Vietnam: Corporate income tax, VAT, foreign contractor tax, and individual income tax developments

Vietnam: Corporate income tax, VAT, tax developments

The KPMG member firm in Vietnam has prepared a report that briefly describes recent tax guidance and developments.


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Corporate income tax

  • Resolution No. 116 provides for a 30% reduction of the corporate income tax liability for 2020 of taxpayers that have total revenue in 2020 not exceeding VND 200 billion (approximately U.S. $8.7 million).
  • Official Letter No. 5476/BTC-CST from the Ministry of Finance provides that revenue with regard to exported goods is recognized upon the completion of customs procedures. Customs procedures, therefore, mark the point of revenue recognition for both corporate income tax and value added tax (VAT) purposes.
  • An investment project in the field of “software production” is entitled to a corporate income tax incentive package including 10% preferential income tax rate for 15 years (a four-year tax exemption, and a 50% reduction of corporate income tax for the next nine years). The Ministry of Information and Communications issued Circular 13/2020/TT-BTTTT defining “software production” and identified seven processes of software production.
  • Official Letter No. 2776/TCT-CS reflects the tax authority’s position that land rental payments (“clawed back”) due to non-compliance with regulations on land management are not deductible expenses but is regarded as fines for administrative offences.
  • Official Letter No. 3218/TCT-CS provides income generated from the sale of manufactured products outsourced to entities located outside incentivized zones are not allowed corporate income tax incentives.


  • Official Letter No. 2410/TCT-KK reflects that when an investment project is not executed in compliance with investment laws, the taxpayer is not eligible for a VAT refund applicable to an “investment project.”

Foreign contractor tax

  • Official Letter No. 3086/TCT-KK reflects that foreign contractors declaring and paying foreign contractor tax (FCT) under hybrid and deduction methods are also eligible for tax payment deferrals allowed under the coronavirus (COVID-19) relief if certain conditions are satisfied.
  • Official Letter No. 3026/TCT-KK provides that a foreign contractor providing construction services in Vietnam is not eligible to declare FCT under the hybrid method. Accordingly, the Vietnamese party remains responsible for withholding, declaring, and paying the FCT on behalf its foreign contractors.
  • Official Letter No. 755/TCT-TTKTT provides that FCT may be due on payments made by a Vietnamese business cooperation contract for employees seconded to work in Vietnam.

Individual (personal) income tax

  • Official Letter No. 2546/TCT-DNNCN provides the new monthly family circumstance relief is to be applied for the third quarterly reporting period that is due for submission by 30 October 2020.
  • Official Letter No. 2533/BHXH-BT provides employers facing financial difficulties due to the COVID-19 pandemic are allowed to extend the suspension of contribution to retirement and survival funds up to December 2020.

Import duty

Official Letter No. 4927/TCHQ-TXNK) states that when an export and processing enterprise imports goods for factory construction, and then in turn sub-leases (including sub-leasing to a domestic business) a part of the factory, the export and processing enterprise is required to declare and pay import duty and import VAT for the goods imported for use in the factory construction. 

Read a September 2020 report [PDF 198 KB] prepared by the KPMG member firm in Vietnam

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