1.Standard rate of BIT:

As from 1 January 2004, the standard rate of BIT applying to newly established domestic enterprises and to newly established FIEs is 28%.

 To benefit from BIT incentives a new investment project, being an investment project for which an investment license or an investment incentives certificate is issued on or after 12 February 2007, must satisfy one of the following conditions:

o       It must invest in one of the trades or sectors referred to in APPENDIX I  in the attached to Decree 24/2007/ND-CP dated 12 February 2006.

 o       For areas where investment is encouraged as referred to  in APPENDIX II in the attached  Decree 24/2007/ND-CP dated 12 February 2006.

APPENDIX II in the attached to Decree 24 set out a list of regions in Vietnam with difficult socio-economic condition and especially difficult socio-economic condition.
 

2.Preferential BIT rates are available as follows:

1.There are now three categories of import duties rates:

o       The standard or ordinary rate applying to imports originating from countries that have not signed an MFN status agreement with Vietnam o       The preferential  rate applying to imports originating from countries that have signed an MFN status agreement with Vietnam (over 65 countries have signed MFN agreements) o       The specially preferential rate applying to imports originating from countries that have signed an agreement with Vietnam on special preferential import duties-these include Singapore, Thailand, the Philippines, Malaysia, Indonesia, Laos, Brunei and Myanmar. The specially preferential rate applying to imports originating from countries that have signed an agreement with Vietnam on special preferential import duties-these include Singapore, Thailand, the Philippines, Malaysia, Indonesia, Laos, Brunei and Myanmar Generally the ordinary rates are 50% higher than the preferential  rate. The finalized US-Vietnam BTA was ratified in December 2001 and normal trade relation status has been established Customs duties are frequently changed. Following its accession to ASEAN, Vietnam has started to implement the CEPT program by which all Asean countries reduce import tariffs on most imports from other Asean countries. By the year 2006, Vietnam tariffs under CEPT will be reduced to between 0% to 5%. Vietnam starts to implement the CEPT program in 1996 and annually issues new lists of goods that are added to the program. Certain imports from the EU, with which Vietnam has conclude a trade agreement, are subject to preferential tariffs. Import duties range from 0% to 5% but in some cases such as liquor, cigarettes and cars the rate can be as high as 100%. The dutiable value of the imported goods is the invoice price or, where there is no invoice price, the minimum prices set out in the Government‘s list. The price will be calculated on the actual purchase price at the port of destination stated in the sales contracts plus freight and insurance cost (being the CIF price) 2.Exemption are granted for: - o       Machinery and equipment that form part of the fixed assets of a FIEs or BCC parties o       Certain specialized means of transport imported by a FIE or BCC parties o       Raw materials and supplies to implement BOT projects o       Certain varieties of vegetation, breeding animals and chemicals for carrying out agricultural, forestry or aquaculture projects o       Construction materials not yet domestically produced o       A once-off exemption for equipment, machinery and specialized means of transport to form the fixed assets of hotels, offices, apartments, commercial centres, super markets, golf courses, tourist and entertainment facilities, healthcare, education and training, and finance and consulting sectors-The complete list of sectors to which the one-off exemption applies is set out in Appendix II attached to LDI Decree 27. Raw materials imported by a FIE or BCC parties for production of products where investment is especially encouraged or for investing in the manufacture of electrical, electronic or mechanical components or spare parts-This is for 5 years only   In addition, export enterprises are not pay import duties on raw materials where the products made from the raw materials are to be exported, subject to certain condition.  3.Export duties are charged on natural resources, rice, mineral, forest and aquatic products and scrap metal and range from 0% to 45%. The price for calculating export duties is the sales prices of the goods at the port of departure as stated in the sales contract less freight and insurance costs (being the free on board (FOB) price).

TOP

III>>V.A.T (Value Added Tax):

1.VAT applies to the supply of goods and services that are regarded as being used “for production, business or other consumption in Vietnam. The tax is ultimately borne by the end consumers or a business that is exempted from tax, because the consumer or exempt business can not recover the input tax paid. There are 2 methods for calculating VAT payable : Method 1: Tax deduction method: the amount of tax payable is equal to output VAT (the price of the goods or services sold multiplied by the tax rate) less the input VAT (the aggregate amount of VAT paid as evidenced by VAT invoices in respect of goods and services purchased by the taxpayer to produce the goods and services supplied) This method applies  to SOEs, FIEs and Vietnamese enterprises. For input tax to be able to be credited the tax payer must obtain a proper tax invoice from the supplier  Method 2: Direct payment method by which the business calculates the “value added” in the period (i.e: the sales price of the goods or services less the value of the goods or services purchased) This method applies to foreign companies not licensed under the foreign investment legislation which do not have the necessary accounting books and record. 2.Exempt goods and services There are many activities which are exempt entirely from VAT including: The transfer of land use right Certain credit services, loans, finance leasing, investment fund, capital assignment and securities trading Medical examination and treatment services Public passenger transportation by bus Teaching and training Life insurance, student insurance, livestock insurance, and types of non-commercial insurance activities Certain agricultural production Imports for humanitarian and non-refundable aid Transfer of technology and computer software (but withholding taxes may apply) Commonly used post, telecommunication and internet services under Government programs Machinery and equipment and special means of transport which are not yet produced in Vietnam and which are imported by a FIE or BCC parties as fixed assets of the enterprises (see below) Construction materials not yet domestically produced and imported to form fixed fixed assets of a FIE or to carry out a BCC (see below) Goods and services of business with income below a certain threshold and  Materials of a FIE or BCC parties  imported to produce products to supply to an enterprise which directly produces products for export Special mention should be made of various types of equipment, machinery and means of transport that are not yet able to be produce domestically. VAT does not apply to the following : o       Equipment, machinery and specialized means of transport forming part of a technological process and construction materials, not yet be able to be produced domestically and required to be imported to create the fixed assets of an enterprise; Ministry of Planning and Investment is responsible for coordination with other ministries to prepare a list from time to time of machinery, equipment, means of transport and construction materials that can be produced domestically so that whatever is not included in that list is exempt from payment of VAT if it is imported to create fixed assets o       Equipment, machinery and specialized means of transport not yet be able to be produced domestically and required to be imported directly for scientific research and technological development o       Aircraft, oil and gas drilling platforms and vessels not yet able to be produced domestically and leased from foreign parties for use for production and for business activities, the taxable price for calculating VAT on this type of equipment when it is sub-leased excludes the rent payable to the foreign party under the head lease. o       Equipment, machinery, spare parts, specialized means of transportation and materials not yet be able to be produced domestically and required to be imported for prospecting, exploring and developing oil and gas.  3.Rates of tax There are 3 rates of VAT : 0%, 5% and 10%  0% VAT rate applies to exported goods and services including processed exports. Exported services are defined as services directly provided to overseas organizations and individuals and used outside Vietnam However, the 0% rate does not apply to international transportation or to goods and services directly supplied to international transportation, overseas tourism services, outbound reinsurance services, outbound credit, financial and securities investments and exported unprocessed mineral resources Certain goods and services sold to EPZs or EPZ enterprises are not treated as 0% and are liable to payment of VAT at  the same rate applicable to the same goods and services as if they were consumed or provided in Vietnam.   5% VAT rate applies to various goods and services including: o       Most forms of clean water supplied for livelihood and production purposes o       Fertilizers and insecticides, livestock feed, certain unprocessed cultivation, husbandry, aquatic and aquaculture  products, services directly supplied for agriculture production, semi-processed cotton; sugar and secondary sugar products, products made form jute, sedge, bamboo and thatch, certain raw and fresh foodstuffs; and some unprocessed forestry products o       Children toys, certain types of books and programmed or clean magnetic tapes or discs o       Technical and scientific services o       Basic chemicals, news-print, certain concrete construction materials and items; tires, materials used for making fishing nets, and preliminary processed rubber latex and resins o       Products of various ferrous and precious metals, and pit-coal, soil, rocks, sand and gravel o       Publishing and showing non-documentary video films o       Automatic data processing machines, their spare parts and components   10%  VAT rate applies to most other types of goods and services including: o       Oil, gas, ore and other mineral products o       Commercial electric products, electronic and engineering products and electric tools o       Legal consultancy services, brokerage services, shipping agencies and hotel, tourism and catering services o       Chemicals and cosmetics; paper and most paper products ; and most post. Telecommunication and internet services o       Milk, confectionery, beverages and  other processed foods o       Leasing houses and other premises o       Gold, silver and gemstones (except for certain imported gold) o       Yarn, fabric, garments and embroidery products o     Pottery, ceramics, rubber and plastic products, wood and wooden products, cement, brick, tiles and other construction materials o       Other goods and services not subject to payment of Special Sales tax o       Other goods and services not subject to the 0% or 5% rate and not otherwise exempted     4.Registration All organizations and individuals carrying on production or trading of taxable goods and services in Vietnam must register for the VAT. Each branch or outlet of an enterprise must register separately and declare tax on its own activities. It is important to note that the transfers of goods between branches may be subject to VAT. 5.Filing and payment of taxes Taxpayers must file VAT returns monthly, by the 10 of the following month. The tax authorities process the tax return and issue a tax assessment notice to the taxpayer. The taxpayer must remit the VAT payable 25 of the month. At the end of the year, the taxpayer must complete an annual tax finalization. 6.Refunds Generally, where the taxpayer’s input VAT for the period exceeds its output VAT, it will have to carry the excess forward for three months. It can then claim a refund from the tax authorities. In certain cases (e.g. BOT projects during construction phase, oil and gas projects during exploration and development phase), a refund may be granted on a monthly basis. Start up entities may be required to wait until the end of the year for refunds. 7.VAT reduction at year end Businesses engaged in manufacturing, construction, transportation, trading, services, tourism or food and beverage services can apply for a reduction of VAT if they suffer from losses during the first three years of VAT. A reduction will only be considered where the amount of VAT paid is larger than the amount of Turnover Tax which would have been payable under the previous tax system. The maximum amount of VAT reduction shall not exceed the VAT amount payable for the year of the reduction. These VAT reductions can reduce monthly VAT payments through the year, subject to the annual finalization at year end.

TOP

V>> Royalties:

All organizations and individuals in all economic sectors engaging in the exploitation of natural resources in compliance with the laws of Vietnam shall be liable to register, declare ad pay royalties with the following rates

Royalties Tariff (Issued with Decree 68-1998-ND-CP of the Government dated 3 September 1998) No Groups and kind of resources Royalty rate (%) I Metallic minerals     1 Ferrous metallic mineral (iron, manganese, titanium and so forth)   2 2 Non-ferrous metallic minerals     -Alluvial gold   2   -Dust gold   3   - Rare earth   4   -Platinum, tin, wolfram, silver, antimony   5   -Lead, zinc, aluminum, bauxite, copper, nickel, cobalt, molybdenum, mercury, magnesium, vanadium, platinum 3   -Other non-ferrous metallic minerals) 2 II Non-metallic minerals (except for mineral water and natural thermal water as provided for in group VII)     1 Non metallic minerals used as common construction materials:       -Soil exploited for leveling or construction of works   1     -Non-metallic minerals used as other common construction materials (such as stone, sand, gravel, soil used for production of brick, and so forth) 2 2 Non-metallic mineral used as high quality construction materials (granite, dolomite, refectory clay, quartzite and so forth)   3 3 Non-metallic mineral used for industrial production  (such as pyrite, apatite, phosporite, kaolin, mica, technical quartz, limestone used for production of lime and cement, sand used for production of glass and so forth)   4 4 Coal         - Anthracite coal exploited from coal mines 1   - Anthracite coal exploited from open coal mines   2   - Brown coal and fat coal   3     - Other coals 2 5 Gemstones     (a)    Diamond, ruby, sapphire, emerald, alexandrite, black precious opal   8   (b)   Adrift, rhodolite, pyrope, beryl, spinel, topaz, crystal amethyst (purple blue, greenish yellow, orange) quartz, crizolit, valuable opal (white or flame red), fenpat, birusa, nephrite   5   c) Gemstones of other types   3 6 Other non-metallic minerals   2 III Oil (1)   IV Gas (2)   V Products of natural forests     1 Assorted round timber       -Category I 40