Over the past few years, Vietnam has benefited from investment by MNEs with strong brands including South Korean Samsung Electronics and LG Display. Manufacturing is strong in Vietnam and accounts for most of its exports to other countries. The World Bank projects GDP growth to stagnate at 6.3% in 2017 and 2018, but Vietnam's public debt to GDP ratio is still relatively high. The government requires tax revenue for public spending on infrastructure, health, education and developing the country's labour market. Like other countries, Vietnam is faced with the challenge of collecting the corporate tax from MNEs while trying to remain a competitive destination to do business.
On February 24 2017, the Communist Party of Vietnam issued transfer pricing decree No. 20/2017/ND-CP (Decree 20). Decree 20 came into effect on May 1 2017. PwC has described Decree 20 as the most important piece of Vietnamese TP legislation in the past decade. It brings the country in line with the BEPS framework and international standards. The decree mirrors many of the OECD's BEPS action points, including the introduction of the 'substance over form' principle which is expected to lead to stricter audits by tax authorities. It also mandates three-tiered TP documentation, and redefines the scope of the related party concept, for example, by increasing the ownership threshold from 20% to 25%, among other stipulations.
Decree 20 highlights the Vietnamese government's determination and seriousness in tackling transfer pricing and base erosion and profit shifting. Taxpayers now have to submit the required TP documentation within 90 days from the fiscal year-end date. The period of 90 days may make it challenging for businesses to get all their required tax information ready for inspection.
A tight time frame has also been implemented for tax audits, with taxpayers required to submit TP documentation upon written request by the tax authorities within 15 working days compared to the previous 30-day deadline.
(As of August 2017)
|Corporate income tax rate||20% (a)|
|Capital gains tax rate||20% (b)|
|Branch tax rate||20%|
|Branch remittance tax||n.a.|
Net operating losses (years)
Source: EY 2017 Worldwide Corporate Tax Guide