Tax Compliance for FDI Enterprises

Why is tax compliance a matter of survival for FDI enterprises?

Unlike purely domestic businesses, FDI enterprises usually have more complex structures: a foreign parent company, cross-border intra-group purchase transactions, foreign experts working in Vietnam, contracts with foreign contractors, and possibly CIT incentives tied to the investment project. Each of these features entails a separate group of tax obligations, with different dossiers, deadlines, and sanctions.

Practice shows that most large back-tax collections against FDI enterprises do not come from intentional tax evasion, but from points businesses take lightly: failing to withhold foreign contractor tax when paying foreign partners, not preparing transfer pricing documentation, claiming tax incentives without meeting all conditions, or issuing e-invoices at the wrong time. When the tax authorities inspect, these accumulate over many years, plus late-payment interest and penalties, creating very large financial obligations — not to mention the impact on the business’s reputation with regulators and the parent group.

One point requiring special attention: since 2024, Vietnam has applied a supplementary corporate income tax under the global anti-base erosion rules. Multinational groups with consolidated revenue of EUR 750 million or more can no longer feel “safe” with a preferential tax rate below 15% in Vietnam — the difference will be collected as a top-up. This is a structural change directly affecting the investment-efficiency equation of many large FDI projects.

The current tax legal framework FDI enterprises need to know

Four foundational documents shape the tax obligations of FDI enterprises today:

• Law on Tax Administration No. 108/2025/QH15 (passed by the National Assembly on 10/12/2025): effective from 01/7/2026, replacing the 2019 Law on Tax Administration. The Law has 9 chapters and 53 articles; Article 5 fully lists tax administration contents from registration, declaration, payment, and refunds to tax examination and international cooperation. A notable new point: the Law removes all provisions on tax inspection — tax authorities no longer organize tax inspections, only tax examinations.
• Law on Corporate Income Tax No. 67/2025/QH15 (passed on 14/6/2025): effective from 01/10/2025, applicable to the 2025 tax period, replacing the 2008 CIT Law. The biggest change is the tiered rate mechanism by revenue: 15% for enterprises with annual revenue not exceeding VND 3 billion, 17% for revenue above VND 3 billion to VND 50 billion, and 20% for the remainder. The Law also expands incentives for high technology, semiconductors, AI, data centers, and renewable energy.
• Law on Value-Added Tax No. 48/2024/QH15: comprehensively regulates VAT obligations, including VAT refund provisions of particular interest to exporting FDI enterprises.
• Resolution No. 107/2023/QH15 on supplementary corporate income tax under the global anti-base erosion rules: effective from 01/01/2024, applicable from fiscal year 2024. The minimum tax rate is 15% (Article 4), applying to constituent entities of multinational groups whose ultimate parent’s consolidated revenue is equivalent to EUR 750 million or more in at least 2 of the 4 immediately preceding years.

In addition, depending on specific operations, businesses are also governed by Circular 89/2026/TT-BTC (foreign contractor tax; effective 1 July 2026, replacing Circular 103/2014/TT-BTC), Decree 132/2020/ND-CP (related-party transactions), Decree 254/2026/ND-CP and Circular 91/2026/TT-BTC (e-invoicing; effective 1 July 2026, replacing Decree 123/2020/ND-CP and Circular 32/2025/TT-BTC).

Seven core tax obligation groups of FDI enterprises

1. Tax registration, declaration, and payment

This is the foundational obligation under the Law on Tax Administration: tax registration, full tax declaration, correct calculation of tax payable, and timely payment. FDI enterprises need to pay special attention to VAT and withheld PIT declaration periods, and to paying tax on behalf of foreign contractors — obligations that small domestic businesses rarely incur.

2. Annual corporate income tax finalization

At the end of each fiscal year, businesses must finalize CIT, determining taxable income, deductible expenses, loss carryforward (maximum 5 consecutive years), and tax payable. Under CIT Law 67/2025/QH15, businesses need to review which tier of the 15%/17%/20% mechanism they fall into — note the 15%–17% rates do not apply to certain cases such as enterprises with non-qualifying related-party relationships or income from capital or real estate transfers.

3. Withholding tax at source

When paying foreign contractors, Vietnamese businesses are responsible for withholding, declaring, and paying foreign contractor tax on their behalf (VAT and CIT calculated as ratios on revenue). Similarly, businesses must withhold PIT on employee salaries, including foreign experts. Missing withholding obligations is one of the most common back-tax errors.

4. VAT and VAT refunds

FDI enterprises in export manufacturing often generate large input VAT amounts and qualify for refunds. Refund conditions, dossiers, and procedures are strictly regulated — businesses should prepare refund dossiers during operations rather than waiting until the need arises to collect documents.

5. Corporate income tax incentives

Many FDI projects enjoy CIT incentives (10% preferential rate for 15 years, tax holidays) tied to incentivized locations or industries. However, incentives are only available when all conditions on the investment project are met, incentivized income is separately accounted for, and conditions are maintained throughout the incentive period. Claiming incentives without meeting conditions is grounds for back-tax collection and penalties.

6. Related-party transactions and pricing documentation

Businesses transacting with related parties (parent company, sister companies in the group) must comply with related-party pricing rules under the arm’s length principle, declare information in Appendix I attached to the CIT finalization return, and prepare transfer pricing documentation before the annual finalization filing. Some cases are exempt from documentation (e.g., revenue below VND 50 billion and total related-party transaction value below VND 30 billion) but must still declare.

7. Global minimum tax

For multinational groups meeting the EUR 750 million threshold, the Vietnamese entity must calculate and pay supplementary CIT if the effective tax rate in Vietnam is below 15%. This obligation applies from fiscal year 2024 with its own calculation method (QDMTT) — businesses need to coordinate with the parent company to determine the obligation rather than waiting for the tax authorities to remind them.

Tax compliance calendar by cycle

In principle, a business’s tax obligations are performed on the following cycles — businesses should build an internal compliance calendar based on this framework:

• Monthly/quarterly: declare and pay VAT, withheld PIT, and arising foreign contractor tax; submit invoice usage reports as prescribed.
• Annually: finalize CIT and PIT; declare related-party transactions (Appendix I); prepare and retain transfer pricing documentation.
• Per occurrence: withhold and pay foreign contractor tax when paying foreign partners; declare non-regular taxes and capital transfer taxes when transactions occur.
• Multi-year periodic: review CIT incentive eligibility conditions; reassess global minimum tax obligations when group structure changes.

Note: specific deadlines for each return type are set by guiding documents and may change; businesses should check current regulations at the time of compliance or consult a lawyer or tax advisor.

Risks of incomplete compliance

Tax sanctions are designed to escalate: daily late-payment interest on underpaid tax, administrative penalties for misdeclaration or tax evasion, back-tax collection for unexamined periods, and in cases with criminal signs, transfer of the dossier to investigative agencies. Beyond direct financial damage, businesses rated high-risk are selected for examination more frequently, affecting normal business operations.

A less-noticed but very real risk: when an FDI enterprise has a dispute with the tax authorities, the foreign parent group usually requires detailed explanations and a reassessment of the entire internal tax control system of the Vietnamese subsidiary. The management costs arising from a tax examination can far exceed the back-tax amount.

How does FLAT LAW FIRM assist FDI enterprises on tax?

FLAT LAW FIRM advises on tax from a legal perspective — we do not provide accounting, tax filing, or tax agency services, but focus on the legal issues of tax: comprehensive tax compliance health-checks, assessing back-tax risks before tax authority examinations, advising on transaction structuring to lawfully optimize tax obligations, drafting and reviewing tax clauses in contracts (tax indemnity clauses, foreign contractor tax allocation), representing businesses in working with tax authorities during examinations, and resolving tax complaints and disputes. For M&A transactions, we conduct tax due diligence to quantify the target’s potential tax liabilities before the buyer commits funds.

See also our tax consulting services for FDI enterprises.

Frequently asked questions

Useful links

You should talk to a lawyer if:

• Your FDI enterprise has never conducted a comprehensive tax compliance health-check.
• You regularly transact with the parent company or related parties but have not prepared transfer pricing documentation.
• You are enjoying CIT incentives and need to reassess eligibility under the new CIT Law.
• You belong to a large multinational group and need to determine global minimum tax obligations in Vietnam.
• You are about to sign contracts with foreign contractors and are unclear on withholding obligations.
• You have received a tax examination notice and need to prepare dossiers and a working plan with the tax authorities.