Simple Tax Guide for Americans in Vietnam
US Expat Taxes - Vietnam
At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Vietnam for over 8 years. Our clients hail from all parts of the country - Ho Chi Minh City and Hanoi, Haiphong and Danang, Bien Hoa and Hue.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.
We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.
The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
We have many clients living in Egypt and know how to integrate your U.S. taxes into the local income taxes you pay. Any Egyptian income tax you already pay can be claimed as against the tax liability on your U.S. return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Egypt for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.
Below we include information on the Vietnamese Tax System for the American Expatriates.
Vietnam personal income tax rates are progressive to 35%. Nonresidents are taxed at a flat tax rate of 20%. Nonemployment income is taxed at rates from 0.1% to 25%.
|Taxable Income per year (VND)||Tax rate|
|VND 0 - 60,000,000||5%|
|VND 60,000,000 - 120,000,000||10%|
|VND 120,000,000 - 216,000,000||15%|
|16,000,000 - 384,000,000||20%|
|VND 384,000,000 - 624,000,000||25%|
|VND 624,000,000 - 960,000,000||30%|
|Above VND 960,000,000||35%|
|Residents - Other tax rates on resident individuals|
|Income from capital investment, copyright and franchise activities||5%|
|Income from transfer of capital||20%|
|Income from transfer of real estate||25%|
|Non-residents - Other tax rates on non-resident individuals|
|Income from business and production of goods||1%|
|Income from business and production of services||5%|
|Manufacturing, construction, transport and other activities||2%|
|Salary and wages||20%|
|Income from capital investment||5%|
|Transfer of capital||0.1%|
|Transfer of real estate||2%|
|Copyright and franchise activities||5%|
|Lottery wins, inheritance and gifts which are securities, capital or assets||10%|
All residents and non-residents are subject to Personal Income Tax in Vietnam.
A resident is liable to pay tax on income sourced in Vietnam as well as on the
portion of income from foreign sources (except for non-taxable income, including
income from real estate transferred between a husband, wife and blood-relations,
scholarships, and overseas remittances).
Deductions are available for family considerations for residents, comprising children
under 18, unemployed spouses and elderly and unemployed parents.
Individuals are responsible for self-declaration and payment of tax.
Tax Basis – Vietnamese residents are taxed on their worldwide income; nonresidents are taxed only on Vietnamese-source income.
Residence – An individual is resident if he/she: (1) spends 183 days or more in the aggregate in a 12-month period in Vietnam starting from the date the individual arrives in Vietnam; (2) maintains a residence in Vietnam; or (3) has leased a residence for 90 days or more in a tax year.
Tax Filing status – Individuals must file separate tax returns; joint tax filing is not permitted.
Taxable income – Employment income, including most employment benefits, is taxable. As from 1 January 2009, dividends (except for government bonds), interest (except for bank deposits and life insurance), capital gains from securities trading, private business income and other income from franchising, inheritance, the transfer of land use rights, and gifts/winnings or prizes are taxable in Vietnam. Profits derived from the carrying on of a trade or profession generally are taxed in the same way as profits derived by companies.
Taxation of Capital gains – Gains from a capital assignment and/or securities trading are subject to 0.1% tax on the gross sale or 20% of net profit.
Tax Deductions and allowances – Subject to certain restrictions, deductions are granted for compulsory social security and health insurance. Severance allowances and redundancy compensation are not taxable. As from 1 January 2009, all benefits in cash or in kind paid by the employer are fully taxable. A new personal income tax law provides more deductions, including a personal deduction (VND 4 million per month) and a dependent deduction (VND 1.6 million/dependent per month). Charitable donations may be deducted in full from taxable income.
Other taxes on individuals:
Capital duty – No
Stamp duty – Rates of 0.5%-15% apply on the transfer of property.
Capital acquisitions tax – No
Real property tax – The municipal authorities levy a tax on real estate.
Inheritance/estate tax – Inheritances and gifts are subject to income tax at special rates.
Net wealth/net worth tax – No
Social security contributions in Vietnam – Vietnamese employees are required to make SI, HI and UI contributions at rates of 5%, 1.5% and 1% of the employee's salary, respectively. Expatriates are only subject to the HI.
Tax Filing and payment of tax – Tax on employment income is withheld by the employer and remitted to the tax authorities. An individual must file a tax return and make a final tax payment by 30 March in the year following the assessment year.
Vietnam Tax year – Vietnam tax year is the calendar year
Penalties – Taxpayers are subject to an extra 0.05% for late payment, 10% on underreported amounts and more stringent penalties for tax evasion.
Vietnam Corporate Taxation
The general corporate income tax rate in Vietnam is 20%.
Tax rate for enterprises operating in the oil and gas and other precious natural resources sectors ranges from 32% to 50%, depending on the project.
Companies engaging in prospecting, exploration and exploitation of mineral resources (e.g. silver, gold, gemstones) are subject to CIT rates of 40% or 50%, depending on the project’s location.
Residence – "Residence" is not defined, but a corporation is generally understood to be resident if it is incorporated in Vietnam.
Tax Basis – Residents are taxed on worldwide income; nonresidents are taxed only on Vietnamese-source income. Foreign-source income derived by residents is subject to corporation tax in the same way as Vietnamese-source income.
Taxable income – Tax is imposed on a company's profits, to include the profits of affiliates and branches (dependent units). Taxable revenue includes income from the sale of products, the provision of services, the leasing or sale of assets, the transfer of shares, joint venture operations with other economic entities and financial operations.
Taxation of dividends – Dividends paid by a company in Vietnam to its corporate shareholders are not subject to tax.
Capital gains tax – There is no separate capital gains tax; gains are taxed at the standard corporate tax rate of 25%. The transfer value is based on the actual price according to the transfer contract. A deemed fair market value will be used if no contract price is available or if the price stated in the contract is deemed to be not at arm's length.
Losses – Losses may be carried forward for up to 5 years. Loss carryback is not permitted.
Surtax – No.
Alternative minimum tax – No
Foreign tax credit – Foreign tax paid may be credited against Vietnamese tax but must be determined based on pretax income. The credit is limited to the amount of Vietnamese tax payable on the foreign income.
Participation exemption – This is generally not available to capital gains derived by a Vietnamese resident holding company on the disposal of a substantial shareholding in a company located in a country that has concluded a tax treaty with Vietnam.
Holding company regime – See under "Participation exemption".
Vietnam Tax Incentives – Preferential tax rates of 10% and 20% for 15 and 10 years, respectively, are available for taxpayers engaged in encouraged investment projects or in socioeconomically disadvantaged locations as stipulated by the government. Lower tax rates (e.g. 0%, 5% and 10%) generally apply in the early years of the tax incentive period.
Dividends – No tax is imposed on dividends remitted overseas unless paid to individuals, where a 5% withholding tax is imposed.
Interest – Interest paid to nonresidents is subject to a 10% withholding tax unless the rate is reduced under an applicable tax treaty.
Royalties – Royalties paid to nonresidents are subject to a 10% withholding tax unless the rate is reduced under an applicable tax treaty.
Branch remittance tax – No
Other taxes on corporations:
Capital duty – No
Payroll tax – No
Real property tax – The municipal authorities levy tax on the occupation of real property.
Stamp duty – A stamp duty of 0.5%-15% is levied on the transfer of property.
Transfer tax – No
Social security contributions – Employers are required to make social insurance (SI), health insurance (HI) and unemployment insurance (UI) contributions of 15%, 3% and 1%, respectively.
Other – Foreign Contractor Withholding Tax (FCWT) is imposed on income from the provision of goods and services from overseas organisations (except for pure trading transactions), which comprises corporate income tax and VAT at a total combined rate of 1% to 10%.
Transfer pricing – Transfer pricing rules introduced in 2005 are being implemented, with the tax authorities beginning audit activities in late 2008. Documentation is required. APAs are not available.
Thin capitalisation – No
Controlled foreign companies – No
Disclosure requirements – No
Vietnam Tax year – Vietnam tax year is the fiscal year. A company must notify the tax authorities if its fiscal year differs from the calendar year and only a quarter end is allowed.
Consolidated tax returns – Consolidated tax returns are not permitted. Each company with independent legal status is required to file a separate tax return. There is no tax relief between independent entities in a group.
Tax Filing requirements – A company must file and pay provisional corporate income tax by the end of the month following the end of each quarter. An annual reconciliation and declaration/filing must be made within 90 days after the fiscal year-end date.
Penalties – Penalties apply for failure to file, late filing or the filing of a fraudulent return.
Rulings – Taxpayers can seek tax rulings from the local or the national tax authorities to clarify their specific tax concerns.
Special Sales Tax
Special Sales Tax is applicable to special goods and services (luxury). The basis for calculating Special Sales Tax shall be based on the quantity of taxable goods sold, their taxable value and the applicable tax rates. Taxable goods and their applicable tax rates are set out in the following schedule:
Business License Tax
Business License Tax is a tax on the business capital of business establishments. The tax payment deadline is at the end of the first month of operations (for the new business establishments) and as at 31 January of each calendar year for business establishments already in operations. Business License Tax rate (annually) depends on the registered capital, as follows:
|Over VND10 billion||VND3,000,000|
|From VND5 billion to VND10 billion||VND2,000,000|
|From VND2 billion to VND5 billion||VND1,500,000|
|Less than VND2 billion||VND1,000,000|
Export-import Tax is levied on the export or import of goods across the Vietnamese border or domestic goods brought into and out of customs free areas. The tax rate for each item is determined based on the tax rate schedule.
Natural resources tax
Natural resources tax is levied on organizations and individuals conducting the exploitation of natural resources in Vietnam. Natural resources tax is determined by the actual natural resources exploited, the unit price and the tax rate stipulated for the specific resources.
Vietnam vat (Value Added Tax) Rates
The general rate of VAT in Vietnam which applies to goods and services is 10%. A reduced rate of 5% also applies to certain goods and services.
Other than Value Added Tax, Vietnam also levies a Special Sales Tax (SCT) which is applicable to goods and services classified as luxury. The rates are from 10% to 70% for SCT (refer to 'Special Sales Tax' section above).
The VAT rate is calculated based on the selling price (exclusive of tax).
Taxable transactions – VAT and Special Consumption Tax (SCT) are levied on the sale of goods and the provision of services.
Registration – All organisations and individuals carrying on the production or trading of taxable goods and services in Vietnam must register for VAT. Each branch or outlet of an enterprise must register separately and declare tax on its own activities. Transfers of goods between branches may be subject to VAT. Registration for tax payment is required within 10 days of a corporation's establishment date. VAT payable by a corporation is calculated by the tax credit method or calculated directly on the basis of added value.
Filing and payment – Monthly filing and payment of outstanding VAT must be made on or before the 20th of the following month.