Vietnam Corporate Income Tax the definitive guide

What is Corporate Income Tax in Vietnam?

Corporate Income Tax (CIT) is a direct tax levied on the taxable profit of entities operating in Vietnam. It is governed by the Law on Corporate Income Tax (most recently Law 32/2013/QH13, as amended) and its implementing regulations, including Decree 218/2013 and Circular 78/2014. The tax is administered by the General Department of Taxation (GDT), which is part of the Ministry of Finance.

Vietnamese CIT is a self-assessed tax: companies compute their own liability, file returns, and pay the tax. The GDT's role is to review filings, conduct audits, and enforce compliance. Most companies interact with the provincial tax department where they are registered; large taxpayers are handled by dedicated large-enterprise divisions.

Taxable profit is accounting profit adjusted for non-deductible expenses, non-taxable income, loss carryforwards, and incentives. The starting point is the audited statutory financial statement prepared under VAS; adjustments are documented in the CIT finalisation return (Form 03/QTT-TNCN).

CIT is paid quarterly on a provisional basis (by the 30th day of the month following the quarter), with annual finalisation within 90 days of fiscal year-end. Late payment triggers late-payment interest at 0.03% per day (approximately 10.95% per year) and penalties of up to VND 25 million per return.

Who pays CIT in Vietnam?

Every entity that conducts business in Vietnam and earns Vietnam-source income is subject to CIT. This includes: 100%-foreign-owned companies (WFOEs), joint ventures, local companies, branches of foreign companies, representative offices with revenue (limited cases), and permanent establishments of foreign companies.

Representative offices are exempt from CIT because they cannot generate Vietnam-source revenue. Branches are taxed as foreign entities on Vietnam-source income at 20% CIT. Foreign companies with a Vietnamese permanent establishment are taxed on the income attributable to the PE.

Foreign-owned companies are not subject to different CIT rates than domestic companies — the 20% standard rate applies to both. However, foreign-owned companies face additional compliance obligations including transfer pricing documentation (Decree 132/2020), capital account reporting to the State Bank of Vietnam, and the foreign contractor withholding regime when engaging local service providers.

Joint ventures are taxed at the JV level (not the parent level). Profits distributed to foreign partners are subject to withholding tax on dividends — 0% under Vietnamese domestic law (no Vietnam-Cayman or similar treaty rate is needed because Vietnam's domestic rate is already 0%).

The 20% rate and reduced rates

The standard CIT rate in Vietnam is 20%. This has been the rate since 2016 (it was 22% from 2014–2015 and 25% before that). The 20% rate is competitive within ASEAN — higher than Singapore (17%) and Hong Kong (16.5%) but lower than the Philippines (25%), Malaysia (24%), and Indonesia (22%).

Reduced rates are available for projects in encouraged sectors or encouraged geographic zones. The reduced rates are:

10% rate — for high-tech projects, software products, certain biotechnology, supporting industries for high-tech products, and projects in special economic zones. The 10% rate typically applies for the first 15 years of the project, with incentives extending beyond depending on the specific regime.

15% rate — for projects in encouraged geographic zones (e.g. certain provinces with difficult socio-economic conditions, industrial zones in encouraged areas). The rate typically applies for a defined period (often 12 years), with subsequent increases.

17% rate — for projects in encouraged sectors that do not qualify for the 10% or 15% rates (e.g. certain manufacturing, certain agricultural projects).

Eligibility for reduced rates must be confirmed at IRC application and registered with the GDT. Once granted, the rate applies for the entire benefit period; the GDT does not retroactively withdraw a granted rate without due process. However, claiming a rate you do not qualify for triggers back taxes, interest, and penalties.

CIT incentives for foreign investors

Beyond reduced rates, Vietnam offers several CIT incentives that are particularly relevant for FDI projects:

Tax holidays — full exemption from CIT for a defined period (typically 2–4 years from the first profitable year, or longer for special projects), followed by a 50% reduction for up to 9 subsequent years. Tax holidays are available for high-tech projects, software, certain education, and certain encouraged-zone projects.

Sector incentives — additional incentives for encouraged sectors (high-tech, supporting industries, software, R&D, certain environmental projects). Sector incentives may be combined with geographic incentives.

Geographic incentives — projects in encouraged zones (defined by the government) qualify for additional incentives beyond sector incentives.

Size incentives — large-scale projects (above a defined investment threshold) may qualify for additional incentives, including longer tax holidays and rate stability.

Incentives must be applied for at the IRC stage. Late applications are not accepted. The IRC must record the incentive and the supporting documents. We help clients model the incentive scenarios before IRC application to ensure eligibility.

CIT filing cycle and deadlines

Vietnamese CIT operates on a quarterly provisional + annual finalisation cycle:

Quarterly provisional CIT — paid by the 30th day of the month following the quarter end. Q1 by 30 April, Q2 by 31 July, Q3 by 31 October, Q4 by 31 January of the following year. The provisional CIT is calculated as 20% (or the applicable reduced rate) of estimated quarterly taxable profit. If actual profit is lower, the provisional payment can be reduced or eliminated via Form 01a.

Annual finalisation return (Form 03/QTT-TNCN) — filed within 90 days of fiscal year-end. For calendar-year companies the deadline is 31 March of the following year. The annual return reconciles provisional CIT to actual liability, calculates any additional tax owed or refund due, and triggers the annual audit package.

Late filing of the finalisation return triggers penalties of VND 5–25 million per return. Late payment triggers late-payment interest at 0.03% per day. Continued non-compliance can lead to enforcement including suspension of the tax code and seizure of bank accounts.

Companies with revenue below VND 50 billion in the prior calendar year may file quarterly rather than monthly VAT, but CIT remains on the quarterly provisional + annual finalisation cycle regardless of revenue.

Deductions and non-deductible expenses

Vietnamese CIT allows deduction of expenses that are 'related to the generation of revenue' and supported by proper documentation. Deductible expenses include: cost of goods sold, staff costs (with PIT/SI properly withheld), rent, utilities, depreciation, professional fees, interest (subject to thin-cap and EBITDA limits), marketing, R&D, and insurance.

Common non-deductible expenses include: PIT on behalf of employees (where the company pays the employee's tax), fines and penalties (except for civil contract penalties), depreciation exceeding the regulatory ceiling, expenses without proper documentation (e.g. invoices that fail VAT validation), expenses related to non-business activities, and provisions not aligned with VAS.

Inter-company charges are deductible if arm's length, supported by a service agreement, and supported by transfer-pricing documentation. The GDT routinely challenges inter-company charges without contemporaneous documentation.

Entertainment expenses are deductible up to a regulatory ceiling (currently 1% of deductible expenses for entertainment in some sectors, with specific caps for advertising). We help clients model the deduction strategy within the regulatory framework.

Loss carryforward rules

Tax losses can be carried forward for up to 5 consecutive years and offset against future taxable profit. Carryback is not permitted. Losses that are not utilised within 5 years expire.

Losses transferred in a merger or consolidation generally follow the surviving entity, subject to specific conditions. The merger must be documented in accordance with the Law on Enterprise and the assets/transferred losses must be substantiated.

The 5-year carryforward is generous by regional standards. However, the rule applies strictly — losses cannot be transferred to a related entity, cannot be sold, and cannot be used to offset income outside the entity that incurred them.

We model the loss-utilisation timeline for clients at incorporation and during restructuring. A common pitfall is failure to claim loss carryforward in the finalisation return; the GDT does not apply carryforward automatically.

Transfer pricing and CIT

Transfer pricing is one of the most heavily audited areas of CIT in Vietnam. The GDT applies the arm's-length principle under Decree 132/2020 and Decree 132/2020/ND-CP. Companies with related-party transactions of VND 50 billion or more in a fiscal year must prepare a contemporaneous Local File.

Common TP adjustments the GDT makes: management fee mark-ups challenged as non-arm's length, royalty rates challenged as above market, intra-group services challenged as duplicative or shareholder activities, and financial arrangements (interest, guarantees) challenged as non-arm's length.

TP audit defence requires robust documentation: benchmarking studies, inter-company agreements, benefit-test analysis for services, and functional analysis. We prepare Local Files, Master Files, and CbCR notifications, and represent clients in TP audits.

Thin capitalisation and interest deduction

Vietnam applies two related restrictions on related-party interest:

Debt-to-equity ratio — related-party debt exceeding 3:1 net assets (5:1 for certain industries) is treated as thin capitalisation. The interest on the excess is not deductible.

Interest-deduction cap — under Decree 132/2020, related-party interest is deductible only up to 30% of EBITDA. Interest above the cap is carried forward for up to 5 years (subject to the EBITDA cap each year).

The GDT increasingly challenges related-party interest on audit. Compliance requires: a documented debt policy, arm's-length interest rate, debt-to-equity compliance, and EBITDA-cap modelling.

Withholding tax on payments to foreign parties

Vietnam imposes withholding tax on certain payments to foreign parties: dividends (0% under domestic law), interest (typically 10%, reduced by treaty), royalties (typically 10%, reduced by treaty to 5–10%), and fees for services performed in Vietnam (FCT, see our Foreign Contractor Tax guide).

Treaty relief is available where the foreign recipient's home country has a tax treaty with Vietnam and the recipient qualifies for the lower rate. The recipient must provide a Certificate of Residence from its home tax authority, and the Vietnamese payer must submit the CoR with the withholding declaration.

Failure to withhold triggers the payer's liability for the unwithheld amount plus penalties. The payer's recovery against the foreign recipient is contractual but typically difficult in practice.

GDT audit defence playbook

A GDT audit typically runs 30–90 days for a single year and covers CIT, VAT, FCT, and PIT. The audit is triggered by: the random selection, a complaint, an industry-wide review, or the company's first-time filing pattern.

Audit defence starts before the audit. We help clients prepare an audit-ready file: organised documentation, pre-audit compliance review, and identification of issues to disclose proactively. Once the audit begins, the priorities are: respond to information requests promptly, present documentation professionally, and escalate to senior GDT officials where appropriate.

Most GDT audits conclude with adjustments of 5–15% of declared tax. Larger adjustments are reserved for serious non-compliance. GDT assessments exceeding VND 50 billion are typically resolved through the appeal process, with substantial reductions achievable on proper documentation.

Common CIT mistakes

The most expensive CIT mistakes we see: (1) failing to claim treaty relief on inter-company payments, (2) deducting inter-company charges without arm's-length documentation, (3) missing the loss-carryforward claim in the finalisation return, (4) over-claiming VAT input credit and creating a CIT adjustment, (5) treating the parent's invoice to the local entity as the same as the local entity's own expenses, (6) failing to register eligible CIT incentives at IRC application.

The most common avoidable CIT penalty: late filing of the finalisation return. The penalty is small (VND 5–25 million) but signals broader non-compliance to the GDT and triggers follow-up audits.

The most expensive avoidable CIT penalty: claiming tax incentives you do not qualify for. The GDT assesses back tax, interest, and a 1–3x penalty. VND 50 billion+ assessments for overstated incentives are not uncommon in major audits.

Frequently asked questions

The most common questions our tax and accounting team receives about vietnam corporate income tax guide for foreign companies (2026).