Contractor tax is one of the important financial obligations of a foreign organization to Vietnam when conducting a business or earning income in Vietnam. So how to determine contractor tax? According to current regulations, how much is this tax and what is the tax payment procedure?
To support foreign contractors as well as customers to understand this tax, here is a detailed manual, full of knowledge from the subject, related regulations on tax calculation, and notes on deductions. and costs to detail the order of implementing contractor tax obligations as prescribed.

CONTRACTOR TAX OVERVIEW
What is contractor tax?

Contractor tax is a tax applied to foreign contractors and foreign sub-contractors when conducting business or earning income in Vietnam. Foreign contractors and foreign sub-contractors are foreign organizations conducting business with a permanent establishment or without a permanent establishment in Vietnam. Accordingly, foreign contractors include:
- Individuals having business activities in Vietnam.
- Foreign organizations having business activities in Vietnam.
According to the provisions on contractor tax in Article 1 of Circular 103/2014/TT-BTC, foreign organizations and individuals have tax obligations when performing one of the following activities:
- Organizations doing business or generating income in Vietnam under contracts or commitments.
- Distribution of goods into the Vietnamese market.
- Produce goods in Vietnam and generate income.
- Name on the contract through the Vietnamese side for negotiation and signing.
Contractor tax includes VAT, CIT and PIT. These taxes are considered when foreign contractors earn income in Vietnam. In which, on a case-by-case basis, the specific tax obligations are as follows:
- If a foreign contractor is an organization, the contractor tax amount will include VAT and CIT.
- If the foreign contractor is an individual, the contractor tax amount will include VAT and PIT.
Legal basis for contractor tax?
Currently, the performance of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or earning income in Vietnam is guided by Circular 103 / 2014 / TT-BTC.
If the provisions on payment of contractor tax in an international treaty to which Vietnam has signed or acceded are different from those guided in Circular 103/2014/TT-BTC, the foreign contractor or foreign sub-contractor in addition to paying taxes in accordance with the provisions of that international treaty.
LEARN ABOUT TYPES OF SUBJECTS OF CONTRACTOR TAX
The contractor tax in 2023 is applied according to the provisions of Article 5 of Circular 103/2014/TT-BTC guiding the implementation of tax obligations for foreign organizations and individuals doing business or earning income in Vietnam. as follows:
- Foreign contractors and foreign sub-contractors are business organizations that fulfill VAT and CIT obligations under the guidance in Circular 103/2014/TT-BTC.
- Foreign contractors and foreign sub-contractors are foreign individuals doing business and performing VAT obligations under the guidance in Circular 103/2014/TT-BTC, PIT according to the Law on PIT.
Foreign contractors and foreign sub-contractors shall fulfill their tax, fee and other fee obligations in accordance with current legal documents on taxes, fees and other charges. In addition, businesses also need to note some of the following outstanding contents about contractor tax in 2023.
Subjects of application and non-applicability of contractor tax
In 2023, the contractor tax applies to specific objects:
- Foreign organizations and business organizations with or without a permanent establishment in Vietnam; business foreigners who are residents or non-residents of Vietnam doing business in Vietnam or earning income in Vietnam on the basis of a contract, agreement, or commitment between the Contractor between a foreign contractor and a Vietnamese organization or individual or between a foreign contractor and a foreign sub-contractor to perform a part of the work of the contractor contract.
- Foreign organizations and individuals provide goods in Vietnam in the form of on-spot import and export and generate incomes in Vietnam on the basis of contracts signed between foreign organizations and individuals with other foreign organizations and individuals. organizations or enterprises in Vietnam (except for processing and returning goods to foreign organizations and individuals) or distributing goods in Vietnam or providing goods according to the delivery conditions of international trade terms - Incoterms that the seller bears all risks related to the goods entering the territory of Vietnam.
- Foreign organizations and individuals performing part or all of the business of distributing goods and providing services in Vietnam. In which, the foreign organization or individual is still the owner of the goods or is responsible for the costs of distribution, marketing, advertising, quality of goods and services delivered to the Vietnamese organization or fixed. the selling price of goods or the price of providing services; including the case of authorizing or hiring a number of Vietnamese organizations to perform distribution services and some other services related to the sale of goods in Vietnam.
- Foreign organizations and individuals shall negotiate and sign contracts through Vietnamese organizations and individuals, contracts in the name of foreign organizations and individuals.
- Foreign organizations and individuals exercise the right to import and export, distribute goods in the Vietnamese market, purchase goods for export, and sell goods to Vietnamese traders in accordance with the law on commerce.
In 2023, those not subject to contractor tax include:
- Foreign organizations and individuals conducting business in Vietnam under the provisions of the Investment Law 2020, the Petroleum Law 1993 (amended and supplemented in 2000, 2008 and 2018), the Law on Credit Institutions 2010 .
- Foreign organizations and individuals provide goods to Vietnamese organizations and individuals without accompanying services provided in Vietnam in the following forms:
- Delivery at a foreign border gate: the seller bears all costs, responsibilities and risks related to the export of goods and delivery at the foreign border gate;
- The buyer bears all costs, responsibilities and risks related to the receipt and transportation of goods from a foreign border gate to Vietnam (including the case of delivery at a foreign border gate with warranty terms). is the responsibility and obligation of the seller).
- Delivery at the Vietnamese border gate: the seller bears all costs, responsibilities and risks related to the goods until the point of delivery at the Vietnamese border gate;
- The buyer bears all costs, responsibilities and risks related to the receipt and transportation of goods from the Vietnamese border gate (including the case of delivery at the Vietnamese border gate with a warranty term that is the responsibility and obligations of the seller).
3. Foreign organizations and individuals earning incomes from services provided and consumed outside the Vietnamese territory.
4. Foreign organizations and individuals providing services to overseas Vietnamese organizations and individuals, specifically:
- Repair of means of transport (aircraft, aircraft engines, aircraft spare parts, ships), machinery and equipment (including marine cables, transmission equipment), whether or not including accompanying replacement materials and equipment;
- Advertising and marketing (except advertising and marketing on the internet);
- Investment and trade promotion;
- Brokerage to sell goods and provide services abroad;
- Training (except for online training services);
- Fees for payment of international telecommunications services between Vietnam and foreign countries that are performed outside of Vietnam, transmission lines and satellite bands from foreign countries according to the provisions of the Law on Telecommunications 2009 ;
- Fees for payment of international postal services between Vietnam and foreign countries according to the provisions of the Postal Law 2010, international treaties on Postal that Vietnam is a signatory to which these services are performed outside Vietnam. Male.
5. Foreign organizations and individuals use bonded warehouses or inland ports (ICDs) as warehouses of goods to serve and support international transportation, border-gate transit, transit or storage of goods or for other enterprises to process.
Who is the contractor tax payer?

In 2023, foreign contractors and foreign sub-contractors are taxpayers when doing business in Vietnam or earning income in Vietnam. The business is conducted on the basis of a contractor's contract with a Vietnamese organization or individual or with another foreign organization or individual doing business in Vietnam on the basis of a sub-contractor contract.
Note:
- Pursuant to the provisions of the Law on Corporate Income Tax 2008 (amended in 2013, 2014 and 2020), the Law on Personal Income Tax 2007 (amended in 2012 and 2014) and documents guiding the implementation currently identifying a foreign contractor, a foreign sub-contractor having a permanent establishment in Vietnam, or being a resident in Vietnam.
- In the Agreement on avoidance of double taxation to which the Socialist Republic of Vietnam is a signatory, there are other provisions on permanent establishments and residents, the provisions of that Agreement shall apply.
Conditions for application of contractor tax are specified as follows:
Case 1: Paying contractor tax by the declaration method (paying VAT by the deduction method, paying CIT on the basis of declaring revenue and expenses to determine taxable income) when the organization meets the following conditions:
- Having a permanent establishment or being a resident in Vietnam.
- The duration of doing business in Vietnam is 183 days or more from the effective date of the contractor contract or subcontractor contract.
- Use the Vietnamese accounting system and register for tax and be granted a tax identification number.
Case 2: Payment of contractor tax by the mixed method (payment of VAT by the deduction method, payment of CIT as a percentage of revenue) is applied when the organization meets the following conditions:
- Having a permanent establishment or being a resident in Vietnam.
- The duration of doing business in Vietnam is 183 days or more from the effective date of the contractor contract or subcontractor contract.
- Organize the accounting according to the provisions of the law on accounting and the guidance of the Ministry of Finance, register with the tax authorities to pay VAT by the deduction method and pay CIT according to the ratio. % calculated on taxable turnover.
Organizations established, operating and registered to operate under Vietnamese law, other organizations and individuals engaged in production and business activities shall pay contractor tax in the following cases:
- Business organizations established under the Enterprise Law 2020, the Investment Law 2020 and the Law on Cooperatives 2012.
- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, armed units, non-business organizations and other organizations.
- Petroleum contractors operate under the 1993 Petroleum Law (amended and supplemented in 2000, 2008 and 2018).
- Branches of foreign companies operating in Vietnam.
- Foreign organizations or representatives of foreign organizations operating in Vietnam.
- Ticket offices and ticket agents in Vietnam of foreign airlines have the right to transport directly or in codeshare to and from Vietnam.
- Organizations and individuals providing sea transportation services of foreign shipping companies; agent in Vietnam of foreign forwarding and delivery companies.
- Securities company, securities issuer, fund management company, commercial bank where securities investment funds or foreign organizations open securities investment accounts.
Other organizations in Vietnam. - Individuals doing business in Vietnam.
This taxpayer is responsible for withholding VAT and CIT before paying to foreign contractors and foreign sub-contractors according to the guidance in Section 3 Chapter II of Circular 103/2014/TT-BTC .
Who is subject to VAT in the contractor tax?
Including goods and services used for production, business and consumption in Vietnam according to the provisions of the 2008 Law on Value Added Tax, except for the subjects specified in Article 5 of the 2008 Law on Value Added Tax (amended and supplemented by Clause 1, Article 3 of the Law amending tax laws 2014).
In addition, according to the provisions of Clause 1, Article 6 of Circular 103/2014/TT-BTC, services or services associated with goods are provided by foreign contractors or foreign sub-contractors in Vietnam or outside Vietnam. On the basis of contractor contracts, subcontractors contracts used for production, business and consumption in Vietnam (except for the case specified in Article 2, Chapter I of Circular 103/2014/TT-BTC) are subject to VAT.
Goods are only subject to VAT at the stage of importation, the value of services provided under the contract specified in Clause 2, Article 6 of Circular 103/2014/TT-BTC is in the following cases:
- Goods delivery and receipt points are located within the territory of Vietnam (except for the case specified in Clause 5, Article 2, Chapter I of Circular 103/2014/TT-BTC);
- The supply of goods is accompanied by services performed in Vietnam such as installation, testing, warranty, maintenance, replacement and other services associated with the supply of goods, even if the the provision of services whether or not within the value of the contract for the supply of goods;
VAT is calculated for the whole contract in case the contract cannot separate the value of the goods and the value of the accompanying services (including the case of free accompanying services).
Who is subject to CIT in contractor tax?
CIT taxable income in contractor tax is the taxable income of foreign contractors and foreign sub-contractors on the basis of contractor contracts, sub-contractors' contracts according to the provisions of Clause 1, Article 7 of Circular 103 /2014/TT-BTC, including:
- Income arising from the provision and distribution of goods.
- Income arising from the provision of services and services accompanying goods in Vietnam.
Incomes generated in Vietnam of foreign contractors and foreign sub-contractors are incomes received in any form on the basis of contractor contracts, sub-contractors' contracts (except for cases specified in Clause 2 of this Article). specified in Article 103 Chapter I of Circular 2014/XNUMX/TT-BTC), regardless of the location of the foreign contractor's or foreign sub-contractor's business activities.
Taxable income of foreign contractors and foreign sub-contractors is income in some specific cases as follows:
- Incomes from transfer of property ownership and use rights; transfer of the right to participate in economic contracts/projects in Vietnam, transfer of property rights in Vietnam.
- Income from royalties is income of any kind paid for the right to use, transfer intellectual property rights and transfer technology, software copyright (including: payments for the right to use use, transfer of copyright and work owner rights; transfer of industrial property rights; transfer of technology, software copyright). “Copyright, work owner’s rights”, “Industrial property rights”, “technology transfer” shall be based on the provisions of the Civil Code, the Intellectual Property Law, the Law on Technology Transfer and the Law on Technology Transfer. implementation manuals.
- Income from transfer and liquidation of assets.
- Interest income: lenders earn income from loans of any kind, whether or not they are secured by a mortgage, whether or not the lender is entitled to the interest of the borrower. borrow; income from deposit interest (except interest on deposits of foreign individuals and interest on deposits arising from deposit accounts to maintain operations in Vietnam of diplomatic missions, representative offices of foreign countries). international organizations, non-governmental organizations in Vietnam), including bonuses associated with deposit interest; income from overdue interest paid as prescribed in the contract; income from bond interest, bond price discount (except for tax-exempt bonds), treasury bills; income from certificate of deposit interest. Interest on the loan includes the fees that the Vietnamese party must pay according to the provisions of the contract.
- Income from the transfer of securities.
- Fines and compensations collected from the counterparty who breached the contract.
- Some other incomes as prescribed by law.
In case goods are supplied in the following forms as prescribed in Clause 2, Article 7 of Circular 103/2014/TT-BTC, the CIT taxable income of the foreign contractor or foreign sub-contractor is the entire Value of goods and services:
- Goods delivery and receipt points are located within the territory of Vietnam (except for the case specified in Clause 5, Article 2, Chapter I of Circular 103/2014/TT-BTC);
- The supply of goods with services performed in Vietnam such as marketing, after-sales service, installation, test-run, maintenance, replacement warranty, other services associated with the supply of goods. , including where the supply of services is or is not part of the contract for the supply of goods;
INSTRUCTIONS FOR APPLICATION PROCEDURES
FCT
i) Pay VAT according to the deduction method, pay corporate income tax according to the declaration method
Foreign contractors and foreign sub-contractors pay VAT by the credit method, pay CIT on the basis of revenue and expense declarations to determine taxable income as prescribed in Article 8 of Circular 103/2014 /TT-BTC if the following conditions are met:
- Having a permanent establishment in Vietnam, or being a resident in Vietnam;
- The duration of doing business in Vietnam is 183 days or more from the effective date of the contractor contract or sub-contractor contract;
- Applying the Vietnamese accounting regime and making tax registration, being granted a tax identification number.
According to the provisions of Article 9, 10 of Circular 103/2014/TT-BTC, the payment of VAT shall comply with the provisions of the Law on VAT 2008 (amended in 2013, 2014 and 2016) and guiding documents. enforce. The payment of CIT is currently in accordance with the provisions of the Law on CIT 2008 (amended and supplemented in 2013, 2014 and 2020) and guiding documents.
ii) Pay VAT and corporate income tax using the direct method
If a foreign contractor or foreign sub-contractor fails to satisfy the above conditions, the Vietnamese investor shall pay tax on behalf of the foreign contractor or foreign sub-contractor according to the following instructions:
How to calculate VAT in contractor tax
VAT is calculated according to the formula:
Amount of VAT payable | = | VAT calculation | x | % VAT calculation on turnover |
Foreign contractors and foreign sub-contractors that are subject to VAT by the method of direct calculation on VAT are not eligible to deduct VAT on goods and services purchased for the performance of contractor contracts or housing contracts. Subcontractors.
The method of determining the turnover for calculation of VAT and the percentage for calculating VAT on turnover for business days shall comply with the provisions of Clauses 1, 2 and 3, Article 12 of Circular 103/2014/TT-BTC.
How to calculate corporate income tax in contractor tax
CIT in contractor tax is calculated according to the formula:
Payable CIT amount | = | Revenue for CIT calculation | x | Percentage of calculating CIT on turnover |
Revenue subject to CIT, the rate (%) of CIT calculated on the taxable turnover shall comply with the provisions of Clauses 1 and 2, Article 13 of Circular 103/2014/TT-BTC.
In addition, CIT for the amount of compensation received from the party violating the contract is larger than the damage value and has taxable income, the foreign contractor may choose to declare and pay CIT according to the tax rate. CIT is calculated on taxable revenue or on the basis of declaring revenue and expenses at the common tax rate.
iii) Paying contractor tax using the mixed method
Pursuant to the provisions of Article 14 of Circular 103/2014/TT-BTC, a foreign contractor or foreign sub-contractor, if fully meeting two conditions, has a permanent establishment or is a resident in Vietnam and The duration of business in Vietnam is 183 days or more from the effective date of the contractor contract or sub-contractor contract, and the accounting organization shall comply with the provisions of law on accounting and the guidance of the Ministry of Finance. then register with the tax authority to pay VAT by the deduction method and pay CIT at the percentage of taxable revenue.
According to the provisions of Articles 15 and 16 of Circular 103/2014/TT-BTC, the payment of VAT shall comply with the guidance in the Law on Corporate Income Tax 2008 (amended and supplemented in 2013, 2014 and 2020). and implementation manuals. The payment of CIT shall comply with the guidance in Article 13 of Circular 103/2014/TT-BTC.
FAQ
Top Q&A
A dossier of application for contractor tax exemption or reduction under a double taxation agreement includes:
- Notice of eligibility for tax exemption or reduction under the Agreement No. 01/HTQT issued together with Circular 156/2013/TT-BTC;
- Certificate of residence issued by the tax authority of the country of residence immediately before the year of notification of eligibility for tax exemption or reduction under the Agreement;
- A copy of the contract signed with organizations and individuals in Vietnam, certified by the taxpayer.
- In case securities trading activities do not have a securities trading contract, the taxpayer shall submit a certificate of depository account for stocks and bonds certified by the depository bank or securities company using form No. 01/ TNKDC Securities issued together with this Circular.
- For income from capital transfer: the taxpayer shall submit a photocopy with the taxpayer's certification of the capital transfer contract, a photocopy of the investment certificate of the Vietnamese company to which the foreign investor contributes. capital certified by the taxpayer.
- In the case of foreign government agencies whose income is exempt from tax under the provisions of the loan interest clause of the Agreement: the taxpayer shall submit a photocopy of the loan contract signed between the Foreign government agencies with organizations and individuals in Vietnam with the taxpayer's certification
- Power of attorney in case the taxpayer authorizes a legal representative to carry out the procedures for applying the Agreement.
Foreign contractors have 2 methods of tax payment, which is the method of declaration and the method of calculating tax as a percentage of revenue. When paying tax according to the declaration method, foreign contractors will be allowed to pay tax similar to Vietnamese enterprises and enjoy the preferential tax deduction policy as prescribed.
Foreign contractors will have to register to declare CIT and VAT. However, in order to enjoy tax deduction incentives, foreign contractors need to meet the following conditions:
- Enterprises with permanent establishments in Vietnam
Subjects with tax residency in Vietnam - Business duration from 183 days or more according to the contractor contract
- Complete the tax registration declaration form and be issued with a contractor tax code, according to Vietnamese accounting rules
The representative of the Vietnamese party needs to notify the tax authority in writing that the foreign contractor will pay tax by the withholding method within 20 days from the date of signing the contract. If a foreign contractor performs many contracts at a time, only one of the contracts is required to register to pay tax according to the approved deduction method, then the other contracts must also pay tax according to the approved method of tax payment. deduct.
At that time, foreign contractors will enjoy the incentive to withhold and pay CIT at the tax rate of 20% on the enterprise's pre-tax profit.
According to Section 1, Article 6 of Circular 103/2014/TT-BTC on subjects subject to contractor tax:
- Objects subject to VAT are goods and services used for production, business and consumption in Vietnam.
- Subjects subject to VAT are services or services associated with goods provided by foreign contractors or foreign sub-contractors in Vietnam or outside Vietnam on the basis of contractor contracts, sub-contractors using used for production, business and consumption in Vietnam.
According to Section 3, Article 2 of Circular 103/2014/TT-BTC, the subjects not subject to contractor tax are foreign organizations and individuals earning incomes from services provided and consumed outside the Vietnamese territory.
Therefore, in principle, a foreign organization that receives income from a Vietnamese organization, but transacts and serves production and consumption outside of Vietnam, not subject to contractor tax.
Complying with regulations and following the right process not only helps you avoid legal risks, but also contributes to the transparency and financial health of your business.
Doing the above is not easy for businesses, the effective solution is to use a professional service: Cooperate with a financial, accounting and tax expert to ensure you follow the correct process and comply with the regulations. legislation.
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