How are tax policies for foreign enterprises operating in vietnam regulated

Tax policies applicable to foreign enterprises operating in Vietnam constitute an important legal framework governing tax obligations arising in the course of investment and business activities. Proper determination of the scope of application enables enterprises to comply with regulations and minimize legal risks. At the same time, tax policies directly affect investment decisions and the remittance of profits abroad by foreign enterprises.

I. Current situation regarding tax policies for foreign enterprises operating in Vietnam

In the context of Vietnam increasingly attracting strong inflows of foreign investment capital, tax policies applicable to foreign enterprises operating in Vietnam play a particularly important role. The basic tax regulatory framework has been relatively comprehensively established, covering major taxes such as corporate income tax, contractor tax, value-added tax, and other related tax obligations.

However, in practice, many foreign enterprises still encounter difficulties in accurately determining their tax obligations due to differences between enterprises with and without a permanent establishment, as well as in the application of double taxation avoidance agreements. In addition, frequent policy changes and increasingly stringent compliance requirements pose significant challenges for tax risk management for foreign enterprises in Vietnam.

II. Concept of tax policies for foreign enterprises operating in VietNam

To properly understand and consistently apply the above regulations, it is first necessary to clarify the concept of tax policies applicable to foreign enterprises operating in Vietnam, as well as the scope and legal nature of such policies.

1. What are tax policies for foreign businesses operating in VietNam? 

Tax policies for foreign enterprises operating in Vietnam comprise the entirety of tax law provisions governing the tax obligations of foreign enterprises arising from investment, business, or service provision activities in Vietnam. These policies regulate matters related to taxpayers, tax bases, tax declaration and payment methods, and tax administration.

Through tax policies, the State not only ensures budget revenue but also orients and regulates foreign investment activities in line with socio-economic development objectives.

2. How is the scope of application of tax policies for foreign enterprises in VietNam determined?

The scope of application of tax policies for foreign enterprises in Vietnam is determined based on the taxpayer and the source of taxable income, pursuant to Article 2 of the Corporate Income Tax Law 2025. Accordingly, foreign enterprises, regardless of whether they have a permanent establishment in Vietnam, are subject to tax policies if they generate taxable income in VietNam.

Where a foreign enterprise has a permanent establishment, its tax obligations are determined with respect to income arising in Vietnam and income arising outside Vietnam but related to the activities of the permanent establishment. Conversely, foreign enterprises without a permanent establishment, including those conducting business on digital platforms and in e-commerce, are only subject to tax on income arising in VietNam.

3. The role of tax policies for foreign businesses in attracting foreign investment

Tax policies applicable to foreign enterprises play a crucial role in creating a transparent, stable, and competitive investment environment in Vietnam. Through provisions on tax rates, tax incentives, and double taxation avoidance mechanisms, tax policies help reduce compliance costs and legal risks for foreign investors.

At the same time, well-designed tax policies enable the State to direct investment flows into prioritized sectors, industries, and regions. Accordingly, tax policies not only secure budget revenue but also serve as an important tool for sustainably attracting and retaining foreign investment.

III. Legal provisions governing tax policies for foreign businesses operating in Vietnam

Based on the theoretical issues outlined above, an examination of specific provisions of current law helps clarify how tax policies for foreign enterprises operating in Vietnam are applied in practice.

1. The scope of regulation of tax policies for foreign enterprises operating in VietNam

The scope of regulation of tax policies is determined primarily based on the taxpayer and the source of taxable income, pursuant to Article 2 and Clause 3, Article 3 of the Corporate Income Tax Law 2025. Accordingly, foreign enterprises, whether having or not having a permanent establishment in VietNam, fall within the scope of regulation if they generate taxable income in VietNam.

Where a foreign enterprise has a permanent establishment, tax obligations apply to income arising in Vietnam, income arising outside Vietnam but related to the activities of the permanent establishment, as well as income arising in Vietnam that is not related to the activities of the permanent establishment.

For foreign enterprises without a permanent establishment, including those engaged in e-commerce and digital platform business, tax policies apply only to income sourced in VietNam, regardless of the location where business activities are conducted.

Fundamentally, tax policies regulate foreign enterprises based on the substance of income generation in VietNam rather than the form of legal presence or business location, thereby ensuring fairness and effective tax administration in cross-border investment and business activities.

2. Principles underlying tax policies for foreign enterprises operating in VietNam

Tax policies for foreign enterprises are developed based on the principles governing the application of corporate income tax incentives under Article 12 of the Corporate Income Tax Law 2025. Accordingly, tax policies, including tax incentives, are determined based on incentivized sectors and incentivized locations, in alignment with the State’s socio-economic development orientation. Specific incentive levels are applied uniformly under the Corporate Income Tax Law, while ensuring the principle of priority application of higher-effect specialized laws, except in special cases decided by the National Assembly.

In addition, tax law recognizes the principle allowing enterprises to choose the most favorable incentive where the same income simultaneously satisfies multiple incentive conditions.

3. Core contents of current tax policies for foreign enterprises operating in VietNam

The core contents of tax policies focus on determining tax obligations, scope of taxpayers, sources of taxable income, and tax application mechanisms to ensure effectiveness, fairness, and conformity with international practice. Specifically:

• Tax obligations are determined based on permanent establishment status and income arising in Vietnam: foreign enterprises with a permanent establishment must pay corporate income tax on income arising in Vietnam and income arising outside Vietnam related to the permanent establishment; foreign enterprises without a permanent establishment are subject to tax only on income arising in Vietnam.
• The scope of taxable entities is expanded to include foreign enterprises operating through e-commerce and digital platforms, even without a permanent establishment, where taxable income is deemed to arise in Vietnam.
• Income sourced in Vietnam, regardless of where business activities are conducted, is the key basis for determining tax obligations.
• Tax rates and incentives are clearly stipulated by sector, industry, and location, ensuring fairness and competitiveness within Vietnam’s tax framework.

Accordingly, tax policies not only define the regulatory scope but also establish a transparent taxation mechanism consistent with the digital economy and international investment flows, enabling foreign enterprises to clearly understand their tax obligations in Vietnam.

4. Sanctions for tax law violations applicable to foreign enterprises operating in VietNam

Sanctions for tax law violations are applied in accordance with regulations on administrative penalties in the tax sector, without distinction between domestic and foreign enterprises, where violations arise during tax declaration, payment, and compliance in Vietnam. Sanctions include warnings, monetary fines, tax arrears recovery, and other remedial measures depending on the nature and severity of the violation.

Pursuant to Clause 5, Article 13 of Decree No. 125/2020/NĐ-CP (as amended by Point a, Clause 10, Article 1 of Decree No. 310/2025/NĐ-CP), where a taxpayer submits a tax return more than 90 days late and such delay results in additional tax payable, the taxpayer may be subject to a fine ranging from VND 15,000,000 to VND 25,000,000. In addition, the taxpayer must pay outstanding tax amounts and late payment interest and may be subject to compulsory enforcement measures to ensure tax compliance.

Where tax violations involve intentional or fraudulent acts and meet criminal prosecution thresholds, enterprises may be subject to criminal liability for tax evasion under Article 200 of the 2015 Criminal Code (as amended in 2017).

In summary, individuals or corporate entities committing tax evasion involving amounts exceeding statutory thresholds or repeating violations after administrative penalties may be subject to criminal sanctions, including fines, imprisonment, business bans, or suspension of operations for a definite term, depending on the severity and consequences of the violations.

IV. Questions regarding tax policies for foreign enterprises operating in Vietnam

1. Are foreign enterprises required to register for a tax identification number in VietNam?

The requirement depends on the form of operation and whether tax obligations arise. Foreign enterprises with a permanent establishment in Vietnam are required to register for a tax identification number pursuant to Article 30 of the Tax Administration Law 2019.

Foreign enterprises without a permanent establishment but generating income in Vietnam fulfill tax obligations under the contractor tax mechanism pursuant to Circular No. 103/2014/TT-BTC.

2. Do tax policies distinguish between enterprises with and without a permanent establishment?

It ís to determine the scope and method of tax obligations, not to exclude taxpayers. Foreign enterprises are subject to tax if they generate taxable income in Vietnam, regardless of permanent establishment status. 

3. How are tax obligations determined for foreign businesses without a permanent establishment?

Tax obligations are determined based on income sourced in Vietnam, regardless of physical presence, ensuring taxation at source in line with international practice.

4. May foreign enterprises authorize organizations or individuals in VietNam to fulfill tax obligations?

Foreign enterprises may authorize tax agents or other organizations or individuals in Vietnam to perform tax procedures pursuant to Article 79 of Circular No. 80/2021/TT-BTC.

5. Is profit remittance abroad subject to tax?

Vietnamese law does not impose a separate tax on profit remittance abroad. Profits may be remitted after fulfillment of all financial obligations, including corporate income tax.

V. Why seek legal advice from NPLaw on tax policies for foreign enterprises in Vietnam

With a team of experienced lawyers and consultants specializing in investment and international taxation, NPLaw assists foreign enterprises in accurately assessing tax obligations, selecting compliant operational structures, and optimizing tax positions in accordance with Vietnamese law and relevant international treaties. NPLaw’s advice is grounded not only in legislation but also in practical tax authority enforcement.

Engaging NPLaw enables foreign enterprises to proactively mitigate tax legal risks, save time and costs, and confidently focus on long-term investment and business operations in Vietnam.

The above information is for reference purposes only. For case-specific advice, please contact NPLaw for professional consultation.