What taxes do foreign subcontractors conducting business in Vietnam have to pay?

What is a foreign subcontractor in Vietnam?

Based on Clause 27, Article 4 of the Bidding Law 2023, it is stipulated as follows:

Terminology Explanation

In this Law, the following terms are understood as follows:

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27. A subcontractor is an organization or individual that enters into a contract with a main contractor to participate in construction works; consulting; non-consulting; related services of the package for supplying goods; works within the mixed package.

28. A special subcontractor is a subcontractor performing important tasks of the package proposed by the main contractor in the bid documents, proposal documents based on the requirements of capacity and experience stated in the bidding documents, request documents.

29. A foreign contractor, foreign investor is an organization established under foreign law or an individual of foreign nationality participating in the bidding.

30. A domestic contractor, domestic investor is an organization established under Vietnamese law or an individual of Vietnamese nationality participating in the bidding.

31. The bidding closing time is the deadline for receiving expressions of interest, preliminary selection applications, bid applications, and proposal documents.

32. The validity period of bid applications, proposal documents is the number of days specified in the bidding documents, request documents and calculated from the date of the bidding closing time to the last valid day as stipulated in the bidding documents, request documents. From the bidding closing time to the end of 24 hours of the closing day is counted as 1 day.

33. Construction includes works during the construction and installation of the project, project components.

Accordingly, a foreign subcontractor can be understood as an organization established under foreign law or an individual of foreign nationality entering into a contract with the main contractor to participate in construction works; consulting; non-consulting; related services of the package for supplying goods; works within the mixed package.

What taxes do foreign subcontractors conducting business in Vietnam have to pay?

According to Article 5 of Circular 103/2014/TT-BTC, it is stipulated as follows:

Applicable Taxes

1. Foreign contractors and foreign subcontractors that are business organizations fulfill their obligations related to value-added tax (VAT), corporate income tax (CIT) as guided by this Circular.

2. Foreign contractors and foreign subcontractors that are foreign individuals involved in business fulfill their VAT obligations as guided in this Circular, and personal income tax (PIT) obligations according to PIT law.

3. Regarding other taxes, fees, and charges, foreign contractors and foreign subcontractors shall comply with current legal documents on taxes, fees, and charges.

Accordingly, foreign subcontractors conducting business in Vietnam or having income generated in Vietnam must pay the following types of taxes:

- For foreign subcontractors that are organizations: Value-added tax, corporate income tax.

- For foreign subcontractors that are individuals: Value-added tax, personal income tax.

What taxes do foreign subcontractors conducting business in Vietnam have to pay? (Image from the Internet)

How to determine the taxable income of foreign subcontractors for corporate income tax in Vietnam?

According to Article 7 of Circular 103/2014/TT-BTC, it is stipulated that the taxable income for corporate income tax of foreign contractors and foreign subcontractors is the income generated from activities of supplying, distributing goods; providing services, services associated with goods in Vietnam based on the contractor contract, subcontractor contract (except for cases stipulated in Article 2 of Circular 103/2014/TT-BTC).

In the event that goods are supplied in the form of: delivery point within the territory of Vietnam (except as specified in Clause 5, Article 2 of Circular 103/2014/TT-BTC); or the supply of goods accompanied by several services conducted in Vietnam such as advertising services, marketing, trade promotion activities, after-sales services, installation, trial operation, warranty, maintenance, replacement, and other services associated with the supply of goods (including cases where accompanying services are free), whether or not these services fall within the contract value for supplying goods, the taxable income for CIT of the foreign contractor, foreign subcontractor is the total value of goods and services.