Vietnam company tax rate: Corporate tax, VAT, Incentives

The Vietnam company tax rate plays a critical role in shaping business decisions for both local and foreign investors. This guide provides a clear overview of corporate income tax, VAT, and key incentives currently available in Vietnam.

What is Corporate Income Tax (CIT) in Vietnam?

Corporate Income Tax (CIT) is one of the most essential components of Vietnam’s business tax system, imposed on companies generating income from business operations within the country. It applies to both domestic and foreign-invested enterprises (FIEs).

Legal basis of corporate tax (Law No. 14/2008/QH12, Decree 218/2013/ND-CP)

The corporate income tax in Vietnam is governed by a clear and structured legal framework, ensuring transparency for both local businesses and foreign investors. The key regulations are:

The Vietnam corporate income tax rate is set out in these documents and enforced through annual updates by the General Department of Taxation.

Who is subject to CIT in Vietnam?

According to Vietnam’s corporate tax regulations, Corporate Income Tax (CIT) applies to a broad range of legal and economic entities operating or earning income in Vietnam. These include both local companies and foreign-invested enterprises.

Entities subject to corporate income tax in Vietnam include:

Taxable income vs non-taxable income

Under Vietnam’s corporate income tax system, taxable income is the basis for determining how much tax a business must pay. Understanding the scope of what is—and isn’t—taxable is essential for accurate tax planning and compliance.

Taxable income in Vietnam

Taxable income includes most types of earnings generated from business activities, regardless of whether the enterprise is local or foreign. The standard Vietnam company tax rate of 20% applies to the following income sources:

• Revenue from sale of goods or services
• Financial income (interest, dividends, exchange rate differences)
• Income from capital transfers, asset disposals, or real estate deals
• Franchise fees and royalties
• Income from leasing assets
• Other business-generated income

What income is exempt from corporate income tax?

Some income is legally exempt from corporate income tax in Vietnam, especially when tied to government priorities or social benefits.

Common exemptions include:

Companies investing in high-tech zones or industrial parks may qualify for non-taxable income periods (tax holidays) or preferential corporate tax rates in Vietnam, reducing their effective tax liability.

Standard corporate tax rate in Vietnam

The standard corporate income tax in Vietnam is currently 20%, a flat rate applied to most domestic and foreign-invested enterprises. This rate is highly competitive compared to other countries in the Southeast Asian region and remains a key factor attracting foreign direct investment (FDI) into Vietnam.

20% standard rate

The standard corporate income tax rate in Vietnam is a flat 20%, applied to the taxable profits of most businesses operating in the country. This rate has been in effect since January 1, 2016, following amendments to the Corporate Income Tax Law to enhance competitiveness and attract investment.

A tax rate of 20% is applied to:

• Vietnamese domestic companies (LLCs, JSCs, state-owned enterprises)
• Foreign-invested enterprises (FIEs) unless they qualify for preferential tax rates
• Enterprises in all sectors not covered by special or incentive tax regimes

Taxable profits are calculated as: Total revenue – deductible expenses – carried forward losses

Businesses are taxed annually on their net profit, and this 20% rate is uniform across industries, except for sectors with special rules like oil & gas or mineral resources.

Compare Vietnam’s tax rates with neighboring countries

It can be seen that Vietnam’s 20% tax rate is competitive in the region, balancing financial revenue and investment attractiveness.

Higher rates for specific sectors

While the standard corporate income tax in Vietnam is 20%, certain industries—particularly those involving natural resource extraction—are subject to higher tax rates due to their strategic, environmental, or monopoly nature.

Sectors subject to higher corporate tax rates in Vietnam include:

These rates are determined by the Government based on project location, reserve levels, and contract terms with the State.

Real examples by industry

To better understand how the corporate income tax in Vietnam applies across different sectors, here are real-world examples of companies operating under the standard or preferential tax regimes. These cases help illustrate how the Vietnam company tax rate is implemented in practical business settings.

Corporate tax incentives for foreign investors

To encourage foreign direct investment (FDI), Vietnam offers a wide range of corporate tax incentives that significantly reduce the effective tax burden for eligible businesses. These incentives are typically granted based on the sector of investment, geographic location, and project size.

Preferential tax rates (10%, 15%, 17%)

Vietnam offers preferential corporate income tax rates of 10%, 15%, or 17% to foreign and domestic investors operating in sectors or locations prioritized by the government. These reduced rates are a key part of the country’s effort to attract high-quality foreign direct investment (FDI).

Tax holiday & exemption

In addition to preferential corporate tax rates, Vietnam offers generous tax holidays and exemptions for qualifying foreign investors. These incentives can significantly reduce the effective corporate income tax in Vietnam, especially in the early stages of a project’s lifecycle.

What is a tax holiday?

A tax holiday refers to a period during which eligible companies are fully exempted from paying corporate income tax (CIT), followed by a period of partial tax reduction.

Structure of tax holiday & Reduction

Tax holiday and exemption policies apply to:

• High-tech & R&D projects
• Investment in economic or hi-tech zones
• Projects located in socio-economically challenged regions
• Sectors under national investment incentives (education, healthcare, environment)

Key sectors and economic zones

To promote sustainable economic development and attract high-quality investment, the Vietnamese government has prioritized a number of sectors and locations for corporate income tax incentives. Companies operating in these areas can benefit from preferential CIT rates, tax holidays, and reduction schemes.

Key sectors with tax incentives

Global minimum tax (Pillar Two) and its impact in Vietnam

In response to the global push for fairer taxation of multinational enterprises (MNEs), Vietnam officially adopted the Global Minimum Tax (GMT) policy—also known as Pillar Two under the OECD/G20 Base Erosion and Profit Shifting (BEPS) framework—effective January 1, 2024.

Overview of Pillar Two (OECD)

Pillar Two is part of the OECD/G20’s Base Erosion and Profit Shifting (BEPS) 2.0 initiative, designed to ensure that large multinational enterprises (MNEs) pay a minimum level of tax regardless of where they operate or shift profits.

This global reform sets a 15% minimum effective corporate tax rate and combats harmful tax competition among countries.

Core components of Pillar Two

Objectives of Pillar Two

• Prevent profit shifting to low-tax jurisdictions
• Promote tax fairness across global economies
• Protect countries’ tax bases, especially in developing economies
• Encourage investment decisions based on real value creation, not tax arbitrage

Vietnam’s adoption timeline & policy

Vietnam officially adopted the Global Minimum Tax (GMT) under the OECD’s Pillar Two framework to align with international tax standards and maintain tax equity in the era of globalized investment.

The policy marks a significant shift in Vietnam’s corporate tax environment, especially for multinational enterprises (MNEs) operating under low preferential tax regimes.

Key milestones in Vietnam’s GMT adoption

Who is affected?

• Multinational groups with global consolidated revenue ≥ €750 million
• Companies operating in Vietnam with effective tax rates below 15%
• Most affected sectors: electronics, tech manufacturing, high-investment FDI

Vietnam estimated 122 MNEs are currently subject to GMT under this policy.

Administrative structure

• Managed by the General Department of Taxation (GDT)
• Vietnam uses the Qualified Domestic Minimum Top-up Tax (QDMTT) mechanism, allowing the country to collect the tax difference locally instead of letting other countries collect it.

Policy response: Incentives rebalancing

As the Vietnam company tax rate incentives become less effective under GMT, the government is:

• Shifting focus from tax breaks → direct financial support
• Preparing the launch of an Investment Support Fund, offering: cash grants, land access or infrastructure assistance
• Encouraging long-term commitments in hi-tech, green tech, and R&D sectors

Impact on FDI & major investors

The implementation of the Global Minimum Tax (GMT) in Vietnam is reshaping the country’s investment landscape. As traditional tax incentives lose effectiveness, foreign direct investment (FDI) strategies are being recalibrated, especially by large multinational enterprises (MNEs).

FDI projects facing tax re-evaluation

Before GMT, many MNEs benefited from ultra-low effective tax rates, sometimes as low as 2.75%, due to extended tax holidays and preferential regimes.

However, starting January 1, 2024, these companies are subject to top-up taxes to meet the 15% minimum threshold, reducing the net benefit of Vietnam’s tax-based incentives.

Real-world examples of GMT impact

Key challenges for Vietnam

• Loss of tax-based competitive edge for high-value FDI
• Need to rethink incentive models to remain attractive under global tax harmonization
• Stricter compliance requirements for both investors and authorities

Government’s strategic shift

To mitigate investment risks and retain FDI:

• Vietnam is launching a National Investment Support Fund
• Replacing tax incentives with: cash subsidies, land-use support and infrastructure co-investment
• Prioritizing projects in: green tech & renewable energy, hi-tech manufacturing & R&D and large-scale job creation (>500 workers)

Vietnam’s new FDI strategy is moving beyond low taxes and focusing on real value creation, innovation, and infrastructure.

Government’s response: Support fund

To counteract the diminishing effectiveness of traditional tax incentives under the Global Minimum Tax (GMT), the Vietnamese government is actively developing an alternative incentive framework through a direct support mechanism known as the Investment Support Fund (ISF).

The ISF is a proposed national-level financial support fund, designed to:

• Replace or complement reduced tax benefits caused by GMT
• Retain strategic foreign investors (especially those affected by top-up taxes)
• Maintain Vietnam’s appeal in global value chains

It represents a fundamental shift from tax-based incentives to budget-based subsidies, aligning Vietnam with global best practices under the OECD framework.

The support fund has the following main features:

Support funds are used for strategic goals:

• Neutralize the impact of Pillar Two on investment inflows
• Ensure fairness between existing investors and future MNEs
• Encourage tech transfer, innovation, and sustainability-focused projects

Comparison: Vietnam’s Corporate Tax vs ASEAN Countries

Vietnam’s corporate income tax (CIT) rate is currently 20%, positioning it competitively among ASEAN countries. However, understanding how Vietnam’s tax regime compares with its regional peers provides valuable insight for foreign investors evaluating total cost of doing business.

Vietnam vs Singapore, Thailand, Malaysia

Vietnam is often benchmarked against Singapore, Thailand, and Malaysia—three of its strongest regional competitors for foreign direct investment (FDI).

Compared with other countries in the region, Vietnam has outstanding advantages and strengths.

While Singapore remains a hub for headquarters and financial services, Vietnam is becoming increasingly competitive for hi-tech manufacturing, R&D, and digital services thanks to:

• Aggressive tax incentives
• Lower labor & operating costs
• Strategic GMT compliance & support reforms

For long-term investors, Vietnam’s effective corporate tax rate can be as low as 5–7% after incentives—outperforming its headline 20% rate.

Total effective tax rate (ETR)

While the official corporate income tax in Vietnam is 20%, the total effective tax rate (ETR)—the actual percentage of profit that companies pay after tax incentives—often tells a very different story. For foreign investors, ETR is a better reflection of real tax burden than just looking at the statutory Vietnam corporate income tax rate.

For foreign investors, ETR is a better reflection of real tax burden than just looking at the statutory Vietnam corporate income tax rate

Thanks to tax holidays and preferential regimes, the ETR in Vietnam can fall far below the headline corporate tax rate in Vietnam. In many FDI projects, especially in technology or manufacturing, companies have reported:

• ETR as low as 2.75%
• Average ETR ranging between 8% – 13%

These figures are significantly below the standard 20% vietnam company tax rate, depending on the structure and location of the investment.

Below is a table comparing ETR levels between Vietnam and ASEAN (Pre-GMT):

Even though the corporate income tax Vietnam headline rate is higher than Singapore’s, the effective tax paid can be lower in many cases.

ETR is important for FDI because of the following factors:

• Determines actual cost of doing business
• Critical for financial modeling and long-term ROI
• More meaningful than comparing only the vietnam corporate income tax rate

Investment implications

The corporate tax landscape in ASEAN plays a major role in shaping foreign direct investment (FDI) strategies. While headline rates offer a first impression, the investment decision is heavily influenced by the real effective burden, long-term policy consistency, and the balance between tax and non-tax incentives.

Vietnam stands out with a balanced approach: a moderate 20% corporate income tax in Vietnam, generous incentives, and improving policy transparency. However, with the Global Minimum Tax (GMT) coming into effect from 2024, companies must now reconsider:

• Long-term sustainability of low-tax jurisdictions
• Whether corporate tax rate in Vietnam after GMT still provides a cost edge
• How new non-tax incentives (like Vietnam’s upcoming Support Fund) factor into ROI

Key factors foreign investors must weigh:

With GMT reducing the strategic advantage of low ETRs, Vietnam’s competitiveness will increasingly rely on execution efficiency, infrastructure, labor quality, and policy clarity—not just the corporate tax rate Vietnam offers on paper. For investors, it’s no longer just about the vietnam company tax rate, but about total investment value over the long term.

How is corporate tax calculated in Vietnam?

Understanding how the corporate income tax in Vietnam is calculated is essential for foreign-invested enterprises (FIEs) and local businesses alike. While the standard vietnam company tax rate is 20%, the actual amount paid depends on the accurate determination of taxable income, deductible expenses, and applicable tax incentives.

Formula for taxable income

To calculate the corporate income tax in Vietnam, businesses must first determine their taxable income, which forms the basis for applying the applicable tax rate.

Enterprises must determine taxable income as a basis for applying current tax rates

General formula for corporate tax in Vietnam:

Taxable income = Gross revenue – Deductible expenses − Losses carried forward

This formula is applied before multiplying by the applicable tax rate, which can be:

• The standard 20% vietnam company tax rate
• A preferential rate of 10%, 15%, or 17% (if eligible)
• Or a higher sector-specific rate for oil, gas, or mining (up to 50%)

In this formula:

• Gross revenue is total income from business operations
• Deductible expenses is legitimate business expenses allowed under tax law
• Losses carried forward: maximum 5 years allowed to offset taxable income and onnly applies to business losses, not from tax-exempt income.

Below is an example of the calculation just mentioned.

Apply corporate tax rate in Vietnam:

• At 20% (standard): 3,000,000,000 VND CIT payable
• At 10% (preferential): 1,500,000,000 VND

As shown, tax incentives can significantly reduce the final burden under the vietnam corporate income tax rate system.

Deductible vs non-deductible expenses

Correctly identifying deductible and non-deductible expenses is crucial when calculating taxable income and determining the final corporate income tax in Vietnam. Mistakes in classification may lead to penalties, back taxes, or loss of tax incentives.

What are deductible expenses?

Under Vietnamese tax law, a business expense is deductible if it meets all of the following criteria:

• Directly related to business operations
• Supported by legal invoices & documents
• Not listed as a prohibited deduction under Circular 78/2014/TT-BTC and subsequent amendments

Common deductible expenses include:

• Salaries and wages (with full PIT declaration)
• Rent, electricity, water, and utilities
• Raw material and inventory costs
• Depreciation of fixed assets (per regulations)
• Travel, marketing, and entertainment (within allowed limits)
• Accounting, legal, and consultancy fees
• Training and R&D costs

These expenses help reduce the effective vietnam company tax rate by lowering taxable income.

What are non-deductible expenses?

Expenses that do not qualify for CIT deductions include those that:

• Lack supporting documents (e.g. no VAT invoice)
• Are paid in cash > VND 20 million without bank transfer
• Exceed statutory limits or are for non-business purposes

Typical non-deductible expenses:

Including non-deductible expenses will overstate costs, leading to underpayment of corporate income tax vietnam, and potential tax reassessment.

Businesses should maintain proper accounting records, reconcile all expenses monthly, and review deductibility against prevailing regulations. This ensures compliance and optimizes the actual corporate tax rate in vietnam.

Loss carry-forward policy

When a business incurs a loss, Vietnam’s tax system allows that loss to be carried forward and offset against future taxable income, which helps reduce the actual corporate income tax in Vietnam in subsequent years. This mechanism is especially beneficial for foreign-invested enterprises (FIEs) in their early years of operation, where heavy startup costs or expansion expenses may result in negative earnings.

Carrying over losses to the following year works as follows:

• Tax losses can be carried forward for up to 5 consecutive years
• The carry-forward begins from the year following the year of the loss
• Losses are applied in full or in part, depending on the amount of taxable income in future years
• No carry-back is allowed under the Vietnam corporate income tax rate regime

Here is a specific example:

This significantly reduces the effective tax burden, lowering the actual corporate tax rate in Vietnam over time.

Loss carry-forward is a key factor that helps reduce corporate income tax Vietnam obligations in early-stage or R&D-intensive investments, especially when combined with preferential CIT rates.

In summary, understanding the Vietnam company tax rate structure—including CIT, VAT, and available incentives—is essential for strategic business planning. With proper compliance and tax optimization, investors can maximize long-term returns in Vietnam’s dynamic market.

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