Vietnam, with GDP growth of over 2023% in 5 and expected to continue its strong recovery, along with over 36 billion USD of registered FDI in 2023, has been affirming its position as a leading attractive foreign direct investment (FDI) destination in the region. However, to optimize opportunities and minimize risks, investors need a thorough understanding of the legal framework, policies and operating costs here.
With many years of experience in FDI investment consulting, we will provide in-depth analysis and practical data on core aspects that every investor needs to understand about tax policies and investment incentives in Vietnam for FDI investors.
1. Tax policy for FDI investors in Vietnam
Vietnam's tax system can be complex, but understanding tax policies and applicable rates is the foundation for compliance and financial optimization for FDI investors.
- Corporate Income Tax (CIT):
- General tax rate: 20%.
- Preferential tax rates can be 10%, 15%, or 17% applied for a certain period of time (e.g. 10% for 15 years) to projects that meet preferential conditions.
- Note: Interest expenses exceeding 30% of EBITDA (earnings before interest, taxes, depreciation and amortization) are not deductible when calculating corporate income tax in some cases. Regulations on related-party transactions (Decree 132/2020/ND-CP) need special attention.
- Value Added Tax (VAT):
- Common tax rates:
- 0%: Applicable to exported goods and services; international transportation; and other cases considered to be exports.
- 5%: Applicable to some essential goods and services such as clean water, medical equipment, and unprocessed basic agricultural products.
- 10%: Standard tax rates apply to most other goods and services.
- Enterprises are entitled to deduct input VAT if they meet all conditions (valid invoices, non-cash payments for transactions of VND 20 million or more).
- Common tax rates:
- Foreign Contractor Tax (FCT):
- Including corporate income tax and VAT (or personal income tax for individuals).
- The specific tax rate depends on the type of service or goods. For example:
- Regular services (consulting, management): Usually 5% corporate income tax + 5% VAT on revenue.
- Loan interest: 5% corporate income tax on interest.
- Copyright: 10% corporate income tax on income from copyright.
- Tax calculation method: Direct deduction, declaration (if foreign contractor meets the conditions) or mixed.
- Personal Income Tax (PIT):
- For income from salaries and wages of resident individuals: Progressive tax schedule with 7 levels, from 5% (for income up to 5 million VND/month) to 35% (for income over 80 million VND/month), after deducting family deductions (currently 11 million VND/month for the taxpayer himself and 4.4 million VND/month for each dependent).
- For non-resident individuals: Tax rates apply 20% on income from wages and salaries.
- Import Tax:
- Depending on the HS code of the goods and the Free Trade Agreements (FTAs) that Vietnam participates in (there are currently over 16 FTAs in effect).
Vietnam's average MFN (Most Favored Nation) tariff rate is about 9-10%, but many tariff lines under FTA commitments have been reduced. 0%.
2. Preferential investment tax policies for FDI in Vietnam
The Vietnamese government offers attractive tax policy incentives, especially for strategic industries and locations for FDI.
- Corporate Income Tax Incentives:
- Common structure:
- “Exempt 4, reduce 9”: Exemption from corporate income tax in 4 years taxable income, reduction 50% tax payable in 9 years next.
- “Exempt 2, reduce 4”: Exemption from corporate income tax in 2 years, reduce 50% in 4 years next.
- Extended preferential tax rates:
- 10% in 15 years: Usually applied to high-tech projects, large-scale projects (for example, investment capital from 6.000 billion VND or more and disbursed within 3 years, or minimum revenue 10.000 billion VND/year after 3 years).
- 17% in 10 years: Applicable to projects in areas with difficult socio-economic conditions.
- Priority areas: High technology (according to the list of the Law on High Technology), supporting industry (products in the list of priority development), high-tech agriculture, environmental protection, renewable energy, high-quality healthcare, education.
- Preferential location: Economic zones (EZs), High-tech zones (HTZs), districts and provinces with difficult or extremely difficult socio-economic conditions.
- Common structure:
- Land Rent and Land Use Fee Incentives:
- Exemption from land rent and land use fees 3 years to entire lease term depending on the sector and location (for example, 11-year, 15-year or full-time exemption for special incentive projects in particularly difficult areas).
- Reduce land rent and land use fees (eg 50% reduction).
- Import Benefits:
- Exemption from import tax on goods used to create fixed assets (machinery, equipment, specialized means of transport in technological lines).
Import tax exemption for a period of time 5 years since the start of production for raw materials, supplies and components that cannot be produced domestically for some special incentive projects.
3. Import regulations that FDI investors need to know
Vietnam is a member of the World Customs Organization (WCO) and has participated in more than 16 FTAs, facilitating trade.
- Customs Procedures: The VNACCS/VCIS system allows electronic declaration, aiming for green channel (low risk) clearance within a few hours. However, the classification of the channel (green, yellow, red) depends on the level of compliance of the business and the nature of the goods.
- HS Code and Tax Rate: Vietnam applies the WCO's Harmonized Commodity Description and Coding System (HS), with detailed HS codes up to 8 or 10 digits. Correct application of HS codes is extremely important to determine tariff rates (MFN tariffs, FTA tariffs) and management policies (licenses, specialized inspections).
- Import License and Specialized Inspection: Some items such as medical equipment, pharmaceuticals, chemicals, food, etc. require an import license or must undergo specialized inspection. Inspection time can range from a few days to a few weeks.
- Customs Value: Comply with GATT/WTO Valuation Agreement. Enterprises need to keep full documents to prove declared value.
4. Reference data of production costs in Vietnam (Q2/2025)
FDI investors can reduce costs by investing in priority industries to enjoy low tax rates, taking advantage of import tax exemptions for machinery, and managing supply chains effectively.
- Labor Cost:
- Regional minimum wage (effective from 01/07/2024, subject to future adjustment):
- Region I: 4.960.000 VND / month (about 195 – 205 USD)
- Region II: 4.410.000 VND / month (about 170 – 180 USD)
- Region III: 3.860.000 VND / month (about 150 – 160 USD)
- Region IV: 3.450.000 VND / month (about 135 – 145 USD) (Reference USD/VND exchange rate: 25.000 - 25.500)
- Actual salary:
- General worker: 6.000.000 – 9.000.000 VND/month (about 235 – 350 USD).
- Technical worker: 8.000.000 – 15.000.000 VND/month (about 310 – 590 USD).
- Engineer/Specialist: 12.000.000 – 25.000.000 VND/month (about 470 – 980 USD).
- Middle management: 25.000.000 – 50.000.000+ VND/month (about 980 – 1.960+ USD).
- Compulsory insurance costs (paid by the employer): Approx 21.5% - 22% on social insurance registered salary fund.
- Regional minimum wage (effective from 01/07/2024, subject to future adjustment):
- Land/Factory Rental Cost:
- Industrial park land rental price: 50 – 250+ USD/m²/rental cycle (depending on region).
- Ready-built factory rental price: 3.5 – 7.0 USD/m²/month.
- Utility Costs:
- Electricity (industrial production): 1.600 – 3.500 VND/kWh (depending on time and voltage level).
- Country (of manufacture): Approx. 10.000 – 15.000 VND/m³.
- Wastewater treatment: Approx. 4.000 – 15.000 VND/m³.
- Logistics and Supply Chain Costs:
- Domestic transportation (40ft container, 50-70km): 3.000.000 - 5.000.000 VND.
- Standard warehouse: 4 – 7 USD/m²/month.
Compliance Costs: Costs for accounting, auditing, legal and tax consulting services can range from several hundred to several thousand USD/month for small and medium enterprises.
5. Tax consulting services in Vietnam for foreign direct investors
With the complexity and frequent changes of the legal system, it is important to work with a professional tax consultancy.
- Ensuring Compliance & Avoiding Risk:
- Helps businesses avoid common mistakes that can lead to administrative penalties (e.g. fines) 20% on tax under-declaration or tax evasion, fine from several million to tens of millions VND for violations of invoices, tax registration procedures) and late payment interest (currently 0.03%/day on the amount of late tax payment).
- Optimizing Tax Benefits:
- Support the correct and adequate application of investment incentives and double taxation avoidance agreements (DTAs – Vietnam has signed DTAs with more than 80 countries and territories).
- Structuring transactions and capital flows in a tax efficient manner.
- Troubleshooting Support: Accompany during tax inspections and audits.
- Strategic Tax Planning: Provide solutions that align with the long-term goals of the business.
6. Conclusion
Vietnam is truly a promised land for FDI investors with great potential and open opportunities. However, “know yourself and your enemy, and you will win every battle”. Having a solid knowledge of tax policies (with specific tax rates and incentives such as 20% common CIT or 10% incentives for 15 years), import regulations (taking advantage of incentives from more than 16 FTAs), production costs (with actual worker salaries ranging from 6-9 million VND/month and industrial park land rental costs ranging from 50-250 USD/m2).
Especially when the choice is made. reputable tax consulting partner in Vietnam will be key factors. This helps investors confidently make decisions, operate effectively and achieve sustainable success in this dynamic market.