FDI corporate income tax policy in 2024

How much is FDI corporate income tax in 2024? To attract and effectively manage foreign investment resources, Vietnam continuously improves institutions and policies and financial incentives, especially corporate income tax policies. Are FDI enterprises subject to corporate income tax, what is the tax rate and what tax incentives are currently available?

1. Are FDI enterprises subject to corporate income tax?

Pursuant to Article 2, Law on Corporate Income Tax 2008, tax payers are regulated as follows:

  • Enterprises are established according to foreign laws.
  • Organizations are established according to the provisions of the Cooperative Law.
  • The public service unit is established according to the provisions of Vietnamese law.

Enterprises with taxable income according to Article 3, Law on Corporate Income Tax 2008 must pay corporate income tax according to the regulations: For taxable income arising in Vietnam and taxable income arising outside Vietnam:

  • Enterprises established under Vietnamese law pay tax on income arising in Vietnam and outside Vietnam.
  • Foreign enterprises with permanent establishments in Vietnam: Pay tax on income arising in Vietnam and taxable income arising outside Vietnam related to the operations of the permanent establishment.
  • Foreign enterprises with permanent establishments in Vietnam: Pay tax on taxable income arising in Vietnam (income not related to the operations of the permanent establishment).
  • Foreign enterprises without permanent establishments in Vietnam: Pay tax on taxable income arising in Vietnam.

Thus, FDI enterprises are established and operate according to the provisions of the Investment Law 2020. Therefore, FDI enterprises are subject to corporate income tax according to the provisions of Vietnamese Law.

Corporate income taxes and investment incentives: A global review

2. Corporate income tax incentives for FDI enterprises

FDI enterprises enjoy preferential foreign corporate income tax rates when implementing investment projects in industries or areas with investment incentives according to the law.

2.1. Preferential tax rates

According to Article 19, Circular 96/2015/TT-BTC, FDI enterprises enjoy preferential tax rates as follows:

  • Newly established businesses enjoy a tax incentive of 10% throughout their operating period.
  • Income from the implementation of new investment projects in areas with difficult socio-economic conditions is subject to a tax rate of 17% for 10 years.
  • Income of farming, livestock, and processing enterprises in the agricultural and aquaculture sectors in areas with difficult or extremely difficult socio-economic conditions will be subject to a tax rate of 15%.
  • Enterprises are People’s Credit Funds, Cooperative Banks and Microfinance Institutions: Apply a tax rate of 17%.

2.2. Corporate income tax exemption

Pursuant to Article 20, Circular 78/2014/TT-BTC, some FDI enterprises will be eligible for corporate income tax exemption, specifically as follows:

2.2.1 Tax exemption for 04 years, 50% reduction of tax payable for the next 09 years for:

  • Enterprise income arising from investment in new projects is entitled to a 10% tax incentive for 15 years.
  • Enterprise income arises from investing in new projects in the field of socialization and implemented in areas with difficult or especially difficult socio-economic conditions.

2.2.2 Tax exemption for 04 years, 50% reduction of tax payable within the next 05 years for enterprise income

arising from investment in new projects in socialized fields not in areas with poor socio-economic conditions difficult, especially difficult.

2.2.3 Tax exemption for 02 years, 50% reduction of tax payable within the next 04 years for:

  • Income from implementing new investment projects: Tax rate of 17% applies for 10 years.
  • Enterprise income arises from investment in new projects in industrial parks.


Tax Incentives for Foreign Investment in Vietnam

3. Impact of global minimum tax

On November 29, 2023, the National Assembly officially passed Resolution 107/2023/Qh15 regulating the application of additional corporate income tax according to the global minimum tax. The resolution takes effect from January 1, 2024, applicable from tax year 2024. In particular, the global minimum tax rate applied in Vietnam is 15% for businesses considered constituent units of Multinational corporations recorded consolidated revenue of 750 million EURO in 2 years of the 4 consecutive years.

The global minimum tax will have an impact on foreign capital flows into Vietnam, especially for large corporations. With a minimum corporate income tax rate of 15%, many foreign investors are currently enjoying special preferential tax rates below 15%, which can reduce the effectiveness of tax incentive policies in Vietnam. With the change in tax policy, there needs to be a new attraction strategy for foreign investors, associated with the process of transforming the economic growth model to continue attracting FDI capital flows into Vietnam.

>>>Read more: Preparing for Tax Inspection: Essential Steps and Documents

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