in a timely fashion will face different levels of penalties based on the days they are overdue – the fine can range from a simple warning letter to hundreds of millions of VND, depending on the gravity. Moreover, your company business license can be repealed anytime if you neglect your tax reports and the fines pile up.
As a result, it is common for companies and corporations to come up with proper tax planning with their consultant. Tax filing and reporting outsourcing to a reliable agency in Vietnam is a surefire way to prevent any hefty expenses and tax mishaps in the future.
Deadlines for Tax Finalization (Tax returns) in Vietnam:
- VAT Finalization: Due 60 days from the end of the fiscal year
- PIT Finalization: Due the 31st of March of the following year
- CIT Finalization: Due the 31st of March of the following year