A Practical Guide for Foreign Companies
Corporate Income Tax (CIT) is one of the most important—and most misunderstood—taxes foreign companies face in Vietnam. While the headline tax rate is straightforward, taxable income calculation, deductible expenses, provisional payments, and audits often create compliance risk.
This guide explains how Corporate Income Tax works in Vietnam, who must pay it, how it is calculated, filing requirements, common mistakes, and how foreign companies manage CIT exposure effectively.
What Is Corporate Income Tax (CIT) in Vietnam?
Corporate Income Tax (CIT) is a tax imposed on the taxable profits of companies operating in Vietnam.
CIT applies to:
- Wholly foreign-owned companies
- Joint ventures
- Vietnamese companies
- Certain income of foreign contractors
📌 CIT liability exists even if profits are retained and not repatriated.
Vietnam CIT Rate: How Much Tax Do Companies Pay?
Standard CIT Rate
- 20% of taxable profit
Preferential CIT Rates (Conditional)
Some projects may qualify for:
- Reduced tax rates
- Tax holidays
- Tax reductions for a fixed period
These incentives depend on:
- Industry
- Location
- Project scale
- Investment policy approval
📌 Incentives must be approved and documented—they are not automatic.
Who Is Subject to CIT in Vietnam?
Resident Companies
- Companies incorporated in Vietnam
- Taxed on worldwide income
Non-Resident Companies
- Foreign companies with income sourced in Vietnam
- Subject to CIT or withholding tax, depending on structure
📌 Structure determines tax treatment—this is a frequent planning issue.
How Is Taxable Income Calculated?
CIT Formula
Taxable Income = Revenue – Deductible Expenses + Other Taxable Income – Losses Carried Forward
While simple in theory, deductibility rules are strict.
What Expenses Are Deductible for CIT?
To be deductible, expenses must:
- Be actual and business-related
- Be supported by valid invoices
- Be paid via non-cash methods (above thresholds)
- Comply with Vietnam accounting rules
Common Deductible Expenses
- Salaries and wages
- Office rent
- Utilities
- Depreciation (within limits)
- Professional service fees
- Marketing expenses (with documentation)
📌 Missing invoices are the #1 reason expenses are disallowed.
Common Non-Deductible Expenses
Examples include:
❌ Personal or non-business expenses
❌ Unsupported cash payments
❌ Fines and penalties
❌ Expenses exceeding statutory caps
❌ Improper depreciation
Disallowed expenses increase taxable profit, often unexpectedly.
Loss Carryforward Rules
- Tax losses can generally be carried forward
- Maximum carryforward period: 5 consecutive years
- Losses must be declared properly
📌 Losses cannot be carried back.
Provisional CIT Payments During the Year
Companies must:
- Make provisional CIT payments during the year
- Base payments on estimated profit
- Reconcile at year-end
📌 Underpayment of provisional CIT can trigger late payment interest.
Annual CIT Finalization
At year-end, companies must:
- Prepare audited financial statements
- Finalize CIT calculation
- Reconcile provisional payments
- Pay any additional tax due
📌 Late or incorrect finalization is a frequent audit trigger.
CIT Audits & Tax Inspections
Vietnam tax authorities actively audit:
- Expense deductibility
- Related-party transactions
- Transfer pricing compliance
- Loss-making companies
- Sudden profit fluctuations
📌 Proper documentation is your primary defense.
Representative Office & CIT
Representative Offices:
- Do not pay CIT on revenue
- Still subject to:
- Payroll tax (PIT)
- Other reporting obligations
📌 Misuse of RO for revenue can trigger retroactive CIT assessments.
CIT vs Employer of Record (EOR)
If you operate via Employer of Record only:
- You do not pay CIT
- No corporate tax filings required
- Payroll tax handled by EOR
📌 EOR is often used to delay CIT exposure until entity setup.
Common CIT Mistakes Foreign Companies Make
❌ Assuming “no profit” means no compliance
❌ Poor expense documentation
❌ Incorrect VAT–CIT treatment
❌ Late provisional payments
❌ Ignoring transfer pricing risks
❌ Relying on overseas accounting rules
These mistakes often surface during audits, not at filing time.
Practical CIT Compliance Checklist
✔ Correct accounting method registered
✔ Valid invoices for all expenses
✔ Provisional CIT payments tracked
✔ Losses declared properly
✔ Annual audit completed
✔ Timely finalization and payment
How BusinessPartner.vn Helps Manage CIT Compliance
BusinessPartner.vn supports foreign companies with:
- CIT calculation and planning
- Expense deductibility review
- Provisional tax management
- Annual CIT finalization
- Audit and inspection support
- Accounting and tax outsourcing
- EOR → entity tax transition
👉 Talk to our Vietnam tax advisors to review your CIT exposure and compliance.
Recommended Reading
Timeline & Cost to Set Up a Company in Vietnam
VAT in Vietnam: Rates, Filing & Common Errors
Tax Filing Deadlines in Vietnam
