Banking and Finance


It is practical that the current banking law system has firmly been set up since 12 December 1997 when the two basic laws, the Law on State Bank of Vietnam and the Law on Credit Institutions, in substitution of the former Ordinances, all of 23 May 1990, have been introduced. Most recently, the Law on State Bank of Vietnam has been amended on 17 June 2003 and the Law on Credit Institutions has been amended on 15 June 2004.

Banking System

The local banking sector has two tiers. The first tier is SBVN being responsible for conducting monetary policy and for supervision and regulation of the banking system. The second tier includes commercial banks, financial companies, credit co-operatives, people's credit funds, and insurance companies. This Section focuses only on the commercial banks which consist of State-run banks, joint stock banks, joint venture banks, foreign bank branches, and foreign bank ROs.

Amongst all, foreign banks wishing to establish a presence in Vietnam has a choice of the last three types, i.e. joint venture banks, foreign bank branches and foreign bank ROs. All the applications for and registrations in relation to those types are subject to the jurisdiction of SBVN. Subject to the license from SBVN, joint venture banks can offer a wide range of banking services in Vietnam. The local partner to a joint venture bank must be an existing commercial bank. The minimum required capital for a joint venture bank is USD10 million.

Like joint venture banks, foreign bank branches are entitled to provide the permitted banking services in Vietnam. The minimum required capital for a branch is US$15 million.
Foreign bank ROs are not allowed to offer banking services in Vietnam. Naturally, they are duly representatives of foreign banks in Vietnam, which can only do market researches and support their parent bank's services.

Generally, joint venture banks and foreign bank branches are subject to the same taxes applicable to other businesses herein.

Foreign Exchange and Transfer

The State management on this matter is shared amongst several State agencies. Amongst all, the Government charges with overall policy on foreign exchange management, based on the recommendation submitted to by SBVN. SBVN is responsible for making plans for implementing such overall policy, and is liable for the day-to-day management and supervision of its plans.

  1. Bank Accounts
    Under the prevailing regulations, foreign capital enterprises can open bank accounts with banks licensed and operating in Vietnam. All the receipts and expenditures including capital contributions, in principle, must be made through such bank accounts.
    Subject to the using purposes, bank accounts which a foreign capital projects can open comprise the following: (a) normal local/foreign currency bank account, (b) deposit bank account, and (c) off-shore foreign currency bank account. Practically, not every foreign capital project is entitled to open off-shore foreign currency bank account because this requires meeting several criteria and being subject to a specific consent from SBVN.
  2. Foreign Exchange Balancing
    In principle, every foreign capital project is required balance itself their foreign currency demands on the basis that all income in foreign currency must at least cover their foreign currency expenditures. However, to encourage the foreign investment in infrastructure construction, essential import substitute production, and other important fields, SBVN has assured balancing foreign currency demands for such type of projects. This assurance shall be extended for the entire duration of those projects.
  3. Cash Transactions
    In principle, all payments and receipts in Vietnam must be made in Vietnamese dong, except for some particular circumstances as permitted by the prevailing laws and depending upon SBVN's approvals, which include commercial banks and financial institutions, foreign exchange bureaus, etc. Foreign investors to BCCs and JVCs are permitted to withdraw cash in foreign currency from bank accounts for paying salary and other allowances to their expatriates, or paying travel allowance to local employees for work-related overseas trips.
    To keep an international balance, the Government actively seeks to channel foreign currency inflows whilst strictly monitoring the outflows. There appears no restriction upon inward remittances, which however must be either converted into Vietnamese dong or deposited into a foreign currency bank account. With respect to outward remittances, they are allowable to some special circumstances which include:

    • Payment for imported goods and services;
    • Abroad remittance by foreign investors, of: invested and reinvested capital, earning profits from undertakings in Vietnam, principals and interests of off-shore loans and credits, and other legal benefits;
    • Payment for travel allowances to employees travelling abroad, payments of salary to the executives of foreign capital enterprises and Vietnamese employees working in a foreign country; and
    • Abroad remittance of salaries and other legal incomes of foreigners.
  4. Exchange Rates
    Any conversion will be based on the exchange rates of the authorized bank affecting the conversion, which will be referred to the rates announced by SBVN at the time of transaction.
  5. Capital and Financial Market
    The efforts made by the Government and State Securities Commission ("SSC") has been responded by the first opening of the Securities Transaction Centre ("STC") in HCMC in 2000, and the smaller one recently in 2004, in Hanoi. Two kinds of goods are well available for sale in the securities market. They are stocks listed by 32 enterprises, mainly enterprises equalized from the SOEs, and bonds issued by the Government and banks.
    Registration with STC is compulsory with respect to foreign individuals and organizations who wish to buy securities in the Vietnamese securities market. With respect to listed stocks, foreign investors can hold up to 49% of the total of stocks in circulation of an issuer, irrespective of individual or institutional ones, instead of 30% as in the past, which is still applicable to non-listed issuers. With respect to listed bonds, foreign individuals and organizations can hold up to 40% of the total of bonds in circulation of an issuer, of which a private individual can hold up to 5% and an organization can hold up to 10%.




The backbone of the taxation system are all the tax laws which for instance, include the Law on Corporate Income Tax, the amended Law on Value-Added Tax, the amended Law on Special Sales Tax, all passed on 17 June 2003 in replacement of the formers dated 22 May 1997 and June 1990.
There are also hundreds of decrees, circulars and other regulations being issued by the Government, various ministries and agencies, from time to time, with a view to guiding for the implementation of those laws.

Types of Taxes

According to the prevailing tax law system, at least, the following taxes should be aware of by foreign investors when doing business in Vietnam.

Details about each type of taxes are described herein.

Corporate Income Tax

The standard tax rate is now 28%, decreased from 32% thanks to the issuance of the Law on Corporate Income Tax in 2003 (effective from 1 January 2004), and applicable to all legal entities, including FIEs (the former CIT applicable to FIEs was 25%).

Below are the incentive tax rates:

  1. The tax rate of 20% shall be granted to projects, for a period of 10 years from their production starting, which belong to the sectors where investment are encouraged (including service projects in IZs), or invest in the locations with socio-economic difficulties.
  2. The tax rate of 15% shall be granted to projects, for a period of 12 years from their production starting, which belong to the sectors where investment are encouraged (including service projects in EPZs and production projects in IZs) and invest in the locations with socio-economic difficulties, or invest in the locations with special socio-economic difficulties.
  3. The tax rate of 10% shall be granted to projects, for a period of 15 years from their production starting, which belong to the sectors where investment are encouraged (including projects for development of IZs and EPZs) and invest in the locations with special socio-economic difficulties.

Value-Added Tax

Value-Added Tax (VAT) is levied on the added value of most goods and services generated during the process from the production, circulation to consumption (With respect to some categories, they are subject to Special Sales Tax). There are four VAT rates as follows:

  1. The tax rate of 0% is applicable to goods for export, abroad re-insurance, abroad credit services, abroad financial investment, abroad stock investment;
  2. The tax rate of 5% is applicable to essential goods and services such as water, fertilizer, insecticides, medicine, educational and training equipment and tools, baby toys, scientific and art books, natural agro-forestry products, animal feeds, services for scientific and agricultural applications, etc;
  3. The standard tax rate of 10% is applicable to most goods and services such as petroleum, coals, ores and other exploited products; commercial electricity; electronic, electrical and mechanical products; chemicals and cosmetics; textiles, fabrics, yarns; sugar, confectioneries, and soft drink; glass, plastic, rubber, construction materials; construction and installation works, transportation and loading/unloading; postal and telecommunication services; leasing of premise, equipment and transport means; legal consulting services; and luxury goods and services such as gold, silver and precious stone trading, hotel, tourism, catering, all kinds of lottery, shipping agents, broker which in the past be subject to the tax rate of 20%.

Special Sales Tax

Other than those subject to VAT, the following are being subject to the Special Sales tax with the rates ranging from 10% to 80% (lower than in the past which varied from 15 to 100%), which are: cigarettes, beer (not including draft beer), alcohol, cars (less than 24 seats), gasoline, air conditioners (less than 90000 BTU), playing cards, joss papers, joss articles; trading in dancing clubs, massage, karaoke, casinos, jackpot game machine-based services, lottery trading, and golf course trading. Betting in horse race and motor race shall be excluded from the list of taxable services.

The goods and services subject to VAT are not subject to special sales tax, and vice versa.

Withholding Tax

Since the corporate income tax rate increased to 28% from 25% as above mentioned, foreign capital projects and investors shall be free from paying the withholding tax from 1 January 2004 when the recently amended Law on Corporate Income Tax comes into full effect.

Import/Export Duties

Vietnam is now adjusting its import and export tariffs in order to promote export and to fulfill the commitments to cut down import duties and remove non tariff barriers in line with AFTA and other international trade organizations.

Technology Transfer Tax

All technology transferors are subject to the technology transfer tax which imposed upon the taxable revenues as agreed in the contract. Instead of three rates previously, there exists only a rate of 10% applicable recently to all cases.

Foreign Contractor Tax

Foreign contractors who conduct production and business activities in Vietnam, not under the FIL, on the basis of signing contracts with Vietnamese legal entities, and sub-contractors who provide services to contractors in Vietnam, shall be liable for paying the same taxes and tax rates as applicable to the local enterprises. These taxes include VAT, corporate income tax, import-export duty, personal income tax, and others if so required by the laws of Vietnam.

Foreign contractors and sub-contractors may choose one between the two following ways to pay VAT and corporate income tax:

  1. Ordinary Method
    This is applicable to whom following the Vietnamese accounting system. The tax payment will be done in the same way of local entities, at the VAT and corporate income tax rates as described above.
  2. Combined Method
    This method is applicable when foreign contractors or sub-contractors do not use the Vietnamese accounting system. In order to facilitate the assessment and payment of VAT and corporate income tax, these two types of taxes are consolidated into one base which is the taxable revenues.

Added values vary from 10%, 25%, 30% to 50% of the taxable revenues, subject to whether it is trading, production, construction with or without supplies. VAT will be calculated by multiplying the said added values with the respective rates.

Payable corporate income tax varies from 1%, 2%, 5% to 10% of the taxable revenues, subject to whether it is trading; production, transport, construction; services; lending; and technology transfer.

Personal Income Tax

All foreigners having incomes in/ from Vietnam, regardless the length of time they live in Vietnam, are the payers of personal income tax.

With respect to whom living in Vietnam less than 183 days, they will be liable for paying tax at a fixed rate of 25% (formerly 10%) of the aggregate income. With respect to whom living in Vietnam over 183 days (so called locally-resident foreigners), they will be subject to the progressive tax tariff, with the maximum rate of up to 40% of their monthly income.

The taxable income minimum rate applicable when calculating tax for a locally-resident foreigner is VND 8 million.

The information on this page is intended as general information only. It is not to be construed as financial, legal or tax advice. Whilst ANZ has collated this information from sources it believes to be reliable, no representation as to its accuracy or currency is made, nor shall ANZ, its affiliates, directors or employees be liable for any loss arising directly or indirectly in relation to the content. ANZ recommends that you seek your own independent advice before making any decision or entering into any transaction.