Taxation and Accounting for Foreign Entrepreneurs in Vietnam (A Thorough Guide: 2025)

Taxation and Accounting for Foreign Entrepreneurs in Vietnam

Introduction

There's a lot of good things going for Vietnam, but in order to properly get into it, one must have a firm grasp of the Vietnam tax and accounting framework. Unlike some Western countries where systems may be more automated or flexible, Vietnam’s regulatory environment is documentation-heavy and highly procedural, requiring close attention to local norms and government compliance. 

Tax compliance is a critical part of maintaining legal business operations and avoiding penalties - unfortunately everything is presented in very dense legalese. United Consulting has prepared this guide to break down the key tax types, accounting standards, and reporting obligations foreign business owners need to understand, in clear and simple to understand language. 

Learn more about setting up a company in Vietnam

Vietnam Corporate Income Tax (CIT)

• Standard CIT Rate: The standard corporate income tax rate in Vietnam is 20%, applied to most business activities. However, this rate does not apply to certain prioritized sectors or investment projects. For example:
  • High-tech enterprises may benefit from a reduced CIT rate of 10% for 15 years, depending on the project’s size, technology level, and field of application.
  • Educational and healthcare projects can qualify for CIT incentives, with rates as low as 10%, along with possible tax holidays.
  • Environmental and renewable energy projects, such as solar farms or waste-to-energy plants, often receive preferential tax treatment under Vietnam’s green energy policies.
  • Enterprises located in economic zones or socio-economically underdeveloped areas may enjoy tax exemptions for up to 4 years, followed by a 50% CIT reduction for 9 subsequent years.
    These incentives are provided under Law on Corporate Income Tax No. 14/2008/QH12 and detailed in Decree No. 218/2013/ND-CP.
• Preferential Rates: Reduced CIT rates are available for specific business sectors such as education, healthcare, and high-tech industries. Additionally, enterprises operating in designated economic zones or underdeveloped areas may benefit from tax holidays or CIT reductions (e.g., 10% for 15 years or exemption for the first 4 years and 50% for the next 9 years).
• Taxable Income: Includes income generated from production, trading, service activities, and other sources both within and outside Vietnam. For foreign-invested enterprises, taxable income also includes income generated by branches or affiliated operations.
• Deductible Expenses: Businesses may deduct reasonable and necessary expenses incurred during operations, such as salaries, depreciation, marketing costs, and professional fees. However, as per Decree No. 123/2020/ND-CP and Circular No. 78/2021/TT-BTC, all deductible expenses must be substantiated with valid electronic VAT invoices, and payments exceeding VND 20 million must be made via non-cash methods. From July 1, 2022, all enterprises are required to issue and store e-invoices for eligible transactions, in accordance with the General Department of Taxation’s e-invoice implementation roadmap. Failure to use e-invoices where required can result in the disallowance of the expense for tax deduction purposes.
• Non-Deductible Expenses: These include personal expenses, expenses without proper invoices, and penalties or fines. Understanding these exclusions is essential for accurate tax reporting.
• CIT Finalization: CIT is finalized annually. Companies must file their annual CIT return within 90 days from the end of the fiscal year. The final return includes a reconciliation of quarterly payments and any additional tax payable or refundable. Businesses should also ensure compliance with transfer pricing documentation if involved in related-party transactions.
• Common Pitfalls: Frequent issues include failure to track deductible vs. non-deductible expenses, late filing of CIT returns, and incorrect application of preferential tax rates. Seeking professional tax advisory services can prevent costly penalties and ensure proper tax planning.

Value-Added Tax (Vietnam VAT) and Other Indirect Taxes

• VAT Rates: The standard VAT rate in Vietnam is 10%, applicable to most goods and services such as electronics, construction materials, processed foods, consulting services, and non-essential consumer goods.

A reduced VAT rate of 5% applies to essential goods and services intended to support social welfare and economic development. Examples include:

• Clean water for domestic consumption
• Agricultural products and fertilizers
• Educational publications, textbooks
• Medical equipment and pharmaceuticals
• Public transportation services

Certain goods and services are exempt from VAT, meaning no VAT is charged and input VAT cannot be credited. Examples include:

• Financial services (e.g., loans, credit)
• Life insurance
• Healthcare services (diagnosis, treatment)
• Education and vocational training
• Public postal services

There are no other VAT rates currently in effect in Vietnam. According to Decree No. 15/2022/ND-CP, the government temporarily reduced the VAT rate from 10% to 8% for certain goods and services during 2022–2023 to support economic recovery, but this reduction was sector-specific and time-limited. Businesses should verify current VAT rates and applicable goods/services based on the General Department of Taxation’s latest guidance.

Understanding whether a product or service falls under standard, reduced, or exempt VAT classification is crucial for proper invoicing, tax filing, and eligibility for input VAT deductions.

• VAT Registration: VAT registration is mandatory for most enterprises engaged in trading, manufacturing, or service provision. Companies must complete registration with the local tax authority within 10 working days from business license issuance. Required documents include:
  • Valid business license
  • Official seal and bank account confirmation
  • Digital signature registration for e-invoicing
  • Application form and accompanying documents following the General Department of Taxation’s guidelines
• Electronic Invoicing (E-Invoice): Upon registration, businesses are required to use government-approved e-invoice platforms. E-invoices must be issued for each taxable transaction, and stored in accordance with tax regulations for auditing and verification purposes.
• Declaration & Payment: VAT filings are submitted either monthly or quarterly:
  • Monthly: For businesses with annual revenue over VND 50 billion.
  • Quarterly: For smaller enterprises with revenue under that threshold.
  • Deadlines: Declarations and payments are due by the 20th of the following month or quarter.
• Refunds: Businesses may be eligible for VAT refunds if input VAT exceeds output VAT for a defined period, especially in cases of investment projects or exports. The refund process is complex and often requires audits by tax authorities.
• Other Indirect Taxes:
  • Special Consumption Tax (SCT): Applies to goods/services deemed luxurious or harmful, such as alcohol, tobacco, soft drinks, and passenger cars. The SCT rate varies by product category and can be significant—up to 150% for certain automobiles.
  • Environmental Protection Tax: Levied on environmentally harmful products, including petroleum, coal, plastic bags, and pesticides. The purpose is to encourage environmental responsibility and internalize ecological costs into market prices.
• Compliance Notes: Inaccurate VAT declarations or failure to register on time can result in penalties, interest charges, and business disruption. Regular reconciliation of input and output VAT and proper archiving of invoices are essential to maintain compliance.

3. Personal Income Tax (Vietnam PIT) and Payroll Compliance

• Applicable to: Both Vietnamese and foreign employees working in Vietnam. Foreigners are considered tax residents if they stay in Vietnam for 183 days or more in a calendar year or have a permanent residence in the country.
• PIT Rates:
  • Residents are taxed on worldwide income at progressive rates based on monthly taxable income, as stipulated in Article 22 of the Law on Personal Income Tax No. 04/2007/QH12 (amended by Law No. 26/2012/QH13). The current PIT brackets are:
    • Up to VND 5 million: 5%
    • Over VND 5 million to 10 million: 10%
    • Over VND 10 million to 18 million: 15%
    • Over VND 18 million to 32 million: 20%
    • Over VND 32 million to 52 million: 25%
    • Over VND 52 million to 80 million: 30%
    • Over VND 80 million: 35%
  • Non-residents are taxed at a flat rate of 20% on income sourced in Vietnam, as stipulated in Article 18.
• Income Sources: Includes wages, bonuses, overtime pay, allowances (housing, transportation, meals), benefits-in-kind, and other monetary compensation. Taxable income excludes some statutory non-taxable benefits such as certain meal allowances, uniforms, and mandated employer contributions to social insurance.
• Employer Responsibilities:
  • Withhold PIT from employee salaries on a monthly basis and remit payments to tax authorities.
  • File PIT declarations monthly or quarterly depending on company size and payroll volume.
  • Prepare and submit annual PIT finalization returns for all employees, including those who have resigned or transferred.
  • Register employees with the Social Insurance Authority and make monthly contributions for:
    • Social insurance (SI): Covers retirement, sickness, maternity, occupational diseases, and work-related accidents. Employers contribute 17.5% and employees contribute 8% of the monthly salary.
    • Health insurance (HI): Provides access to medical care and public health services. Employers contribute 3% and employees contribute 1.5%.
    • Unemployment insurance (UI): Offers temporary income support and job placement assistance. Employers contribute 1% and employees contribute 1% of the salary, with a cap based on regional minimum wage multiples. 
  • Maintain up-to-date labor contracts and report any changes in employment status (new hires, resignations) to the Department of Labor.
  • Ensure payroll is compliant with Vietnamese labor laws, including mandatory benefits and working hour regulations.
• Payroll Processing Notes: Payroll must be handled accurately with deductions properly accounted for, including statutory insurance contributions, union fees (if applicable), and PIT. Payroll data must be retained for inspection and included in financial audits.
• Penalties for Non-Compliance:
  • Failing to register employees or withhold taxes properly may lead to penalties ranging from administrative fines to criminal charges for tax evasion.
  • Delays in tax payment can incur interest charges.
  • Misclassification of employees (e.g., as contractors to avoid PIT) is closely monitored and penalized.
  • Under Article 11 of Decree No. 125/2020/ND-CP, misclassification and incorrect PIT declarations can lead to administrative fines ranging from VND 5,000,000 to VND 25,000,000, depending on the severity and whether the violation was intentional. In cases of tax evasion, criminal liability may also apply under Article 200 of the 2015 Penal Code (amended 2017).
• Best Practices:
  • Use a payroll software or local payroll service provider to ensure compliance.
  • Perform regular internal audits of payroll and PIT processes.
  • Keep abreast of changes in tax law, especially thresholds and non-taxable items, to adjust compensation packages appropriately.

4. Accounting Standards and Bookkeeping

• Vietnamese Accounting Standards (VAS): All businesses operating in Vietnam must follow VAS, a framework established by the Ministry of Finance to ensure transparency and consistency in financial reporting. VAS includes detailed guidance on revenue recognition, asset valuation, and financial disclosures. Although Vietnam is planning to gradually adopt International Financial Reporting Standards (IFRS) for certain large enterprises and listed companies, most small and medium-sized businesses must continue to adhere strictly to VAS.
• Chart of Accounts: Businesses must adopt a standardized chart of accounts prescribed by the Ministry of Finance. This framework helps ensure comparability and transparency across businesses. Companies may customize account details but must maintain the structure and coding system as regulated.
• Currency and Language: All accounting books, records, and reports must be maintained in Vietnamese and expressed in Vietnamese Dong (VND). Businesses dealing in foreign currencies must revalue them periodically according to VAS rules.
• Invoicing: The use of electronic invoices (e-invoices) is now compulsory for most entities. Businesses must register their invoicing system with the tax authority and issue digital invoices for all transactions. These invoices must be uploaded to the tax authority’s portal and include legally required information such as buyer/seller tax codes, amounts, and applicable taxes.
• Retention of Records: Enterprises are required to retain their accounting documents for at least 10 years, as stipulated under Article 41 of the Law on Accounting No. 88/2015/QH13. Required records include:
  • General ledgers and sub-ledgers
  • Journals and cash books
  • Financial statements and audit reports
  • VAT invoices and tax declarations
  • Contracts and supporting documents for expenses
  • Payroll records and insurance contribution filings
    Records must be archived securely, either physically or digitally, and be accessible for tax inspections or audits.
• Additional Considerations:
  • Accounting Software: It is highly recommended to use MOF-compliant accounting software that generates reports in Vietnamese and aligns with VAS formats.
  • Annual Financial Statements: Must be submitted with a declaration of accuracy signed by the legal representative and chief accountant.
  • Third-Party Accounting Services: Foreign businesses often engage local accounting firms to manage bookkeeping and compliance. This can help ensure adherence to local practices and reduce the risk of non-compliance.

Maintaining compliant accounting practices is not only a regulatory requirement but also a crucial element in supporting long-term business sustainability, tax efficiency, and investment readiness.

5. Reporting and Auditing Requirements

• Reporting Schedule:
  • Monthly/Quarterly Reports: Businesses must submit reports on Value-Added Tax (VAT), Personal Income Tax (PIT), and other applicable taxes. The frequency—monthly or quarterly—is based on the prior year’s revenue threshold, in accordance with Article 8 of Decree No. 126/2020/ND-CP guiding the Law on Tax Administration. For instance, companies with revenue exceeding VND 50 billion in the preceding year are required to report monthly, while smaller firms may report quarterly.
  • Annual Reports: Enterprises must finalize and submit their Corporate Income Tax (CIT) return, audited financial statements (if required), and other regulatory disclosures. These reports provide a comprehensive overview of the company’s financial activities and are essential for tax reconciliation and investor transparency.
  • Employee-Related Reports: Employers must also submit annual labor reports and insurance declarations to relevant government agencies.
• Audit Requirements:
  • Mandatory Audit: Companies subject to mandatory audits include foreign-invested enterprises (FIEs), public companies, credit institutions, insurance firms, and enterprises with state capital. Additionally, companies applying for VAT refunds often undergo tax audits.
  • Audit Firm: Audits must be conducted by independent firms licensed by the Ministry of Finance. Firms must follow Vietnamese Standards on Auditing (VSA). Businesses should schedule audits in advance to meet deadlines and avoid penalties.
  • Audit Scope: A statutory audit covers the company’s balance sheet, income statement, cash flow statement, and notes to financial statements. It assesses the accuracy and compliance of financial data with VAS.
• Filing Deadlines:
  • Most year-end tax and financial filings must be completed within 90 days of the fiscal year-end. For calendar year-end companies, this means filing no later than March 31.
  • Delays in submitting required reports may result in administrative fines and scrutiny from tax authorities. Businesses must also file reports even if no revenue is generated (so-called "nil returns").
• Best Practices for Compliance:
  • Establish a clear internal calendar for all filing deadlines.
  • Work with a licensed accountant or auditing firm to prepare compliant financial statements.
  • Maintain detailed documentation for all financial activities to support audit readiness.
  • Regularly review regulatory changes issued by the General Department of Taxation and Ministry of Finance.

Accurate and timely financial reporting not only fulfills legal obligations but also enhances a business's credibility with partners, investors, and regulators. For foreign investors, it serves as a critical component of maintaining long-term operational viability in Vietnam.

Conclusion

Vietnam’s taxation and accounting system can be complex, especially for foreign entrepreneurs unfamiliar with local laws. With guidance from a local advisory firm, you'll be able to be aware of key issues, align with regulatory requirements, and establish a compliance calendar to avoid future missteps.

To summarize, here are the key takeaways every foreign entrepreneur should remember:

• Register for all applicable taxes early (CIT, VAT, PIT) and file returns on time.
• Use electronic invoices for all transactions and ensure proper documentation for deductible expenses.
• Understand and apply the correct tax rates for your business activities, including CIT incentives if eligible.
• Stay compliant with payroll and insurance obligations to avoid legal and financial penalties.
• Follow Vietnamese Accounting Standards (VAS) and maintain detailed, accurate records.
• Prepare for mandatory audits and reporting deadlines with an internal compliance calendar.

By planning proactively and seeking local expertise, foreign entrepreneurs can operate successfully in Vietnam’s regulated business environment.

Contact United Consulting today for personalized support with:

• Tax registration and compliance strategy
• Monthly and annual reporting
• Payroll and insurance setup
• Audit preparation and financial statement filing