THE VIETNAMESE TAX SYSTEM AND ITS

ADMINISTRATION
 DOCUMENTS
PIT CIT VAT Invoicing FCT TP DEPN & ADMIN
PRVS
Degree 123/2020 20
Circular 111 78 219 103 78 45
Amended by Amended by Amended by
119/2014 119/2014 119/2014
Amended by Amended by Amended by
151/2014 151/2014 151/2014
Amended by Amended by Amended by
92/2015 96/2015 26/2015
Amended by Amended by
130/2016 & 147/2016
173/2016
Consolidated 68/VBHN- 66/VBHN-BTC 14/VBHN-BTC 25/VBHN-BTC
circular (in BTC (2019) (2019) (2018) (2022)
Vietnamese, for
reference only)
2018 revisions 25/2018 25/2018 25/2018
2019 48
2020 Resolute Amended by Degree
954/2020 Degree 132 126
Web: vietsourcing.edu.vn Fp: https://ww w.facebook.com/vietsou cing.edu.vn/ Group: https://www.facebook.com /groups/vietsourcing /
 THE OVERALL FUNCTION AND PURPOSE OF TAXATION IN A MODERN
ECONOMY

Economic factors
It encourages:
• Saving on the part of the individual, by offering
tax relief for interest from saving;
• Entrepreneurs who build their own business in
certain business such as software by offering
special rate on VAT and CIT.

It discourages:
• Smoking and alcoholic drinks, through the duties
placed on each type of product;
 THE OVERALL FUNCTION AND PURPOSE OF TAXATION IN A MODERN
ECONOMY

Social factors
Direct taxes based on income and profits personal income tax and corporate income tax, tax only those
who have these resources.

Indirect taxes paid by the consumer (VAT) discourage spending and encourage saving. Lower or nil rates
of tax can be levied on essentials.

Progressive such as personal income tax, where the proportion of the income paid over in tax increases
as income rise, target those who can afford to pay. Starting threshold and rates of taxation
taxes can be adjusted so as to ensure that those on very low incomes pay little or no tax.

Regressive taxes such as turnover tax in the past, where the proportion of the income paid over in tax
decreases as income rise

Flat taxes such as corporate income tax with the aim of fair treatment among different type of
businesses
 THE OVERALL FUNCTION AND PURPOSE OF TAXATION IN A MODERN
ECONOMY
Social factors
Efficient tax
• is one where the costs of collection
are low relative to the tax paid over
to the government. The
government publishes for the
administrative costs incurred by
government departments in
operating the taxation systems, but
there are also compliance costs to
be taken into account.
Compliance costs
• are those incurred by the taxpayer,
whether they are the business
preparing tax returns under the
self-assessment system or the
employer operating the PAYE
system to collect income tax or the
business collecting value added tax.
Some of the more equitable taxes
may be less efficient to collect.
 THE OVERALL FUNCTION AND PURPOSE OF TAXATION IN A MODERN
ECONOMY

Environment factors
The taxation system is moving slowly to

accommodate the environment concerns especially

concerns about renewable/non-renewable sources of

energy and global warming. So far there is rarely a case

where taxes were introduced for environmental

reasons. An example is tax on natural resources

 DIFFERENT TYPES OF TAXES

Classifications
By tax base By tax calculation

Ad valorem tax:
levied on the value of
Income taxes Capital taxes Consumption tax Unit or Specific tax: the tax base. In
levied on the volume Vietnam most of
of what is being taxed taxes are ad valorem
taxes.

Individual income
tax Capital gain tax Value added tax
Ex: (1) Tax on
agricultural land (2) Ex: Corporate income
Import duty on tax is charged at 20%
second-hand on total taxable
imported cars income
Corporate income
tax Inheritance tax Excise tax
 DIFFERENT TYPES OF TAXES

Direct and indirect taxes

Those charged on income and gains, whilst indirect taxes are those paid by the consumer to the supplier, and then
to the Government. VAT is an indirect tax, whilst personal income tax, corporate income tax are direct taxes.
For direct tax, different ways of distribution of tax burden
• Progressive: progressive taxes take an increasing portion as the value of the tax base rises and depends on the
marginal rate of tax being greater than the average rate of tax

• Marginal rate = (Change in tax paid/Change in income)

• Average rate = (Total tax paid/Total income)
• Regressive: regressive taxes take an declining portion as the value of the tax base rises and depends on the
average rate of tax being greater than the marginal rate of tax

• Proportional: proportional taxes take a constant portion as the value of the tax base rises and depends on the
marginal and average rates of tax being equal
 DIFFERENT TYPES OF TAXES

Taxes in Vietnam

(1) Value Added (2) Special Sales (3) Import – (4) Corporate (5) Personal
Tax Tax export duty Income Tax Income Tax

(6) Tax on (7) Tax on Non- (10) Land related

Agriculture Land Agriculture Land (8) Natural (9) Enviroment collection: Land
Resources Tax Protection Tax usage cost, Land
Usages Usages leases cost

(11) Fee,
Surcharge and
other collection
 OVERALL STRUCTURE OF THE VIETNAMESE TAX SYSTEM

The overall structure of the Vietnamese tax system

Government

People’s Committee of Ministry of Finance

Provinces,
Municipalities

General Department of State Treasury, General Department of

Taxation departments, Vietnam Customs
institutes
People’s Committee of
Districts Tax Department of
Customs Department of
Provinces,
Provinces, Municipalities
Municipalities

Tax Sub-department of Border- gate customs Sub-

Districts departments
 OVERALL STRUCTURE OF THE VIETNAMESE TAX SYSTEM

Regulation issuances

Ministry of
Finance/General
The Parliament The Government The competent Departments of
Ministries Taxation/Department
of Taxation

• issues the Laws on • issues Decrees • issues Circulars • issues Official Letter
different kind of tax detailing the guiding the providing detail
implementation of implementation of implementation for
the Laws Decrees particular cases
 TAX AVOIDANCE AND TAX EVASION

Tax evasion and tax avoidance

• consists of seeking to mislead the tax

authority by either:
Tax evasion • Suppressing information to which they
are entitled
• Providing them with deliberately false
information
Tax avoidance • is more difficult to define.
 TAX AVOIDANCE AND TAX EVASION

The need for an ethical and professional approach

Under self-assessment, all taxpayers are responsible for
disclosing their taxable income and gains and the deductions
and reliefs they are claiming against them.
The practicing accountant often acts for taxpayers in their
dealings with tax authority and situations can arise where
the accountant has concerns as to whether the taxpayer is
being honest in providing information to the accountant for
onward transmission.
How the accountant deals with such situation are a matter of
professional judgment, but in deciding what to do, the
accountant will be expected to uphold the standards of the
Association of Chartered Certified Accountants. He must act
honestly and objectively, with due care and diligence, and
showing the highest standards of integrity.