Vietnam

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Tax authorities

General Department of Taxation, Ministry of Finance
123 Lo Duc St, Hanoi, Vietnam
Tel: +84 4 3971 2310
Fax: +84 4 3971 2286
Email: bbtweb@gdt.gov.vn
Website: www.gdt.gov.vn

Tax rates at a glance

(As of September 2012)

Corporate income
Standard	25%
Enterprises operating oil and gas and natural resource sectors	32%-50%
Capital gains	25%
Branch tax	25%

Withholding tax
Dividends	5% (a)
Interest	5% (b)
Royalties	10%
Technical service fees	5% (c)
Branch remittance tax	0%

Net operating losses
Carryback	0
Carryforward	5 years (d)

No tax is imposed on dividends remitted overseas unless paid to individuals
Interest paid to a non-resident is subject to a 5% withholding tax (corporate tax) unless the rate is reduced under a tax treaty. Interest paid to non-residents that are not credit institutions may be subject to an additional withholding tax of 5% (value added tax).
A withholding tax of 5% (corporate tax) and 5% (value added tax) generally applies to technical service fees paid to a non-resident. The corporate tax may be exempt under a tax treaty.
Losses must be carried forward consecutively in full to taxable income for up to a maximum of the 5 years after the year in which the losses are incurred.

Tax

	Deloitte KPMG PwC
	Baker & McKenzie Ernst & Young Grant Thornton VDB Loi
	Vision & Associates

Vietnam is rapidly becoming a success story for many other emerging economies in the Asia-Pacific region to imitate. Having transformed itself from one of the poorest countries in the world into a lower middle-income country, it is constantly making efforts to evolve its economy. The World Bank has stated "the conclusions of the October 2011 Communist Party Plenum recognised the need for economic restructuring and identified restructuring of public investment, of state-owned enterprises and the financial sector, as priorities for the next five years".

"As Vietnam is being more deeply integrated into international economic life and the regional community, as well as step by step confirming its position as a link in global supply chains, its legal framework for taxation is more and more required to approach international standards and practices in this field," said Le Quynh Anh from Vision & Associates. "In addition, Vietnam is still a developing country where the skills and capacity of legislators have a certain shortage in comparison with developed countries. Consequently, a legislative act in Vietnam normally has a short life cycle and is frequently amended and supplemented after it is introduced," said Anh.

The macro picture indicates a bright future for the country, however the past 12 months have seen stunted growth. "Generally about 60% of the stock market reported lower profits, and this has affected tax revenue. Tax authorities have become more aggressive through tax audits," said Thomas McClelland from Deloitte.

To help provide some relief, in May 2012, the National Assembly approved a 30% corporate tax income reduction for small and medium enterprises, and labour intensive businesses for 2012. On December 27 2011, Decree No 121/2011/ND-CP reduced withholding tax to 5% from 10% on interest payments from Vietnam to offshore lenders.

"[Tax authorities] are tough on penalties, the enforcement environment is going to be a lot tougher. They are becoming even more focused on transfer pricing," said McClelland.

"There is an ongoing perception, expressed in the media, that foreign companies are not paying their fair share of tax in Vietnam," said Warrick Cleine from KPMG. "This is derived by reducing corporate tax revenue from everyone, including the foreign sector. While foreign companies say it is because economic conditions mean they are not going well, the tax authorities think it is a matter to do with transfer pricing (abuse), or other forms of non-compliance," said Cleine.

As a result, all practitioners agree that transfer pricing is a clear focus for the Inland Revenue Department (IRD). The General Department of Taxation has established a specialised transfer pricing team and the Ministry of Finance announced that 1,500 enterprises would be targeted for transfer pricing audits in 2012.

''It is expected that the current trend of an increasing focus on transfer pricing is set to continue as revenue authorities continue to become more sophisticated and focused on balancing the national budget," said Christopher Butler, from Ernst & Young. Although gradual steps are being undertaken to improve the maturity of the tax authorities, the "appeal mechanism in Vietnam is still underdeveloped, it is still difficult to defend transfer pricing adjustments and adjustments resulting from tax investigations once made," said Cleine.

Professionals hope the proposals for advance pricing agreements (APA) will help alleviate this uncertainty once officially implemented. The proposal is forecast to pass through the legislature and be approved by October and become effective sometime in 2014. The emphasis for corporate taxpayers will then be on compliance with transfer pricing documentation requirements which will be viewed as a prerequisite for negotiating APAs with the tax authorities.

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Deloitte

The Deloitte tax team has been growing strongly in the past year, with new tax professionals joining the team. The national leader is Thomas McClelland who leads a team of three partners and 85 fee earners. The dynamic economic environment in Vietnam ... [more]

KPMG

KPMG's tax team is led by Warrick Cleine. He oversees a team of more than 200 tax professionals locally in addition to his role as KPMG's Asia Pacific head of tax. The team has welcomed new talent to the team as well as making internal promotions.Ron ... [more]

PwC

The tax team at PwC has an exemplary reputation in Vietnam for their thorough knowledge of local customs and law. Richard Irwin leads the expanding group which consists of four partners and 138 fee earners. He has 17 years of experience in advising major ... [more]

Baker & McKenzie

Frederick Burke oversees the Baker & McKenzie tax team. Burke has 20 years of experience, making him a well respected practitioner in international law and corporate M&A matters. The other partner on the team is Thanh Vinh Nguyen who specialises in providing ... [more]

Ernst & Young

Ernst & Young's tax practice is led by Christopher Butler. With two partners and 113 fee earners on the team, they have the capability to offer the range of tax services typical of a big four firm. The strong transfer pricing team consists of 12 professionals.The ... [more]

Grant Thornton

Matthew Facey took over as a director and leader of Grant Thornton's tax team in May 2012. Ken Atkinson is the team's managing partner. Both are supported by a team of nine tax professionals. The firm has been undergoing an internal restructuring since ... [more]

VDB Loi

Less than a year old, VDB Loi has the potential to become a leading firm for tax services in Vietnam. Founders Edwin Vanderbruggen and Jean Loi who both come from DFDL, have recruited a strong and knowledgeable team from various prestigious tax firms. ... [more]

Vision & Associates

Le Quynh Anh is the executive partner of Vision & Associates tax practice. Though well regarded for their tax disputes team, the team's service offerings cover corporate income tax, foreign contractor tax and personal income tax. Often clients will hire ... [more]