Overseas tax credit in Vietnam

Legal grounds

• Circular 78/2014 – TT/BTC

Principles of overseas credit in Vietnam

The Corporate Income Tax (CIT) paid overseas will be credited in Vietnam (i.e., offset against the total CIT payable assessed following Vietnam regulations on total worldwide incomes) with the following principles:

• Overseas profit and overseas CIT paid shall only take into account in Vietnam in the year when profit is remitted to Vietnam (i.e., not in the year incurring profit overseas). 
• The losses derived in overseas are not permitted to offset against the taxable profit of investment in Vietnam. 
• Tax rate: Standard tax rate 20%.

Note: I.e., CIT rate % in overseas ≤ standard CIT rate % in Vietnam

• Tax exempted/reduced following the regulations in the country where investing is also deducted (i.e., to credit full tax calculated based on standard tax CIT rate % overseas although the actual tax paid is lower thanks to tax holiday in overseas).
• Suppose Vietnamese companies do not declare tax in Vietnam when shifting profit earned from overseas. In that case, the tax authorities have the right to deem taxable profit.

Documents to claim overseas tax credit

Documents to claim overseas tax credit in Vietnam including:

• CIT declaration in overseas certified by the taxpayer;
• Tax payment vouchers or original tax payment confirmations issued by the foreign tax authorities. 

Example 

Company ABC has an investment project in country X. In 2022, the overseas investment earns USD100,000. This investment project is entitled to 50% CIT reduction at country X. The CIT rate in country X is 15%.

In addition, the company has another investment project in country Y. In 2022, the overseas investment earns USD200,000. Investment project is not exempted/reduced tax following the regulations of country Y. The CIT rate in country Y is 30%. The current standard CIT rate in Vietnam is 20%.

So the CIT payable by ABC enterprise in Vietnam is calculated as follows: