Did you know one of the most common reasons 80% of startups shut down within the first 3 years is due to violating legal obligations such as tax declarations? To avoid unexpected penalty notices for late tax payments, you need to identify the taxes your business must pay and when to pay them. KMC will address these issues in the following section.
What is tax?
According to Article 8, Clause 4 of the 2020 Enterprise Law, fulfilling tax obligations is a prerequisite for smooth business operations. Individuals or businesses, including FDI enterprises, are required to pay taxes to the government in accordance with the law. This fee is not used in exchange for a specific service or direct refund, but rather it is “a contribution” from everyone to help the country operate more smoothly.
The government uses this fund to maintain and develop society, regulate the economy and society, and guide consumer behavior. Below are specific actions:
- The government builds infrastructure such as roads, schools, hospitals; pays salaries to civil servants, teachers, and doctors; and ensures national defense and security to maintain and develop society.
- Personal income tax and corporate income tax help balance income and regulate the economy and society.
- Some special taxes such as excise taxes are levied on alcohol, tobacco, and imported cars. The purpose is to limit consumption of these products to protect public health and the environment.
Taxes businesses must pay and simple calculation methods
Business license tax
This is a fixed fee that businesses must pay annually after registering a company. It is a mandatory tax, but small businesses and newly converted household businesses are exempt for 3 years from the date of registration.
The fee ranges from 300,000 VND to 3,000,000 VND depending on charter capital and revenue. For example, if capital is under 10 billion VND, you need to pay 3 million VND/year.
Value-added tax (VAT)
VAT is the additional value when selling goods or services. Simply put, it’s the extra amount customers pay when buying goods, and the company must pay this difference to the government after subtracting input tax. There are usually two calculation methods:
- Deduction method (easier for large companies):
Tax payable = output tax – input tax
Example: If you collect 900,000 VND in tax when selling and spend 700,000 VND when purchasing, then you need to pay 200,000 VND in tax. - Direct method (for small companies):
Based on revenue: Sales x % rate (1% for goods, 5% for services)
Example: If you sell goods worth 9 million VND, you need to pay 90,000 VND (1%).
Based on value-added: Profit x 10% (for gold, silver, gemstones)
Example: Buy a ring for 4 million, sell for 5 million, profit 1 million. You need to pay 100,000 VND in tax.
Corporate income tax (CIT)
This tax is based on profits after deducting legitimate expenses such as purchase costs and operating expenses. This is how the government collects from the successful business activities of companies, and the amount reflects business efficiency.
Formula: Profit x 20% (or higher depending on the industry, e.g., oil and gas).
Example: If you profit 22 million VND, you need to pay 4.4 million VND in CIT.
Note: clearly stating legitimate expenses can reduce the amount of tax paid.
Personal income tax (PIT)
This is the tax the company pays on behalf of employees based on their salary and bonuses. Although this is the employee’s tax, the company must withhold a portion of the salary to pay on their behalf so that employees don’t have to worry.
Formula: (salary – deductions) x tax rate
Deductions are amounts “subtracted” from the employee’s salary before tax calculation. The goal is to avoid taxing the entire salary, especially for those with families or insurance contributions. There are 3 main types of deductions:
- 11 million VND/month per individual
- 4.4 million VND/month per dependent such as children or elderly parents
- Insurance contributions including social, health, and unemployment insurance already paid by the employee
Example: Salary of 17.77 million VND – 17 million VND in deductions = 770,000 VND. You pay 38,500 VND (5%) in PIT.
Tax payment timelines
| Tax type | Frequency | Declaration deadline | Payment deadline | Late payment penalty |
| Business license taxi | Annual | Within 30 days from establishment | July 30 or January 30 | 0.05% of unpaid tax per day |
| VAT | Monthly or quarterly | 20th of the following month or 30–31 of next quarter | 20th of the following month or 30–31 of next quarter | 0.03% of unpaid tax per day |
| Corporate Income Tax | Quarterly | 30th of the first month of the next quarter | 30th of the first month of the next quarter | 0.03% of unpaid tax per day |
| Personal Income Tax | Monthly/quarterly, annual finalization | End of March next year (finalization) or end of first month next year (declaration) | End of March next year (finalization) or end of first month next year (declaration) | End of March next year (finalization) or end of first month next year (declaration) |
After knowing the types of taxes businesses must pay, proceed right away and don’t let taxes become a “debt bomb” that explodes unexpectedly. If you don’t have much time, use KMC’s tax declaration services. We guarantee timely, complete, and accurate tax filings that comply with Vietnamese law.
Contact us now via hotline: +84814894789, +84919889331 (HCMC) or +84814894789 (Hanoi).
