What is Tax? Some Common Types of Taxes in Vietnam in 2024

Taxes play a crucial role in maintaining the state budget, which in turn supports investment in essential sectors such as healthcare, education, and infrastructure. In addition, taxes are seen as an important tool for regulating the economy and redistributing income. However, not everyone fully understands the nature of taxes or can differentiate between the common types of taxes in Vietnam. In this article, KMC will help you understand everything about taxes as well as the important types of taxes.

What is Tax?

Tax can be understood as a compulsory payment imposed by the State on organizations and individuals, not reimbursed directly, to meet the expenditure needs for the public benefit. According to legal regulations, taxes can be applied in direct or indirect forms and are paid in cash or equivalent labor value. It is an essential tool to maintain political power, fulfill the functions of the State, adjust macroeconomic goals, and redistribute income for businesses.

Tax is a mandatory payment to the government

What are the Characteristics of Taxes?

Taxes are the foundation for maintaining political power and executing the State’s duties. Here are some characteristics of taxes:

• Compulsory Nature: Taxes are a legal obligation imposed on all individuals and organizations required to pay taxes. Non-compliance will result in strict penalties according to the law.
• Powerful Nature: Taxes not only ensure revenue for the state budget but are also enforced through powerful agencies such as the General Department of Taxation and tax authorities.
• Non-Refundable: Taxes are paid into the state budget and are not refunded or tied to any specific services.
• Definite Nature: Taxable entities, the tax base, tax rates, and tax payment periods are clearly defined to ensure transparency and fairness in tax management.
• Long-term Nature: Taxes are not seasonal or temporary; they are a regular financial obligation contributing to the sustainable development of the country.

What is the Role of Tax in the Economy and for Citizens?

Taxes are an important tool for regulating macroeconomic objectives, ensuring sustainable economic development, and supporting the livelihood of the people. 

What is the role of tax?

Role of Tax:

in the National Economy

• State Budget Revenue: Taxes provide funds to invest in essential areas such as education, healthcare, transportation, and environmental protection.
• Regulating Business Cycles: The government uses taxes to stimulate or slow down the economy. For example, reducing taxes to stimulate consumption during an economic downturn or increasing taxes to control inflation when the economy grows too fast.
• Encouraging or Restricting Specific Industries: Special consumption taxes are applied to products like tobacco, beer, and alcohol. This helps reduce consumption, while environmental protection taxes encourage businesses to reduce emissions.
• Balancing Wealth Inequality: Higher income taxes for the wealthy help narrow the gap between the rich and the poor, ensuring social fairness.

For Citizens

• Regulating Consumer Demand: When taxes increase, the prices of products and services also rise, reducing consumer spending. Conversely, reducing taxes stimulates consumption and boosts economic growth.
• Ensuring Social Fairness: Progressive tax policies require high-income earners to pay more taxes, while lower-income individuals may receive exemptions or reductions, helping to alleviate their financial burden.

Common Types of Taxes in Vietnam

A summary of some common types of taxes in Vietnam

In Vietnam, there are several common types of taxes applied depending on the industry and sector. Below are some important types of taxes you should know:

Value Added Tax (VAT)

VAT is a tax levied on the value added to goods and services during production and consumption. This tax is usually calculated as a percentage of the value of goods or services.

• Tax Rate: The current VAT rate in Vietnam is 10%, but some special items may have a lower rate or be exempt from tax, such as agricultural products, healthcare, and education.
• Taxable Entities: Enterprises involved in manufacturing, retail, and service businesses are subject to VAT.

Personal Income Tax (PIT)

PIT is a tax levied on the income of individuals from sources such as salaries, wages, bonuses, profits from investments, rental income, etc.

• Tax Rate: Personal income tax is calculated based on a progressive rate ranging from 5% to 35%, depending on monthly income.
• Taxable Entities: All individuals with income in Vietnam are required to pay personal income tax.

>> Read more: Personal Income Tax Consulting Services According to the Latest Regulations 2024

Corporate Income Tax (CIT)

CIT is a tax levied on the profits of businesses after deducting allowable expenses.

• Tax Rate: The current CIT rate in Vietnam is 20%, but it may be reduced depending on the specific industry and type of business.
• Taxable Entities: Businesses engaged in manufacturing and commercial activities in Vietnam must pay this tax.

Special Consumption Tax (SCT)

SCT is levied on certain goods and services that have a significant impact on public health, the environment, or society, such as alcoholic beverages, tobacco, and certain entertainment services.

• Tax Rate: Depending on the product type, SCT can range from 10% to 150%.
• Taxable Entities: Products and services in the special consumption tax group.

Business License Tax

The business license tax is an annual tax that individuals and organizations involved in business activities must pay to register their business activities in Vietnam.

• Tax Rate: The amount of the business license tax depends on the enterprise’s or individual’s revenue, usually ranging from 300,000 VND to 3,000,000 VND per year.
• Taxable Entities: Individuals and organizations engaged in business must pay this tax.

Import-Export Tax

Import-export tax is levied on goods exported or imported across Vietnam’s borders. The purpose of this tax is to protect domestic industries and regulate international trade.

• Tax Rate: The rate varies depending on the type of goods and the countries involved in import-export activities.
• Taxable Entities: Enterprises and organizations engaged in import-export activities.

Property Tax

Property tax is levied on the ownership or use of assets, especially land and real estate. This tax helps the government regulate asset-related activities.

• Tax Rate: The property tax rate varies depending on the value of the asset and its geographical location.
• Taxable Entities: Individuals and organizations owning assets.

Non-Agricultural Land Use Tax

This tax applies to organizations and individuals using land for non-agricultural purposes, such as residential or industrial land.

• Tax Rate: The tax is based on the land area used and its geographical location.
• Taxable Entities: Landowners or users of non-agricultural land in Vietnam.

Professional Tax Consulting Services at KMC

KMC is proud to be one of the reputable and professional tax consulting firms in Vietnam. With over 15 years of experience in the field of accounting and tax services, we are committed to providing our clients with optimal solutions that save costs and ensure full compliance with current legal regulations.

KMC is a reputable and professional tax consulting firm in Vietnam

Strengths of KMC’s Tax Consulting Services:

• Experienced in Tax Consulting: With over 15 years of operation in the industry, we have built a team of experts with deep knowledge of Vietnam’s tax regulations.
• Optimal Solutions: KMC provides effective tax solutions, helping businesses optimize tax costs while ensuring full compliance with tax obligations.
• Diverse Services: KMC offers services including tax consulting, business consulting, accounting services, and human resources consulting
• Expert Team: KMC’s tax consultants are always up to date with the latest tax policy changes, ensuring that our clients receive accurate and timely advice.

If you are interested and wish to learn more about common taxes, please contact us at Hotline 0814894789 for timely support. Our team of experts at KMC is always ready to answer all your questions and offer optimal solutions.