What is the tax of foreign contractors according to the law in Vietnam? What taxes are applied to foreign contractors in 2024 in Vietnam?

What is the tax of contractors according to the law in Vietnam? What taxes are applied to foreign contractors in 2024 in Vietnam?

Pursuant to Article 5 of the Circular 103/2014/TT-BTC stipulating taxes of foreign contractors:

Taxes

1. Taxpayers defined in Clause 2 Article 4 Chapter I are obliged to withhold VAT and corporate income tax as prescribed in Section 3 Chapter II before paying foreign contractors and foreign sub-contractors.

2. Foreign contractors and foreign sub-contractors are foreign businesspeople that pay VAT as prescribed in this Circular or pay personal income tax as prescribed by regulations of law on personal income tax.

3. Foreign contractors and foreign sub-contractors shall pay other taxes, fees and charges in accordance with applicable regulations of law on taxes, fees and charges.

As regulations above, tax of contractors, also known as tax of foreign contractors, is a type of tax applied to foreign contractors and sub-contractors who generate income from providing services or goods within the territory of Vietnam.

The taxes of contractors currently applied include value-added tax, corporate income tax for foreign contractors and sub-contractors being organizations; value-added tax, and personal income tax for contractors who are individuals.

What is the tax of foreign contractors according to the law in Vietnam? What taxes are applied to foreign contractors in 2024 in Vietnam? - image from internet

What are cases of payment of taxes of contractors in Vietnam?

Pursuant to Article 1 of the Circular 103/2014/TT-BTC stipulating 05 cases of payment of taxes of contractors in Vietnam:

[1] Foreign business organizations having permanent establishments in Vietnam or not; foreign business individuals that are residents of Vietnam or not who do business in Vietnam or earn income in Vietnam under contracts, agreements, or commitments between the foreign contractor and a Vietnamese entity or between a foreign sub-contractor and a foreign sub-contractor to perform part of the main contract.

[2] Foreign entities providing goods in Vietnam in the form of domestic export and earn income in Vietnam under contracts between them and Vietnamese companies (except for cases in which goods are processed and then returned to foreign entities) or distribute goods in Vietnam or provide goods under Incoterms rules that require the sellers to be responsible for goods that have been taken into Vietnam’s territory.

[3] Any foreign entity that performs the whole or part of goods distribution or service provision in Vietnam, who is still the owner of goods that are delivered to Vietnamese organizations or take responsibility for the cost of distribution, advertising, marketing, quality of goods/services delivered to Vietnamese organizations, or impose prices (including the cases in which the foreign entity authorities or hires some Vietnamese organization to perform part of the distribution or service provision pertaining to goods sale in Vietnam).

[4] Any foreign entity that negotiates or concludes contracts via a Vietnamese entity.

[5] Any foreign entity that exercises its right to export, import, distribute goods in Vietnam, buy goods to export, or sell goods to Vietnamese traders in accordance with trading laws.

Which entities shall not pay taxes of contractors in Vietnam?

Pursuant to Article 2 of the Circular 103/2014/TT-BTC, following entities shall not pay taxes of contractors in Vietnam:

- Any foreign entity doing business in Vietnam as prescribed by law.

- Any foreign entity that provides goods for Vietnamese entities without ancillary services in Vietnam in the form of:

+ Delivery at the foreign border checkpoint:

The seller incurs all responsibility, costs, and risk to the transport and delivery of goods at the foreign checkpoint;

The buyer incurs all the responsibility, cost and risk to the receipt and transport of goods from the foreign checkpoint to Vietnam.

+ Delivery at a Vietnam’s border checkpoint:

The seller incurs all responsibility, costs, and risk until goods reaches the Vietnam’s checkpoint;

The buyer incurs all the responsibility, cost and risk to the receipt and transport of goods from the Vietnam’s checkpoint.

- Any foreign entity that earns income from services provided and used outside Vietnam.

- Any foreign entity that provides any of the services below for Vietnamese entities, provided the services are provided overseas:

+ Repair of means of transport (aircraft, aircraft engine, aircraft and ship parts), machinery and equipment (including undersea cables and transmission devices), with or without spare parts;

+ Advertising and marketing (except for online advertising and online marketing);

+ Trade promotion and investment encouragement;

+ Brokering goods sale and services provision overseas;

+ Training (except for online training);

+ Division of charges for international telecommunications services between Vietnam and foreign contractors, which are provided outside Vietnam, lease of transmission lines and satellite frequency bands overseas as prescribed by the Law on telecommunications;

Division of charge for international postal services between Vietnam and other countries as prescribed by the Law on Postal services and international agreements on postal services to which Vietnam is a signatory, provided such services are provided outside Vietnam.

- Any foreign entity using a bonded warehouse or inland clearance depot (ICD) as a warehouse serving international transport, transit of goods, or storage of goods to be processed by other companies.

Best regards!