Official Letter 3185 / TCT-HTQT 2020 on withholding tax paid abroad from tax payable in Vietnam

To: Tax Department of Binh Duong province.

The General Department of Taxation received Official Letter No. 10300 / CT-TTHT dated June 25, 6 of the Tax Department of Binh Duong province requesting guidance on withholding tax paid abroad from the tax amount payable in Vietnam by the limited company. Seiwa Kaiun Vietnam (Seiwa Vietnam Company) applies the Double Taxation Avoidance Agreement (Tax Agreement) between Vietnam and Indonesia and gives the following comments:

1. Regarding the determination of income type:

Pursuant to the provisions of 03 contracts signed between Seiwa Vietnam Company and PT Seiwa Logistics Indonesia Company (Seiwa Indonesia Company), the income Seiwa Vietnam Company receives from the provision of additional services. inventory management software, inventory management system data maintenance and inventory management software maintenance is income from business. Therefore, the income of Seiwa Vietnam Company in Indonesia is governed by Article 7 (Corporate Income), the Tax Agreement between Vietnam and Indonesia.

2. Regarding the deduction of tax paid abroad:

Clause 1 Article 7 of the Vietnam - Indonesia Tax Agreement stipulates:

“The income of an enterprise of a Contracting State shall be taxed only in that State, except where the enterprise conducts business in that other Contracting State through a permanent establishment in that other State. If the enterprise conducts business in the above manner, the profits of the enterprise may be taxed in that other State, but only so much of the profits attributable to that permanent establishment ... "

Seiwa Vietnam's permanent establishment in Indonesia is determined in accordance with Clause 3b, Article 5 of the Vietnam-Indonesia Tax Agreement, specifically:

“3. The term "permanent establishment" also includes:

(b) the supply of services, including consulting services by an enterprise through employees or other persons assigned by the enterprise to perform the above activities, but only activities which are the aforesaid substance extends (within the same project or a related project) in a Country in one period or periods combined for more than three months over a period of 12 months. ”

In case Seiwa Vietnam Company provides services via email, phone and directly performs at the warehouse or factory of Seiwa Indonesia Company, the monetary policy determination should be based on the actual time of the employees of the company. Seiwa Vietnam Company provides services in Indonesia. If the employees of Seiwa Vietnam Company perform the provision of services in Indonesia in one or more combined periods of not more than three months within a period of 12 months, Seiwa Vietnam Company does not form a monetary policy in Indonesia. Indonesia. Therefore, Seiwa Vietnam Company does not have to pay tax in Indonesia and the tax already paid in Indonesia (if any) will not be deducted from the corporate income tax payable in Vietnam.

The General Department of Taxation replies so that the Tax Department can know and implement./.