Rates of tax - There are four rates as follows:

When taxable turnover cannot be readily classified based on the tax tariff, VAT must be calculated based on the highest rate applicable for the particular industry, or range of goods, in which the business is involved.

VAT Calculation Methods- The law specifies two different methods for calculating VAT payable:

a. Tax deduction method
This is the conventional VAT used in most other VAT jurisdictions. VAT payable is calculated as the output VAT charge to customers less the input tax suffered on purchases of goods and services. For input tax to be deductible, the taxpayer must obtain a proper VAT invoice from the supplier.

b. Direct application on value added method
Under this method, the business must firstly calculated the "value added " in the period. The value added equals the sales price of the goods/services purchased. The appropriate VAT rate is then applied to this "value added " figure to arrive at the VAT liability for the period. For businesses with little or no accounting records, tax payable is estimated. Taxpayers using this method are not permitted to issue VAT invoices on their sales.

Method 1 applies to State-owned enterprises, foreign invested enterprises, and Vietnamese enterprises (e.g., limited companies, join stock companies).

Method 2 applies to Vietnamese household enterprises, and foreign contractors not licensed under the law on Foreign investment, which do not have in place the necessary accounting and invoicing procedures to implement method 1.

Registration

All organizations and individuals carrying on production or trading of taxable goods and services in Vietnam must register for the VAT. Each branch or outlet of an enterprise must register separately and declare tax on its own activities. It is important to note that the transfers of goods between branches may be subject to VAT.

Filing and payment of taxes

Taxpayers must file VAT returns monthly, by the 10 of the following month. The tax authorities process the tax return and issue a tax assessment notice to the taxpayer. The taxpayer must remit the VAT payable 25 of the month. At the end of the year, the taxpayer must complete an annual tax finalization.

Refunds

Generally, where the taxpayer?s input VAT for the period exceeds its output VAT, it will have to carry the excess forward for three months. It can then claim a refund from the tax authorities. In certain cases (e.g. BOT projects during construction phase, oil and gas projects during exploration and development phase), a refund may be granted on a monthly basis. Start up entities may be required to wait until the end of the year for refunds.

VAT reduction at year end

Businesses engaged in manufacturing, construction, transportation, trading, services, tourism or food and beverage services can apply for a reduction of VAT if they suffer from losses during the first three years of VAT. A reduction will only be considered where the amount of VAT paid is larger than the amount of Turnover Tax which would have been payable under the previous tax system. The maximum amount of VAT reduction shall not exceed the VAT amount payable for the year of the reduction. These VAT reductions can reduce monthly VAT payments through the year, subject to the annual finalization at year end.

Production Royalties:

Every foreign or Vietnamese organization and individual that utilizes natural resources have to pay royalty to the State. Royalty rate depends on the quantity of resources, conditions of resource exploitation, transportation taking references of international general rules and policies on consuming market.

Table of Royalty Rate

Special Sales Tax (excise tax):

Special Sales Tax is the tax calculated for (on) the value of commodities produced, imported that are subject to Special Sales Tax. Goods that are subject to Special Sales Tax: all kinds of alcohol, beer; imported automobiles; all kinds of petrol, naphtha, substances for mixing and other substances for mixing of making petrol.

Table of Special Sales Tax Rate

Personal income tax
Vietnamese citizens residing in Vietnam, Vietnamese citizens residing overseas, individuals residing in Vietnam and expatriates working in Vietnam; four categories of persons are governed by this tax. Regular income subject to the tax is the total income of each individual on the average per month of a year over 2,000,000 VND for Vietnamese citizens and over 8,000,000 VND for the Foreigners residing in Vietnam included the Vietnamese citizens working in overseas. While a non-resident Foreigner considered in Vietnam, the regular income tax is the total income on his Vietnam income. A foreigner considered to be a resident in Vietnam if he stays in Vietnam more than 183 days within one year since he comes in Vietnam, and considered to be a non-resident in Vietnam if he stays in Vietnam less than 183 days.

Calculation of income tax to the Foreigners residing in Vietnam and Vietnamese citizens residing overseas.

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