Current situation of foreign companies disagreeing with the applicable tax rate

Recently, the situation in which foreign companies disagree with the tax rate determined by tax authorities has shown an increasing trend in Vietnam. The main causes stem from differences in the application of law, changes in tax policies, and increasingly strict regulations on related-party transactions. Such practical reality requires enterprises to correctly understand legal provisions, ensure full compliance, and promptly protect their lawful rights and interests when disputes with tax authorities arise.

I. Common legal risks related to foreign companies disagreeing with the applicable tax rate

When foreign companies disagree with the applicable tax rate, they may face the following risks:

• The risk of tax arrears and administrative sanctions is the most common risk when foreign companies disagree with the applicable tax rate but fail to ensure compliance during inspections and audits, and their accounting methods or self-declared tax rates are not accepted by the tax authorities.
• The risk of tax enforcement may arise where the company intentionally fails to comply with decisions on tax arrears or sanctions. In such cases, the Tax Authority has the right to apply strong enforcement measures in accordance with the law, including: Freezing bank accounts, prohibiting transactions, or deducting money from accounts to recover tax debts; notifying that invoices are no longer valid, causing the company to be unable to use invoices and seriously disrupting business operations; and seizure of assets and auction thereof, which is the final and most serious measure to recover tax debts.
• Impacts on reputation and operations in Vietnam represent a risk that, although not coercive in nature, may seriously affect the company and have long-term negative effects on its existence. The company may be classified as having high tax risks and be subject to in-depth inspections and audits regarding various taxes and fiscal years. The prolonged process of explanation, inspection, and complaint resolution consumes significant resources and disrupts business operations.

II. Understanding foreign companies disagreeing with the applicable tax rate

1. What factors may lead to foreign companies disagreeing with the applicable tax rate?

There are many factors leading to foreign companies disagreeing with the applicable tax rate; however, the following are the most common:

• Differences in tax rates among countries: Countries compete with one another to attract foreign companies, resulting in differences in applicable tax rates among jurisdictions.
• Frequent changes and fluctuations in tax regulations: Laws and amending circulars are regularly revised, which may cause enterprises to apply outdated provisions, fail to update regulations in a timely manner, or have different interpretations compared to tax authorities.
• Complex related-party transactions: When companies within the same group or multinational corporations conduct internal transactions, determining the “market price”, allocating costs, and taxable profits often causes disputes, easily leading to foreign enterprises disagreeing with the calculated tax rate.

From the above factors, it can be seen that foreign companies disagreeing with the applicable tax rate often originates from differences in tax policies, legal interpretation and application, as well as the complexity of related-party transactions. Therefore, correctly identifying the causes is an important basis for enterprises to choose appropriate handling methods and protect their lawful rights and interests.

2. Do foreign companies have legal rights when they disagree with the applicable tax rate?

Where foreign companies disagree with the applicable tax rate, they are entitled to the rights provided under Article 16 of the Law on Tax Administration 2019, as amended and supplemented in 2024, including:

• The right to provide information and explanations regarding the determination of tax obligations; the right to explain figures and tax calculation bases with tax authorities.
• The right to file complaints and initiate lawsuits against administrative decisions and administrative acts relating to taxation.
• In addition, this Article also provides other rights such as: Receiving support and guidance in tax payment obligations; being provided with information and documents to perform tax obligations and exercise tax rights; and reserving opinions in tax inspection and tax audit minutes.

Thus, disagreement with the applicable tax rate does not mean that the enterprise loses its rights; rather, it must know how to exercise its lawful rights to protect its interests.

III. Legal provisions related to foreign companies disagreeing with the applicable tax rate

1. Which authority may foreign companies file complaints with when they disagree with the applicable tax rate?

Pursuant to Articles 7, 18, and 33 of the Law on Complaints 2011, foreign companies disagreeing with the applicable tax rate have the right to file the first complaint with the Tax Department/Sub-Department of Taxation that issued the decision, and the second complaint with the General Department of Taxation under the Ministry of Finance.

According to Articles 12 and 16 of the Law on Tax Administration 2019, as amended and supplemented in 2025, the General Department of Taxation has the authority to manage and review decisions relating to corporate income tax, value-added tax, personal income tax, related-party transactions, and other tax obligations.

2. Which provisions of tax law may support foreign companies when they disagree with the applicable tax rate?

In cases where foreign companies disagree with the applicable tax rate, the following provisions of tax law may provide support:

• Provisions regarding taxpayers’ rights under Article 16 of the Law on Tax Administration 2019, as amended and supplemented in 2025, such as the right to request explanations and information regarding tax calculation bases, and the right to complain or initiate legal proceedings against inappropriate tax decisions.
• Provisions on complaints, complaint settlement, and lawsuits: When disagreeing with the applicable tax rate, the company must still comply with the decision but may request explanations from tax authorities, file complaints, or initiate legal proceedings in accordance with Article 54 of the Law on Tax Administration as amended and supplemented in 2025.
• Article 8 of the Law on Tax Administration 2019, as amended and supplemented in 2025, also recognizes the principle of tax administration aimed at ensuring the lawful rights and interests of taxpayers, creating a basis for foreign companies to request tax authorities to apply the law correctly, objectively, and transparently in determining tax obligations.

In addition to provisions under tax law, foreign companies may also rely on international cooperation regulations between countries for further support.

3. What mistakes in tax dossiers may cause foreign companies to disagree with the tax rate and lead to violations?

During tax declaration and payment in Vietnam, foreign companies may easily encounter certain mistakes causing tax authorities to impose higher tax liabilities or additional tax assessments.

When the company disagrees with such tax rates, disputes may arise and lead to the risk of being considered in violation of tax obligations. Common mistakes include:

• Errors in tax documents and declarations: Failure to submit sufficient contracts, invoices, payment documents; failure to retain records or inability to prove legitimate expenses.
• Errors in determining taxable income and deductible expenses, including incorrect accounting of valid expenses.
• Errors in related-party transactions, which are the most common issues for foreign companies.
• Incorrect determination of permanent establishment, leading to misunderstandings regarding the place where tax obligations arise.
• Failure to comply with deadlines for tax declarations and submission of tax dossiers.
• Failure to regularly update legal regulations.

IV. Questions related to foreign companies disagreeing with the applicable tax rate

1. How may the commercial relationship between foreign companies and the State be affected when they disagree with the applicable tax rate?

When foreign companies disagree with the applicable tax rate, the relationship between such companies and the State may be affected to a certain extent. The foreign company may lose credibility with tax management authorities, face a higher risk of stricter supervision in future inspections, and experience impacts on import-export activities, tax incentives, and business licenses.

2. When a foreign company disagrees with the applicable tax rate, what documents should it prepare to protect its rights?

In such cases, the foreign company should prepare documents such as tax declaration dossiers, financial statements, complete invoices and supporting documents, related-party transaction dossiers (if any), contracts, international payment documents, and written explanations regarding tax calculation methods and legal grounds in order to protect its lawful rights and interests.

3. What is the maximum time limit for foreign companies to file complaints regarding the applicable tax rate?

The maximum time for foreign companies to file complaints regarding the applicable tax rate is 90 days from the date of receipt of the tax decision, pursuant to Article 9 of the Law on Complaints 2011.

4. If a foreign company fails to follow the correct complaint procedure regarding the applicable tax rate, what problems may arise?

If a foreign company fails to comply with the proper procedures and formalities when filing complaints regarding the applicable tax rate, the complaint may not be accepted under Article 11 of the Law on Complaints 2011 (such as expiry of the complaint period, lack of jurisdiction, or improper form). In such cases, decisions on tax assessment, tax arrears, or tax sanctions remain effective and are not suspended under Article 147 of the Law on Tax Administration 2019, as amended and supplemented in 2025.

The enterprise may be subject to tax assessment under Article 50, administrative sanctions depending on the type of violation under Decree No. 125/2020/ND-CP, late payment interest at 0.03% per day under Article 59, and even tax enforcement measures under Article 125 of the Law on Tax Administration 2019, as amended and supplemented in 2025.

5. What measures may be applied when foreign companies disagree with the applicable tax rate but fail to comply with legal regulations?

When foreign companies disagree with the applicable tax rate but fail to comply with legal regulations, the following measures may be applied:

• Tax assessment under Articles 50–52 of the Law on Tax Administration 2019, as amended and supplemented in 2025.
• Administrative sanctions and late payment interest depending on the type of violation under Decree No. 125/2020/ND-CP.
• Unexpected tax inspections under Articles 110 and 113 of the Law on Tax Administration 2019, as amended and supplemented in 2025.
• Temporary suspension of tax incentives or tax refunds under Articles 47 and 60 of the Law on Tax Administration 2019, as amended and supplemented in 2025.

Therefore, enterprises must comply with legal procedures in order to minimize risks and protect their lawful rights and interests.

V. Are you looking for a reputable legal expert to support issues related to foreign companies disagreeing with the applicable tax rate?

Let NPLaw Firm accompany you. With extensive experience in taxation and legal matters involving foreign-invested enterprises, our team of lawyers will support the analysis of tax decisions, preparation of dossiers, development of legal arguments, and representation in working with tax authorities, helping enterprises protect their interests and minimize risks to the greatest extent possible.

In conclusion, foreign companies disagreeing with the applicable tax rate is a complex legal issue involving significant risks relating to finance, reputation, and business operations in Vietnam. To handle this effectively, enterprises must thoroughly understand tax law regulations, follow proper complaint and explanation procedures, and proactively remedy arising errors. Preparing complete documentation and choosing appropriate legal solutions will help enterprises protect their lawful rights and interests and minimize adverse consequences during dealings with tax authorities.

The above information is for reference purposes only. Should you require detailed consultation regarding your specific case, please contact NPLaw Firm for immediate advice.