Vietnam Tax: MOF issues guidance on foreign-source income derived by corporate entities

A circular issued by the Vietnamese Ministry of Finance on 19 January 2010 provides guidance on the tax obligations of Vietnamese enterprises investing overseas.

According to the circular, the regular corporate income tax rate of 25% generally applies to foreign-source income derived by Vietnamese entities; any preferential tax rates that Vietnamese enterprises investing overseas are entitled to under current law on their domestic Vietnamese-source income are not applicable.

Corporate income tax paid overseas or paid by a foreign partner on behalf of the Vietnamese entity (including tax on dividends) may be credited against the amount of corporate income tax payable in Vietnam on the foreign-source income. The offset also takes into account any corporate income tax exemption or reduction in profits from the overseas investment project as stipulated by the law of the country where the Investment Is made.

The circular became effective on 5 March 2010 and replaces 2002 guidance on the tax obligations of Vietnamese enterprises investing overseas.