Guidelines to avoid common tax mistakes when starting a company in Vietnam

Establishing a company in Vietnam is an important first step to legalize business operations, especially for foreign investors. However, during operation, many enterprises - particularly newly established companies - often make tax-related mistakes due to a lack of understanding of local regulations or the absence of a professional accounting system. These mistakes can lead to administrative fines, tax arrears, or damage to the company’s reputation.

Below are practical guidelines to help businesses avoid common tax errors when setting up a new company in Vietnam.

1. Failing to register for tax and electronic invoices on time

After obtaining the Business Registration Certificate, the company must register for a tax code and activate electronic invoices within the required timeframe. Many companies delay this process due to unfamiliarity with the procedure, resulting in:

• Inability to issue legitimate invoices to clients.
• Administrative penalties under Decree No. 125/2020/NĐ-CP.

Solution: Complete the tax registration and electronic invoice activation within 10 working days from the issuance date of the business license, and select a reliable e-invoice provider.

2. Submitting incorrect or late tax declarations

A very common error is delayed submission of VAT, CIT, or PIT declarations, or incorrect reporting of revenue and expenses. This leads to:

• Late payment penalties and tax arrears.
• Loss of credibility with tax authorities.

Solution:

• Set up a regular tax filing schedule (monthly or quarterly).
• Use digital accounting and tax software to minimize manual errors.

3. Failing to distinguish deductible and non-deductible expenses

When calculating Corporate Income Tax (CIT), many new companies fail to understand which expenses are tax-deductible and which are not.

For example, expenses without valid invoices, cash payments exceeding the allowed limit, or transactions without contracts or supporting documents are not deductible.

Solution:

• Maintain complete accounting records and valid invoices.
• Ensure all transactions are made via bank transfer for transparency.

4. Not registering employees and failing to deduct Personal Income Tax (PIT)

Many small businesses hire employees but fail to sign labor contracts or withhold PIT as required by law. This is a violation that can result in administrative penalties.

Solution:

• Sign clear labor contracts and register for social insurance (SI) for employees.
• Perform PIT withholding and declarations monthly or quarterly on time.

Related reading: Procedures for Registering a Personal Tax Code for Foreigners in Vietnam

5. Improper storage of accounting documents and financial reports

Some startups neglect to store invoices, accounting records, or annual financial statements properly. When inspected by tax authorities, these businesses struggle to prove the legality of their revenues and expenses.

Solution:

• Hire an in-house accountant or partner with a reputable accounting service provider.
• Submit annual financial statements on time (no later than March 31 each year).

6. Not updating new tax policies in time

Tax policies in Vietnam change frequently (for example, VAT reductions, CIT incentives for new companies, etc.). Failing to stay updated may cause businesses to miss legitimate incentives or unintentionally violate new regulations.

Solution:

• Follow updates from the General Department of Taxation, Ministry of Finance, or professional advisory firms.
• Regularly review your tax and accounting processes to ensure compliance.

Complying with tax regulations not only helps businesses avoid legal risks, but also demonstrates credibility and professionalism in operations. Establishing a sound tax management system from the beginning is a solid foundation for long-term business growth in Vietnam.

If you are a newly established enterprise or a foreign investor facing difficulties in tax declaration and management, Zora Consulting is a trusted partner ready to assist you. With a team of experienced professionals in accounting, taxation, and corporate legal compliance, Zora Consulting provides:

• Comprehensive tax advisory and declaration services for new businesses.
• Assistance with electronic invoice registration, tax code setup, and financial reporting quickly and accurately.
• Assurance of full compliance with Vietnamese tax regulations, helping your business operate confidently and grow sustainably.