Taxes are the main source of revenue for the state budget. Paying tax as prescribed by law is the obligation and right of all organizations and individuals. Therefore, in order to clarify the legal provisions on specific taxes that organizations and individuals in general and foreign enterprises, in particular, must pay, within the scope of this article, we will provide the specific analysis as follows:

Legal basics

• Decree No. 139/2016/ND-CP dated October 04, 2016, regulation on licensing fees
• Law No. 14/2008/QH12 dated June 3, 2008 on enterprise income tax.
• Law No. 38/2019QH14 dated June 13, 2019 on Tax administration 
• Law No. 45/2009/QH12 of November 25, 2009, on Severance tax
• Law No. 57/2010/QH12 of November 15, 2010 Environmental protection Tax
• Law No. 27/2008/QH12 of November 14, 2008, on Excise Tax

Taxes that foreign businesses must pay

Licensing fees

The licensing fee payers are the organizations and individuals that operate their trade or production of goods and services under the regulations of law. The licensing fee is a direct fee and is usually a quota levied on the enterprise registration certificate of the business. The licensing fee is collected annually, the amount is based on the registered capital or annual turnover of the enterprise. 

The amounts of annual licensing fees for organizations engaging in business as follows:

• Organizations with charter capital and investment capital of greater than VND 10 billion: VND 3,000,000;
• Organizations with charter capital and investment capital of less than or equal to VND 10 billion: VND 2,000,000;
• Branches, representative offices, business premises, public service providers, other business entities: VND 1,000,000.

The amounts of licensing fees for the organizations that operate their trade or production of goods and services are based on the charter capital written in the certificate of enterprise registration or the charter of cooperatives. In case of absence of charter capital, it is based on the investment capital written in the certification of investment registration or decision on investment guidelines.

In case the organizations: (i) Organizations with charter capital and investment capital of greater than VND 10 billion or (ii) Organizations with charter capital and investment capital of less than or equal to VND 10 billion change charter capital or investment capital, then the basics for determining the amounts of licensing fees are their charter capital or investment capital of the year preceding the year of calculation of licensing fees. 

Where the charter capital or investment capital written in the certificate of business registration or certificate of investment registration is in foreign currency, it shall be converted into Vietnamese dong as a basis for determining the amount of licensing fees in accordance with the buying rate of commercial banks or credit institutions where the licensing fee payers open their accounts at the time they make payment to the state budget.

Enterprise income tax

Corporate income tax (CIT) is a direct tax, collected on the final results of production and business activities of enterprises. Taxpayers are also tax payers. The payable tax amount is based on the results of production and business activities of the enterprise.

The way to calculate CIT is determined according to the following formula:

CIT = Taxable income x CIT rate

Where: 

Taxable income = Taxable income – Tax-exempt income – Carry forward losses

Taxable income = (revenue – deductible expenses) + other taxable income

Thus, the formula for calculating corporate income tax is:

CIT = (revenue – deductible expenses + other taxable income – tax exempt income – carried forward losses) x CIT rate

CIT rate

The tax rate of 20% applies to all businesses established under Vietnamese law.

The tax rate from 32% – 50% will apply to enterprises having activities of searching, exploring, exploiting oil and gas, and other rare and precious resources in Vietnam.

The tax rate of 50% will apply to enterprises engaged in prospecting, exploration and exploitation of mines of rare and precious resources. Examples are: platinum, gold, silver, tin, precious stones, rare earths excluding petroleum, tungsten and antimony.

Value Added tax

Value Added Tax (VAT) is an indirect tax levied on the added value of goods and services. VAT is also incurred to the final stage of consumption. Although the consumer who pays VAT, the person who directly fulfills the tax obligation to the State is the organizations and individuals producing or trading in goods or services

Value-added tax calculation methods include the Tax credit method and Method of calculation of tax based directly on added value

Tax credit method

• Tax credit method applies to

(i) Any taxpayer that earns at least 1 billion VND in annual revenue from selling goods and services Credit-invoice, provided the taxpayer adheres to the accounting and invoicing practice according to accounting and invoicing laws, except for business households and businesspeople calculating of tax based directly on added value 

(ii) Any taxpayer that voluntarily applies credit-invoice method, except for the business households and individuals that pay tax using direct method

(iii) Any foreign entity that provides goods and services serving petroleum exploration and extraction and authorizes a Vietnamese party to deduct tax.

• VAT payable:

VAT payable

=

Output VAT

–

Deductible output VAT

Method of calculation of tax based directly on added value

• This method may be applied by the following entities:

(i) The operational companies and cooperatives that earn less than 1 billion VND in annual revenues, except for those that voluntarily apply the credit-invoice method;

(ii) The new companies and cooperatives, except for those that voluntarily apply the credit-invoice method;

(iii) Business households and businesspeople;

(iv) The foreign entities doing business in Vietnam without following the Law on Investment; the organizations that fail to adhere to accounting and invoicing practice, except for those that provide goods and services serving petroleum exploration and extraction.

(v) The business organizations other than companies and cooperatives, except for those that voluntarily apply the credit-invoice method.

• VAT payable

VAT payable = Rate% x Revenue

Export and import duties 

Taxed goods

• Goods exported and imported through Vietnam’s border and border checkpoints.
• Goods exported from the domestic market into free trade zones; goods imported from free trade zones into the domestic market.
• Goods indirectly exported-imported; goods exported and imported by enterprises exercising their right to export, import, or distribute.

Taxpayers

• Owners of exports and imports.
• Entrusted exporters and importers.
• People entering and leaving Vietnam carrying exports or imports, sending or receiving goods through Vietnam’s border and border checkpoints.
• Taxpayers’ guarantors and other entities authorized to pay tax on behalf of taxpayers
• Any person who purchases or transports goods within the tax-free allowance applied to border residents which are sold domestically instead of being consumed or used for manufacture; foreign traders permitted to deal in exports and imports at bordering markets as prescribed by law.
• Owners of exports or imports that are initially tax-free but then taxed.

Severance tax

Severance tax is an indirect tax, this is the amount that organizations and individuals must pay to the state when exploiting natural resources. In other words, the severance tax is a tax regulating income on the exploitation and use of the country’s natural resources.

Tax calculation:

Severance tax payable = taxable resource output x taxable price x tax rate

Environmental Protection tax

Environmental protection tax is an indirect tax, collected on products and goods when used, causing adverse impacts on the environment.

Tax calculation:

Environmental protection tax payable = quantity of taxable goods x absolute tax rate per unit of goods

Land use tax

There are two types of land use tax that foreign enterprises must pay: tax on business land used entirely for business purposes and tax on non-agricultural land used for unspecified business purposes. the area used for business purposes.

Excise tax

Excise tax is an indirect tax levied on some special, luxury goods produced and consumed by businesses. The establishments that directly produce the goods will be responsible for paying the tax, but the consumers are the ones who bear the tax because the tax is added to the selling price.

Tax calculation:

excise tax = excise taxable price x excise tax rate