Tax is an important tool for the State to increase budget revenue as well as manage and limit negative phenomena in the economy. Tax is also simultaneously the enterprise’s obligation to give back to the community that has created conditions for it to do business and make profits.
Basically, the tax obligations of a foreign-invested company include the following types of taxes:
1. Business License Tax
The Business License Tax is specifically regulated in Circular 302/2016/TT-BTC, effective from January 1, 2017. For foreign-invested enterprises, the registered capital is determined as investment capital, and depending on the capital recorded in the Investment Certificate, there will be different Business License Tax rates:
Unit: VND
| Business License Tax Tier | Registered Capital | Tax Rate (VND/year) |
|---|---|---|
| Tier 1 | Over 10 billion | 3,000,000 |
| Tier 2 | Under 10 billion | 2,000,000 |
| Tier 3: For dependent units: Branches, representative offices, business locations. | 1,000,000 |
2. Corporate Income Tax
Corporate Income Tax (CIT) is a tax levied on income from business production activities and other income of an enterprise. Other income usually refers to income from the transfer of assets and property rights.
Tax calculation method:
Corporate Income Tax payable = [Taxable income – (Tax-exempt income + Losses carried forward from previous years)] × Tax rate
Taxable income = Revenue – Deductible expenses + Other income
From January 1, 2016, the Corporate Income Tax rate is 20%.
3. Value Added Tax
Value Added Tax (VAT) is a tax levied on the added value of goods and services throughout the production, circulation, and distribution process. However, not all goods and services are subject to VAT.
There are two methods of calculating tax:
- Credit method:
VAT payable = Input VAT – Deductible output VAT
- Direct method:
VAT payable = Added value of goods, services sold × VAT rate
VAT rates have three levels: 0%, 5%, and 10%.
4. Special Consumption Tax
Special Consumption Tax (SCT) is an indirect tax levied on consumers of luxury products, services not essential for daily life, or sectors that the State wants to restrict. A foreign-invested company, if it trades in products and services regulated in Article 2 of the Law on Special Consumption Tax, must pay this type of tax.
Tax calculation method:
Special Consumption Tax = Taxable price × Tax rate
In which, the taxable price is the selling price, the service provision price excluding special consumption tax, environmental protection tax, and value-added tax. Special Consumption Tax rates range from 15% – 65% depending on the type of goods and services.
5. Import and Export Duties
If a foreign-invested company carries out export or import of goods, it has the obligation to pay import and export duties.
There are three methods for calculating import and export duties:
- Percentage method:
Determine tax as a percentage (%) of the taxable value of exported or imported goods.
Calculation: Taxable value × Tax rate
Preferential and special preferential tax rates are specifically regulated in the tax schedule between Vietnam and countries with preferential agreements. The normal tax rate is issued with Decision No. 36/2016. If goods are not on the list of normal tax rates, a rate of 150% applies.
- Absolute method:
Fix a specific amount of tax per unit of exported or imported goods.
Calculation: Quantity of goods actually exported/imported × Absolute tax rate specified per unit of goods at a given time
- Combined method: Simultaneously apply the two methods above.
Calculation: Total tax amount calculated by percentage + Total tax amount calculated by absolute method.
6. Tax Accounting Services for Foreign-Invested Companies by VN Law Firm
- Consulting on issues related to foreign loans, loans from parent companies, and registration of loans with the State Bank;
- Consulting on procedures for opening capital transfer accounts, capital contribution accounts for foreign-invested companies after establishment;
- Consulting on procedures for transferring profits abroad for foreign-invested companies;
- Comprehensive consulting on issues related to Value Added Tax, Corporate Income Tax, Personal Income Tax, etc.;
- Consulting on adjustments for enterprises regarding errors in their accounting and tax activities;
- Guiding and carrying out tax declaration procedures for newly established foreign-invested companies;
- Comprehensive tax accounting consulting for foreign-invested companies on a quarterly, monthly, and annual basis;
- Declaring and submitting all types of reports and taxes monthly, quarterly, annually, and settling all types of taxes for foreign-invested companies;
- Establishing and completing accounting book systems for foreign-invested companies according to current legal regulations;
- Representing enterprises to explain accounting and tax records to state agencies.
