Viet Nam - A Guide for Business and Investment - asean-korea centre

Method 2: Withholding Method (“no VAT registration”)According to this method, VAT and CIT will be withheld by the Vietnamese customer at a deemed percentage of thetaxable turnover. Various rates are specified for different business activities. The FC’s responsibility to file for andpay taxes is thus passed to the Vietnamese party. The VAT and CIT rates are summarised below:Industry Effective VAT rate Deemed CIT rateTrading: distribution, supply of goods, materials,machinery and equipment in Vietnam1% 1%Services 5% 5%Construction, installation without supply ofmaterials or machinery, equipment.Construction, installation with supply ofmaterials or machinery, equipment.5% 2%3% 2%Transportation 1.25% 2%Manufacturing, otherbusiness activities2.5% or 1.25% 2%Interest Exempt 10%Royalties Exempt 10%Method 3: Hybrid methodtion of the lease contract, the land rental shall be keptstable until the expiration of the lease and shall not beThis is a combination of method 1 and 2, whereby the subject to any adjustment.FC would maintain a simplified VAS for VAT conventionfiling purpose and pay CIT on a deemed basis like underPersonal Income Tax (“PIT”)Method 2.Currently, the following individuals are liable to payNatural Resource Taxpersonal income tax (PIT):Under Vietnamese Law, the State manages natural resources• Vietnamese citizens residing in Viet Nam;and royalties need to be paid to the Statefor the utilization of natural resources. Royalties range• Vietnamese citizens residing overseas and expatriatesworking in Viet Nam;from 0% to 40% and are levied for companies exploitingprecious stones and coal, and companies utilizing• Other individuals residing in Viet Nam indefinitely;andforest products, marine products or natural water.Land RentalsWhere the land is rented from the State, the tariff• Foreigners working in Vietnam and in receipt ofincome including employees of business, culturalor social organisations, representative offices andbranches of foreign companies, foreign contractorsand individuals working independently.frame for land rental is determined by the Government.Based on such tariff frame the People’s Committee ofthe relevant province will determine the specific landrental tariff. The land rental is kept stable for a periodof at least five years from the investment licence date.Where land rentals have been paid for the whole dura-A foreigner residing in Viet Nam for more than 183days within a tax year will be considered a tax resident,unless DTAs between Viet Nam and other countriesprovide otherwise. A tax resident is subject to progressivetax rates with the highest marginal rate of 40%. Aforeigner who stays in Viet Nam less than 183 days inPART III. BUSINESS AND FOREIGN INVESTMENT ENVIRONMENTViet Nam - A Guide for Business and Investment 39