International schools and hospitals in Vietnam stand at the intersection of two policy systems: foreign investment policy (conditions for foreign investors to open education and healthcare establishments) and socialisation policy (tax incentives for education and healthcare activities meeting State criteria). The core incentive is a 10 percent CIT rate for the entire operation on income from qualifying socialised activities — but “qualifying” here is a set of criteria on type, scale and operating standards, not something every fee-charging school or hospital automatically receives.
The 10 percent rate for socialised income and its conditions
Under CIT Law 67/2025/QH15, enterprise income from socialised activities in education and training, healthcare, culture, sports and the environment enjoys a 10 percent preferential rate for the entire operating period, provided the establishment meets the criteria on type, scale and standards for socialisation establishments under the list issued by the Prime Minister. Unlike location incentives with a countdown, the socialisation incentive has no 15-year “clock” — its value lies in duration and stability for education and healthcare projects with long investment lives.
The practical conditions have three layers: the legal entity and operating licences in the right field (school establishment licence, medical practice licence); meeting socialisation criteria on scale and standards (area, equipment, staffing, service ratios by establishment type); and separate accounting of socialised income versus other commercial income. The third layer is where many establishments stumble: a school that also leases space, sells commercial meal services and runs short courses outside its programme — income streams outside qualifying socialised activities bear the standard 20 percent rate and must be clearly separated in the books.
Tuition, hospital fees and VAT
Under VAT Law 48/2024/QH15, education and training services and medical examination and treatment services are outside the scope of VAT. The consequence cuts both ways: the establishment does not charge output VAT on qualifying tuition and hospital fees; but input VAT on goods and services purchased for the non-taxable activity is not creditable and becomes a cost. For a healthcare establishment, this is a major financial variable because imported medical equipment and specialised consumables carry significant input tax.
The boundary to manage is ancillary services outside the education and healthcare core: premium accommodation and dining inside a hospital; commercial training courses outside a degree programme; equipment and space leasing. These services may bear standard VAT and must be invoiced and declared separately. Designing the price schedule and service contracts to separate core and ancillary services from the outset avoids the entire revenue base being questioned over its non-taxable nature.
Legal entity structure and notes for foreign investors
Foreign investors in education and healthcare operate through an enterprise entity (a company) under the investment conditions applying to foreign investors — for education, the frame of Decree 86/2018/ND-CP on foreign cooperation and investment in education, including conditions on capital, programmes and staffing; the public non-business unit model is not open to foreign capital. For tax, this entity receives socialisation incentives as an enterprise performing socialised activities, regardless of the foreign capital ratio — the conditions sit in the activity, not in the capital’s nationality.
Two structural notes: first, if one entity operates both a socialised establishment and purely commercial activities (for example a premium commercial clinic chain not meeting socialisation criteria), dispute risk over the incentive scope rises sharply — many investors choose separate entities from the start. Second, tuition and hospital fees collected in advance by term are deferred revenue: taxable income recognition must follow actual service delivery progress, and the refund policy for withdrawing students or patients must be reflected consistently in both accounting and the tax file.
Frequently Asked Questions
1. Which income of an international school or hospital gets the 10 percent rate?
Income from education, training and medical activities meeting the socialisation criteria (type, scale and standards under the Prime Minister’s list) receives 10 percent for the entire operating period under CIT Law 67/2025/QH15. Income outside that scope — space leasing, ancillary commercial services — bears the standard 20 percent rate and must be separately accounted.
2. What are the socialisation conditions for the incentive?
Conditions comprise: operating licences in the education or healthcare field; meeting socialisation criteria on establishment type, scale and standards under the Prime Minister’s list; and separate accounting of socialised versus other income. The incentive attaches to the qualifying activity and applies equally to foreign-invested establishments, regardless of the foreign capital ratio.
3. Are tuition and hospital fees subject to VAT?
Tuition as an education and training service and hospital fees as a medical service are both outside the scope of VAT under VAT Law 48/2024/QH15. The establishment therefore charges no output tax on them but also cannot credit related input VAT. Ancillary services outside the core (accommodation, dining, leasing) may bear standard tax and must be separated.
4. How does the legal entity structure (company versus non-business unit) affect tax?
Foreign investors operate through a company entity (not a non-business unit), under sector investment conditions — such as Decree 86/2018/ND-CP for education. The company still receives the 10 percent rate if its activities meet socialisation criteria. Where one entity also holds non-qualifying commercial activities, consider separate entities to protect the incentive scope.
This article has been quality-reviewed by the FLAW AI Legal Council
