FAQ

New enterprises are required to apply for an enterprise identification code by submitting required information to the National Business Registration Information System electronically. Enterprise code is used for tax filings and other administrative procedures. When the code is issued, the system also assigns the tax authority that is responsible to handle your company. After obtaining the code, the company must submit the documents listed below to the local authority where it has been assigned.
– Notice of basic accounting information which shows the depreciation method, accounting regime (in case small and medium companies apply the accounting regime regulated in Circular 200/2014/TT-BTC), fiscal year (in case a company selects the fiscal year-end other than December), and accounting currency (in case a company’s accounting currency selected is not Vietnamese Dong) to managing tax office

At the same time, the company can proceed with opening bank accounts and purchasing a digital signature (USB token).
The company also needs to pay an annual license registration fee after the registration.

Yes, you can. However, in certain industrial sectors, you are prohibited from investing at all or investment is conditional in accordance with investment regulations and Vietnam’s WTO commitments.

Yes, you can. Vietnamese nationality is not required to become General Director in Vietnam.

FDI (100% foreign-owned companies)

Pros

– More flexibility with its own strategy and policy

– Quicker decision-making process

Cons

– Restriction or prohibition for FDI to operate in certain sectors

– little personal connection/local network at the beginning

Joint venture with local Vietnamese companies

Pros

– Full use of personal connection and sales/distribution channel of the Vietnamese partner

– Familiarity with local business practice

Cons

– Time consuming process to reconcile opinions with the Vietnamese partner

– Gap in a sense of compliance and business practice

A representative office of foreign companies is not allowed to perform profit-making activities, and their activities are limited to market research and other non-for-profit activities. In case you do not have sufficient information to make a decision to invest in Vietnam yet, it would be suitable foothold in Vietnam. Generally speaking, initial one-time cost and operating cost of representative office is much lower than the cost of having a subsidiary. On the contrary, having a subsidiary in Vietnam in the form of either Joint Stock Company or Limited Liability Company is a better form of investment for an investor who intends to manufacture products in Vietnam or to conduct sales activities. As long as you follow the regulations in Vietnam, establishing a company in Vietnam gives you more flexibility in business activities.

It normally takes 3 to 6 months to close a representative office from the time of submitting an application for closure to a complete. The most time consuming process is the procedure to close the tax code where you need to work with tax authorities until they accept the closure of tax code. Tax authorities audit tax returns filed in the past during this procedure. In case of closing a company established in Vietnam, you are given 2 options, namely sell or close. “Sell” means that you transfer capital investment to other party or parties. After buyer and seller agree on transfer of capital, they must amend investor information on the license, and the seller files CIT on capital transfer, even if there is no capital gain. “Close” means liquidation of the company. It usually takes more than 6 months. Same as the closure of a representative office, it takes time to finalize tax obligations in Vietnam and obtain an approval to close the tax code from the tax authorities If the seller can find a buyer, the administrative process is normally quicker than the closure of company. In addition, given the time value and administrative cost, closure of representative office is often considered less expensive. The information contained here is based on our experience. The length of closing process could be longer or shorter, depending on cases.

Yes, you can make a company in HCMC and establish branches in other provinces. As to tax, personal income tax (PIT) and value added tax (VAT) are, in general, declared at each jurisdiction the office locates. Therefore, if your head office is located in HCMC, PIT and VAT are declared in HCMC as well as jurisdictions branches locate except for some cases in which VAT can be declared only at the jurisdiction where the head office locates. On the contrary, corporate income tax (CIT) can be declared in either of two methods: (1) HCMC head office declares CIT including branches in other provinces or (2) HCMC head office and branch offices declare CIT separately at each jurisdiction the office is located. In case a branch is established as a manufacturing site, tax needs to be allocated and paid to the local tax office where the branch (manufacturing plant) is located.

There is no minimum requirement. A company or a representative office can be operated by one foreigner.

No. The size of the company does not matter when you apply for a work permit for foreign workers. However, foreign employees must be in a good health condition, must have clean criminal record, must have educational background and/or work experience in the area which the foreigner plan to work for and must meet all other requirements. There are some exemptions from filing a work permit, such as an individual investor investing in a limited liability company with contributed capital of VND 3 billion or more.

No, it does not. Companies in Vietnam are allowed to select a fiscal year-end from the end of March, end of June, end of September, and end of December. If a company wants to select a fiscal year-end other than December 31, it must inform the tax authority of selected fiscal year-end. In case the company do not inform it, the tax authority considers December 31 as the company’s fiscal year-end.

EPE is the abbreviation of Export Processing Enterprise. EPE is a company that operates within Export Processing Zone or a company that operates in an industrial park or a special economic zone and sells all manufactured products to a company that exports products to abroad. In general, if a company meets the requirements to be EPE, EPE is exempted from value added tax and import duties. EPE does not need to declare value added tax since it is considered to be located in a non-value added tax area.

Value-added Tax (VAT)

VAT is declared monthly. In case an enterprise satisfies the following criteria, the enterprise can choose to declare VAT quarterly:

• Turnover declared in the previous calendar year is less than or equal to VND 50 billion.
• Newly established companies may choose to declare VAT quarterly and after a full 12 months of business operation, the companies must declare VAT monthly or quarterly based on turnover declared in the previous calendar year.

Notes:

• Monthly/quarterly VAT declaration shall be consistent for each calendar year.
• In case an enterprise that is declaring VAT monthly satisfies the criteria to declare VAT quarterly and chooses to do so, the enterprise shall submit a written request to change its declaration period to the tax authority no later than 31 January of the year for which it wants to declare VAT quarterly.
• In case an enterprise concludes that it does not meet the criteria to declare VAT quarterly, it shall declare VAT monthly immediately from the first month of the following quarter. The enterprise does not need to submit revised VAT returns for the past months; however, it shall review and make additional tax payments (if any), in accordance with applicable regulations.

Personal Income Tax (PIT)

PIT is declared monthly.

In case an enterprise satisfies the following criteria, it may choose to declare PIT quarterly:

• For entities and individuals who are required to withhold PIT: if the entities and individuals declare VAT quarterly, they may choose to declare PIT quarterly.

Corporate Income Tax (CIT)

Currently, corporate income tax (CIT) return is not required to submit quarterly, but tax payment is still required if you have tax liabilities.

Foreign Contractor Tax (FCT)

In general, a Vietnamese Company declares Foreign contractor tax (FCT) upon payment to a foreign contractor; however, monthly declaration option is available for a company that makes many payments to foreign contractors during a month with advance registration at the tax office.

According to prevailing regulations, VAT and CIT of foreign contractors shall be finalized upon termination of the contracts; corporate income tax calculated using mixed methods of foreign contractors shall be finalized upon termination of the contracts; corporate income tax declared by foreign contractors shall be finalized annually.

Corporate income tax (CIT): 20%

Personal income tax (PIT): Progressive rate from 5 to 35% is applied to salaries, wages and income from business for resident individuals. Flat rate of 20% is applied to salaries and wages for non-resident individuals.

Value added tax (VAT): 10% (this standard rate is applied to goods and services other than items listed below) 5% (water services, medical and educational equipment, etc) 0% (export of goods and services, sales of goods and delivery of service to EPE, international transportation service etc) Exemption (land use right, financial service, computer software, education and training, etc)

The deadline for tax returns required to be submitted monthly is the 20th of the following month. For instance, if you declare value added tax return for July, the deadline for submission is August 20. The deadline for tax returns required to be submitted quarterly is 30th day of the following quarter. For example, your 2nd quarterly personal income tax return is due on July 30.

In general, if one of the following criteria is met, you (non-Vietnamese citizen) are treated as a resident of Vietnam for tax purpose

– a person who has been present in Vietnam for 183 days or longer in a calendar year or for 12 consecutive months from the day on which that person arrives at Vietnam

– a person who has either a permanent residence card or temporary residence card in Vietnam

– a person who rents a house in Vietnam under a contract or contracts that last 183 days or longer in total during the tax year (a house includes hotels, guesthouses etc whether they are rented by that person or by the employer)

Following countries have tax treaties for the avoidance of double taxation: Australia, Austria, Bangladesh, Belarus, Belgium, Brunei, Bulgaria, Canada, China, Cuba, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Republic of Korea, North Korea, Kuwait, Laos, Luxembourg, Malaysia, Mongolia, Morocco, Myanmar, Netherlands, New Zealand, Norway, Oman, Pakistan, Palestine, Philippines, Poland, Qatar, Romania, Russia, Saudi Arabia, Serbia, Seychelles, Singapore, Slovak Republic, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Tunisia, Ukraine, United Arab Emirates, United Kingdom, Uzbekistan and Venezuela.

You are required to file PIT return for the income earned on a world-wide basis from January 1, 2021 to December 31, 2021. So, you need to include payroll paid in your home country prior to coming to Vietnam. However, you can deduct personal income taxes paid in your home country on income earned overseas as tax credit from PIT calculated in accordance with regulations of Vietnam with certain limitations. If you paid compulsory insurance premiums required by the country where you hold the nationality or works that are similar to those in Vietnam, such as social insurance, health insurance, and unemployment insurance, you can deduct such payments from taxable income.

If you are a citizen of a country or territory that has entered into an agreement on double taxation and prevention of tax avoidance with Vietnam, you are required to calculate personal income tax from the month you arrived at Vietnam (if you came to Vietnam for the first time) to the month in which the labor contract expires and you leave Vietnam. So, you do not need to include salary paid in your county prior to coming to Vietnam.

In general, moving expenses paid for foreign expatriates coming to Vietnam (not the expenses paid to go back to the home country) are nontaxable. The house rent paid directly by the employer on behalf of the employee shall be included in the taxable income according to the actual amount paid, which must not exceed 15% of the total taxable income (excluding house rent). If the tuition is directly paid by the employer and meets certain requirements, the fee for children of foreign employees in Vietnam to study in Vietnam is not taxable. Please note that if such rent or tuition was paid by the employee and was reimbursed by the employer, such expenses are treated as taxable income of the employee.

You need to submit Form 02/KK-TNCN for salary paid in your home country and pay tax quarterly (Please note that if Parent Company charges the salary paid in your home country to its subsidiary, your employer in Vietnam usually handles declaration and payment of tax on your behalf by using a different form). Then, at year-end, you are required to file Form 02/QTT-TNCN to finalize your personal income tax on a worldwide basis. You are personally responsible for declaration and payment of your personal income tax on a worldwide basis.

Yes, you can. However, the chart of accounts, accounting books and financial statements exported from the accounting software must comply the Accounting law of Vietnam. They need to be prepared in Vietnamese. Therefore, most companies decide to use accounting software developed in Vietnam that are already in compliance with Vietnamese accounting regulations (most of the time, you can use the software both in Vietnamese and English).
The accounting regulations in Vietnam require the use of specific general ledger account codes and description for each asset, liability, equity, revenue and expense item. The way to record each transaction is also defined in detail.

VAT shall be declared on a monthly or quarterly basis, depending on turnover of the previous calendar year. VAT declaration shall be consistent for each calendar year. Details are provided under the “What type of tax returns do we need to submit monthly and quarterly?” section.

You need to keep the following documents in order to make input VAT to be deductible:
– Legitimate VAT invoices for goods and services purchased within Vietnam, receipts of VAT payment on imported goods, or receipts of VAT payment on behalf of foreign organizations, who do not have legal status in Vietnam, and foreigners who do business or earn income in Vietnam.
– Voucher of non-cash payment for the purchase that costs VND 20 million or more (VAT included) except for some specific cases.
– For input goods and services serving export activities, required documents include contract, customs declaration, VAT invoice, non-cash payment voucher in compliance with payment deadlines stated in the contract.

In general, you are requested to write complete information in VAT invoices. However, if the information is too long to write, you can use some common acronyms, such as acronyms for city, district and industrial zone.

Case 1: The invoice has been drafted, registered with the tax authority(*), but has not been handed to the buyer, and the seller discovers an inaccuracy

• Notice the tax authority by submitting Form 04/SS-HDDT, cancel the error invoice.
• Issue a new electronic invoice (e-invoice), register the invoice with the tax authority.

(*) registered with the tax authority: tax authority will issue a unique code printed on the issued invoice

Case 2: The invoice has been issued, registered or not registered with the tax authority, has been handed to the buyer, and the seller/buyer discovers an inaccuracy

• If the name, address information is wrong: the seller notices the buyer (without issuing a new invoice) and notices the tax authority by submitting Form 04/SS-HDDT (not applicable to invoices that have not been registered with the tax authority)
• If the tax code, tax rate, monetary amount, etc. information is wrong, the seller may choose between the following 2 methods:

+ Method 1: Issue an adjusted invoice (specify the invoice it is adjusting)

+ Method 2: Issued a replacement invoice (specify invoice it is replacing); notice the tax authority by submitting Form 04/SS-HDDT and prepare an adjusting memo between the parties that specifies the inaccuracy.

Case 3: The invoice has or has not been registered with the tax authority, the tax authority discovers an error: adjust according to instructions of the tax authority.

Invoices must be written in Vietnamese. If the seller has to issue an invoice in foreign language, foreign text must be placed to the right of the text written in Vietnamese in bracket or must be placed under the text written in Vietnamese. You should use a font smaller than the one you use for Vietnamese text. In case the seller has the right to sell goods/services and collect money in US dollar, the seller can write USD amount on the face of invoice with a description in Vietnamese (USD amount in Vietnamese language). Exchange rate between USD and Vietnam Dong is required to be written in the invoice in that case.

If an asset meets the following three conditions, it will be recorded as fixed assets.
– It is certainly possible that the use of asset generates future economic benefits
– Estimated useful life is equal to or greater than one year
– Price can be measured reliably and it must be 30 million VND or above
As to depreciation method, you can apply one of the following three methods. However, since the situation you can apply a method other than straight-line method is limited, the majority of companies has applied the straight-line method.
– Straight-line method
– Adjusted declining-balance method
– Unit of production method
Useful life is based on estimates, but the Ministry of Finance sets the standard useful lives for certain asset categories. Depreciation and amortization calculated in excess of the depreciation and amortization which is calculated by using the standard useful lives set by the Ministry of Finance is not deductible for CIT purpose.

We site some examples of typical nondeductible expenses as follows:
– Salary, allowance, bonus, and other benefits that are not written in the labor contract, labor regulation, financial policy of the company and the likes of those.
– Expenses without VAT invoice and/or other supporting documents
– Expenses not related to business activities
– Depreciation expenses of fixed assets that are not used for business operation
– Depreciation expenses over those calculated using useful life stipulated by the Ministry of Finance
– Expenses for employee clothing without VAT invoice/Cash payment of VND 5,000,000 or more per person per year for uniform
– Unrealized foreign exchange loss resulted from year-end revaluation of asset items such as cash on hand, cash in bank, and account receivables.
You can deduct entertainment expenses (except for certain expenses, such as golf membership fee) as long as you meet the requirements to be deductible for tax purpose. There is no threshold for entertainment expenses to be deductible.

You can deduct welfare cost such as company trip expense, condolence payment for family members affected by natural disasters. You must obtain supporting evidence such as VAT invoice when paying to a supplier and you need to maintain internal regulations when paying directly to the employees. The total expenditures incurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.

Expenses must meet the following 3 conditions in order to be deductible for tax purpose.
– Actual expenses related to business activities
– Expenses evidenced with VAT invoice and other supporting documents
– Expenses with an evidence of payment for payments over 20 million VND (payments over 20 million VND need to be made via non-cash payment method, such as bank transfer.)
You must obtain and keep VAT invoice, payment evidence, and other supporting documents such as contracts. Please keep in mind that regulations in Vietnam are much stricter in terms of level of detailed requirements in supporting documents as compared with other countries, such as in US.

Nature of payments and amount must be written in the document such as labor contract, collective labor agreement, labor regulation, financial policy of the company. If there are variable payments (eg. performance-based bonus), you must stipulate the amount and conditions in one of the above documents.

Yes. In Vietnam, withholding tax for a foreign company is called “foreign contractor tax” (FCT). In case a foreign company signs a service contract with a Vietnamese company and provides service in Vietnam, Vietnamese company needs to withhold FCT on behalf of the foreign company, when paying fees to the foreign company. FCT consists of 2 components; corporate income tax and value added tax. The tax rate varies depending on the type of service a foreign company provides. Foreign company is charged for FCT regardless of whether it has permanent establishment in Vietnam or not.

Yes, when you import goods, you should pay attention to trade terms same as service provision. When goods are imported from abroad to companies in Vietnam under the trade term of CIF or FOB without any service elements in the contract, such as installation service, the transaction is not subject to foreign contractor tax. However, if the contract includes incoterms that indicate the seller takes risk and responsibility for cost incurred in Vietnam, such as DDU or DDP, the transaction as a whole becomes subject to foreign contractor tax. DDU or DDP indicates that the seller takes responsibility for domestic transportation in Vietnam, thus the seller is considered that it performs some service in Vietnam and the transaction becomes subject to FCT.

Revenue from sales of goods is recognized when all of the following 5 conditions are satisfied:
– the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
-the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
– the amount of revenue can be measured reliably;
– it is probable that the economic benefits associated with the transaction will flow to the Company;
– the costs incurred or to be incurred in respect of the transaction can be measured reliably.
For service providing companies, revenue is recognized when the outcome of such transactions can be measured reliably, i.e when following 4 conditions are satisfied:
– the amount of revenue can be measured reliably;
– it is probable that the economic benefits associated with the transaction will flow to the Company;
– the percentage of completion of the transaction at the balance sheet date can be measured reliably; and
– the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Timing to issue an invoice is clearly defined in the invoice regulation. The followings are some of the principles stated in the regulation.
– Product sales: The day of issuing an invoice is the day on which the ownership or the right to use a product is transferred from the seller to the buyer
– Service revenue: The day of issuing an invoice is the day service is completed irrespective of payment collection. However, in case companies receive payment in advance before or during rendering services, invoice must be issued on the payment date (except for deposits, advances for accounting-audit, financial consulting, outsource supervision services).
– Export sale of goods: The day of issuing an invoice for export goods is the day on which export customs procedure has been completed.

– Construction:  The day of issuing an invoice is when the construction is accepted, handed over, in whole or in part, regardless of whether payment has been made.

– For certain specific transactions that require reconciliation of data between the parties:  The day of issuing an invoice is when data reconciliation is completed, but no later than the 7^th day of the following month of the month in which the service is completed.

Yes. Accrual basis of accounting is used in Vietnam.

The Company should record NG goods and damaged goods directly to cost of goods sold account in the period incurred.

The method of translating financial statements presented in foreign currency (US dollar or other currencies) into Vietnam Dong is as follows:
– Assets and liabilities are translated into Vietnam Dong at the telegraphic transfer (TT) exchange rate of a commercial bank where the Company has a main bank account and conducts majority of transactions with at the reporting date
– Owner’s equity (contributed capital of owners, share premium, other capital, bond conversion option) is translated into Vietnam Dong at the actual exchange rate at the date of capital contribution
– Foreign exchange difference and asset revaluation difference are translated into Vietnam Dong at the actual exchange rate at the date of valuating of such items
– Retained earnings and other funds which are distributed from retained earnings are translated into Vietnam Dong by using the historical exchange rates used to translate each period’s income statement
– Profit and dividends paid to shareholders are converted into Vietnam Dong at the actual exchange rate at the date of payment
– Income statement and cash flow statement are converted into Vietnam Dong at the actual exchange rate at the date of transaction. In case the average exchange rate of accounting period approximates the actual rate (the difference does not exceed 3%), the average rate can be applied.

For a company that uses Vietnam Dong as its accounting currency, the Company should record these transactions in Vietnam Dong by using exchange rates defined in regulations to convert from foreign currency to Vietnam Dong. As requested by regulations, the Company also has to maintain record of transaction amount in original foreign currency.

Except for some specific cases, the principles to classify items as short-term or long-term in the financial statements are listed below:
– Assets and liabilities items that are recovered or paid within 12 months (or 1 business cycle) from the date of reporting are classified as short term in the balance sheet
– Assets and liabilities items that are recovered or paid after 12 months or more (or 1 business cycle) from the date of reporting are classified as long-term in the balance sheet.

Note: the classification of long-term and short-term prepaid expenses is determined based on the original term of such prepaid expenses, not based on the remaining term.

In general, below listed documents are prepared to record revenue;
– Purchase order/quotation/Contract (case by case basis)
– Customs declaration for export sales
– Delivery notes/completion minute/handover minute
– VAT invoice that is prepared in accordance with regulations

A company that mainly conducts business in a certain foreign currency (US dollar or other currencies) can select that specific foreign currency as its monetary unit in accounting and record all transactions in that selected foreign currency.
The criteria to determine the monetary unit in accounting is described in the accounting law and regulations. If a company selects accounting currency other than Vietnam Dong, they are required to send a notification to the tax authority.

All companies, with some exceptions, need to employ a chief accountant. If the company decides not to employ a chief accountant, the company has an option to use outsourced accountant from an accounting firm who has an appropriate license to be a chief accountant. One of the exceptions to this requirement is representative offices. Representative offices do not need to have a chief accountant.

All foreign invested companies, regardless of the ownership percentage of foreigners, need to be audited. The company is required to submit audited financial statements to the tax and some other authorities within 90 days from its fiscal year-end.

In case a probation contract is signed separately from the labor contract, the company does not need to pay compulsory insurance for a new staff during his/her probation period. Upon completion of probation period, if a labor contract is signed, the company can choose to pay compulsory insurance either from the effective date of labor contract or from the date of the probation contract (start date of probation period) retrospectively. On the contrary, if the probation period is stipulated in the labor contract, the company needs to pay compulsory insurance from the start date of probation period.

The basis to calculate compulsory social insurance includes basic salary registered at the insurance office, but it is limited to 20 times of the basis salary (VND 29.8 million from July 1st, 2019). The salary above VND 29.8 million is not subject to social insurance. Currently, the basis to calculate compulsory insurance includes salary and salary-based allowances as well as other amounts shown in the labor contract.

Foreigners working for companies in Vietnam shall be exempted from participating in compulsory social insurance scheme in case they are transferred internally or have reached the retirement age. Foreigners working in Vietnam shall be required to participate in the compulsory social insurance scheme in case they have work permits, practicing certificates, practicing licenses issued by Vietnamese authorities, and have signed indefinite-term employment contracts or 1-year-or-longer employment contracts with employers in Vietnam. The contribution rates are as follows:

– Social insurance: Employers and foreigners shall make a contribution at 17.5% and 8%, respectively, of the total salary.

– Health insurance: Employers and foreigners shall make a contribution at 3% and 1.5%, respectively, of the total salary.

Vietnamese Dong (VND), convertible foreign currencies, gold, rights to use land, intellectual property rights, technologies, technical know-hows and other assets that can be assessed in VND.

The company must open a direct investment capital account at an authorized credit institution and receive capital contribution from foreign investors through its direct investment capital account. Direct investment capital account is a demand account foreign invested company opens either in foreign currency or Vietnamese Dong in order to perform direct investment activities in Vietnam.

There are no minimum or maximum legal capital requirement except for financial, bank, real estate and some regulated sectors.

Yes. The company can receive oversea loans either from financial institutions or foreign companies. However, the proceeds from long-term and mid-term loans need to be received via a direct investment capital account. Under Circular 05/2016/TT-NHNN, proceeds from short-term loans are allowed to be received via either a direct investment capital account or a foreign loan account. Refer to the question “How do we receive charter capital from foreign investors?” for the definition of direct investment capital account. For long-term loans, you are also required to register the information at the state bank of Vietnam.

The company needs to contribute charter capital within 90 days from the day the certificate of business registration is issued.

Investors often pay expenses incurred to establish a company in Vietnam before obtaining the investment license. In practice, it is difficult to remit money to overseas investors (please ask your bank for the detail). In order to reimburse expenses to the investors, the company might want to offset the payable with outstanding receivables from investors, if there are any. In order to offset payable and receivables, the company needs to prepare appropriate documents; a reimbursement agreement and an additional clause to the existing sales contract that specifically states that sales invoice is paid by offsetting against outstanding payables. As an additional note, such expenses paid by investors can be treated as deductible expenses for CIT and can be included in input VAT of the Company in Vietnam if the company follows certain requirements of CIT Law and VAT Law.