Nov. 11 – Many first and second tier suppliers, including small to medium-size enterprises, are prioritizing their investments into Vietnam, acting on the business potential that it holds for companies involved in a larger supply chain providing goods and services to manufacturing hubs in Asia. It is thus increasingly important to understand the taxes which Vietnam imposes on business, such as corporate income tax (CIT).
In the final part of our recent coverage of taxation, this article will provide an introduction to corporate income tax in Vietnam.
The standard CIT rate is 25 percent for both domestic and foreign-invested enterprises (FIEs) in most industries. In an effort to attract more foreign direct investments, boost investment in Vietnamese businesses and to support struggling local enterprises, Vietnamese lawmakers have recently approved the government’s proposal to reduce the current CIT rate from 25 percent to 22 percent (the new rate is expected to take effect starting January 1, 2014).
The National Assembly will also cut CIT rates for small and medium-sized enterprises and developers of low-cost housing by 5 percent (to 20 percent) and 15 percent (to 10 percent), respectively.
This new tax rate would put Vietnam at an advantage over other neighboring countries such as China (25 percent), Indonesia (25 percent) and the new rising star Myanmar (30 percent). Having said that, however, other countries such as Thailand do offer a lower CIT rate at 20 percent and also more attractive incentives and tax breaks for newcomers.