Other BriefingsCorporate Income Tax Framework for Foreign-Owned Companies in Vietnam
Corporate income tax becomes operative once a foreign-invested entity begins commercial activity in Vietnam. Liability does not depend on profitability or scale. From that point forward, taxable profit must be assessed, returns submitted, and payments made under Vietnam’s statutory framework. This makes corporate income tax a structural feature of market entry, influencing operating models, capital deployment, and profit realization.
How Vietnam applies corporate income tax
Vietnam administers corporate income tax through a nationally standardized regime. The headline corporate income tax rate is 20 percent, applied nationwide to most enterprises. Certain qualifying projects may access preferential treatment, most notably a reduced 10 percent rate for encouraged sectors and locations.
The system operates on a self-assessment basis. Companies calculate taxable income, file returns, and remit payments directly to the tax authorities, with audits conducted after submission.
When Foreign-owned enterprises become taxable
Corporate income tax exposure is triggered by commercial presence rather than ownership nationality.
Once a foreign investor establishes a revenue-generating operation in Vietnam, corporate income tax obligations arise. This applies to wholly foreign-owned enterprises, joint ventures, branches, and permanent establishments engaged in business activity.
Representative offices remain outside the corporate income tax system because they are prohibited from generating income. When activities extend beyond liaison functions, tax liability typically follows.
What income does Vietnam taxes
Vietnam applies a source-based approach to corporate taxation. Income connected to Vietnam is generally taxable domestically.
This includes locally generated operating profits, service income performed or consumed in Vietnam, capital gains from Vietnamese assets, and other revenue streams with a Vietnamese nexus. Offshore structuring does not override domestic taxation where economic activity occurs inside the country.
How taxable profit is determined
Corporate income tax is levied on taxable profit rather than gross revenue.
Taxable profit begins with recognized revenue and is reduced by allowable expenses incurred in generating that income. Vietnam applies statutory depreciation schedules and distinguishes between deductible and non-deductible costs. Losses may be recognized subject to regulatory conditions.
Accounting profit and taxable profit may diverge where expenses fail to meet tax deductibility standards.
Corporate income tax incentives and investment policy
Vietnam uses corporate income tax incentives to channel foreign investment into priority industries and designated regions.
Qualifying projects may receive full tax exemption for up to four years, followed by a 50 percent reduction for an additional five to nine years, depending on sector classification and location. Preferential rates and exemptions are embedded into investment licensing and depend on statutory qualification.
Incentives reflect national development policy and are not automatic.
Transfer pricing and related-party transactions
Foreign-owned companies operating within multinational groups are subject to Vietnam’s transfer pricing regime.
Related-party transactions must comply with the arm’s length principle. Companies are required to disclose such transactions annually and maintain documentation supporting pricing methodologies. This area represents a central compliance exposure for foreign-invested enterprises engaged in cross-border activity.
Loss utilization and profit distribution
Tax losses may be carried forward for up to five consecutive years, after which unused losses expire.
Profit distribution is permitted only after corporate income tax obligations have been satisfied. Dividends are typically remitted following annual finalization, subject to full tax compliance.
These rules shape the financial lifecycle of foreign-invested operations.
Corporate income tax compliance cycle
Corporate income tax operates on recurring reporting periods.
Companies make provisional payments on a quarterly basis and complete annual finalization within 90 days of the fiscal year end. Tax filings must align with statutory financial statements, linking accounting records directly to tax compliance.
There is no dormant status that suspends these obligations once an entity exists.
Common first-time investor errors
New entrants frequently assume incentives apply automatically, underestimate documentation requirements, confuse accounting profit with taxable income, or treat representative offices as suitable vehicles for commercial activity.
These errors typically arise from applying home-jurisdiction assumptions to Vietnam’s regulatory framework.
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