Business Taxes and Costs in Vietnam
Understand the financial obligations of a business owner in Vietnam…
The standard corporate income tax rate is 25 percent. Depending on the type of business, and whether it meets certain conditions, there may be preferential tax rates, tax reductions and tax holidays available.
Businesses engaged in localities with especially difficult socio-economic conditions or those in preferred areas of investment, including high technology fields, scientific research, technology and computer software development, may qualify for tax rates of 10 percent for a period of 15 years. Other businesses that are involved in education and training, vocational education, health care, culture, sports, and environmental protection are also eligible for a combination of reduced tax rates and tax holidays. New businesses investment projects in localities with difficult socio-economic conditions that are not in preferred areas of investment will be taxed at 20 percent for a period of 10 years. Other tax incentives may also be made available according to the needs of Vietnam.
A value added tax of 10 percent is levied on most goods and services in Vietnam. In addition to this tax, certain goods and services are also assessed a Special Sales Tax, which ranges from 10 to 70 percent, depending on the product or service involved. Cigarettes, alcohol, automobiles and some luxury items such as golf memberships, casinos and massage parlours are subject to the Special Sales Tax.
Businesses are encouraged, but not required, to hire Vietnamese employees. Regular working hours should not exceed 48 hours per week. Overtime is permitted, but may not exceed 12 hours per week, or in most cases, 200 hours per year. All employees are entitled to at least 12 days of annual leave. Additionally, female employees are entitled to maternity leave of four to six months, and will receive an allowance equal to 100 percent of their salary during each month of leave. Employees are traditionally paid an extra month's salary as a bonus for Tet, the Vietnamese lunar new year.
Minimum wages vary from one district to another. Employees working for foreign capital enterprises are entitled to a wage of VND 2 million per month in:
- Ho Chi Minh City
- Hai Phong
- Bien Hoa City
- Thu Dau Mot Town
- Vung Tau City
- Some rural districts of Dong Nai Province
- Some rural districts of Binh Duong Province
Distant suburbs of Hanoi and other major cities, as well as some smaller Vietnamese cities, have lower minimum wages that range from VND 1.4 to 1.78 million per month.
Social security insurance payments
Foreign businesses in Vietnam are required to pay into the government's social insurance fund for their Vietnamese employees. This payment amounts to 17 percent of the employee's total earned wages. The payment will increase to 18 percent of total wages starting 1 January, 2014. Employees must also contribute seven percent of their total wages to the fund, an amount that will be increasing to eight percent beginning on 1 January, 2014. In addition, employers must pay three percent of total wages for health insurance for their Vietnamese employees, with the employee contributing an additional 1.5 percent of their total wage. Employers and employees must also pay one percent each for unemployment insurance. If an employee leaves a foreign business, the employer is not required to pay any severance allowance provided that the employer and employee have both paid into the unemployment insurance.
The amount and complexity of paperwork that is involved in opening a business in Vietnam is significant. However, there are several online resources available that provide a depth of detail about the requirements, including:
- The Vietnamese Consulate in the United Kingdom – offers in-depth information, in English, about how to set up a business in Vietnam
- E-Regulations Vietnam – a Vietnamese government resource that gives detailed step-by-step instructions on what investors must do in order to own a business in Vietnam. Regulations will vary from one province to another. There are different procedures for Hanoi, Ho Chi Minh City and Danang. Detailed instructions for starting a new business in those three cities can be found on this website
- The American Chamber of Commerce chapters in Hanoi and Ho Chi Minh City – have a wealth of information on their websites for foreigners who want to start a business in Vietnam. They can also make referrals to reputable professional service providers that are doing business in Vietnam, including accountants, lawyers, advertising and media professionals, consultants, and freight-forwarders
- The US Commercial Service offices in the US Embassy in Hanoi – offers a list of law firms doing business in Vietnam, with Vietnamese lawyers who can provide formal legal opinions on matters of Vietnamese law and legally represent clients in Vietnamese courts. They also maintain a list of accountants and accountancy firms who are familiar with the intricacies of business accounting and reporting in Vietnam. The lists, in PDF format, can be found in the “Quick Links” section in the right-hand column of the business section of the embassy website