Foreign contractor tax ("NTNN")

System of current legal documents

Circular No. 103 / 2014 / TT-BTC dated 06 month 8 year 2014, Circular guiding the implementation of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or having income in Vietnam, take effect from the date of 01 / 10 / 2014, replacing Circular No. 60 / 2012 / TT-BTC dated 12 / 4 / 2012 of the Ministry of Finance guiding the implementation of tax obligations applicable to organizations, foreign individuals doing business in Vietnam or earning income in Vietnam.

Download File: https://goo.gl/LgNdDK

Download Backup file:  http://bit.ly/2P6VHk4

Summary of text content

Scope of application

FCT applies to foreign organizations and individuals doing business or earning income in Vietnam on the basis of a contract or agreement with a Vietnamese party (including foreign invested enterprises in Vietnam). FCT is not a separate tax, but includes VAT and CIT, or PIT on personal income.

FCT applies to a number of payments including loan interest, royalties, service fees, rents, insurance premiums, securities transfer and transfer services, and goods provided in Vietnam or attached. according to the service implemented in Vietnam.

In addition, some agreements under which foreign organizations directly or indirectly participate in the distribution of goods or provide services in Vietnam are also subject to the application of FCT - for example Foreign organizations still own goods, bear the costs of distribution, advertising and marketing, are responsible for the quality of goods, services, pricing decisions, or authorizing / hiring companies. Vietnam performs a part of distributing goods and providing services in Vietnam.

Exemption from FCT includes a payment for the supply of pure goods (eg delivery with terms of liability, costs and risks related to goods delivered first or at a Vietnamese border gate). , and not accompanied by services performed in Vietnam), for services provided and consumed outside Vietnam, and some other services performed entirely outside Vietnam (eg some translations repair, training, advertising, marketing, etc.).

Payment method of FCT

Foreign contractors may choose one of the following three tax payment methods: deduction method, rate fixing method and mixed method.

Method of 1- Method of deduction

Under this method, foreign contractors will have to register and declare VAT and submit CIT and VAT declarations similar to Vietnamese companies. Foreign contractors can apply the deduction method if they meet the following conditions:

• Having a permanent establishment in Vietnam or being a tax resident in Vietnam;
• Business term in Vietnam under contractor contract; subcontractor contract from 183 day or more; and
• Applying Vietnam accounting regime, completing tax registration declaration and being granted tax code.

The Vietnamese party must notify in writing to the local tax authority that the foreign contractor will pay tax by the deduction method within 20 working days from the date of signing the contract.

If foreign contractors perform multiple contracts at the same time, if there is a qualified contract and foreign contractor registers to pay tax by deduction method, other contracts must also pay taxes under the foreign method. registered.

Foreign contractors will pay CIT at the tax rate of 20% on profit.

Method 2 - Rate fixing method

Foreign contractors pay tax according to the fixed-rate method without having to register for VAT declaration and payment and are not required to submit CIT and VAT declarations. Instead, VAT and CIT will be withheld by the Vietnamese party at the fixed rates on the total taxable revenue. These rates vary depending on the activities performed by NTNN. VAT retained by the Vietnamese party is generally considered to be the deductible input VAT in the Vietnamese VAT declaration.

The declaration of FCT by the method of determining the rate of foreign contractors providing goods and services for oil and gas exploitation, exploration, development and production activities is prescribed separately.

Method 3 - Mixed method

Mixed method allows foreign contractors to register to pay VAT by deduction method (ie output VAT minus input VAT deductible), but pay CIT according to the fixed percentage of the joint venture tax collection.

Foreign contractors who want to apply mixed methods must meet the following conditions:

• Having a permanent establishment or a tax resident in Vietnam;
• Business term in Vietnam under contractor contract, subcontract contract from 183 date or more; and
• Organize accounting in accordance with the law on accounting and guidance of the Ministry of Finance.

Determine payable contractor tax

Value-added taxg

(1) VAT calculation revenue is the total revenue from the provision of services and services associated with VAT-liable goods received by foreign contractors and sub-contractors, excluding tax amounts. payable, including expenses paid by the Vietnamese party on behalf of the foreign contractor or foreign subcontractor (if any). In case of agreement in contractor contracts, subcontract contracts, received by foreign contractors and foreign subcontractors excluding payable VAT, VAT calculation turnover must be converted into business VAT collection is determined by the following formula:

Corporate income tax

(2) CIT calculation turnover is the entire turnover excluding VAT that foreign contractors and foreign subcontractors have not yet deducted from payable taxes. The turnover for CIT calculation shall include the expenses paid by the Vietnamese party on behalf of the foreign contractor or foreign sub-contractor (if any). In case, according to the agreement in the contractor contract, the subcontractor contract, the revenue received by a foreign contractor or a foreign sub-contractor does not include the payable CIT, the turnover for CIT calculation is determined according to public wake up later:

Some dispatches need attention

Loan interest and expenses payable to foreign parties (Official Letter No. 724 / TCT-CS dated 02 / 3 / 2018 of General Department of Taxation)

Under the Double Taxation Avoidance Agreement, loan interests paid to foreign banks eligible for tax exemption under the double taxation avoidance agreement will be exempt from contractor tax (FCT) payable in Vietnam. However, other expenses payable to foreign banks such as capital arrangement fee, commitment fee are separate items, not included in loan interest, the company in Vietnam is responsible for declaration and payment. withholding tax on behalf of foreign bank. Vietnam-based companies may deduct VAT paid on behalf of foreign contractors and account for the corporate income tax paid by contractors instead of deductible expenses when calculating CIT if other expenses payable to foreign banks are not including contractor tax.

Contractor tax when purchasing machinery with services (Official Letter No. 13409 / CT-TTHT dated 02 / 4 / 2018 of Hanoi Tax Department)

In case the Company signs a contract with a foreign contractor (FCT), a contract for separating the value of machinery, equipment, transportation, installation, warranty ..., the Company pays tax on behalf of the foreign contractor. follow the direct method as follows:

- Regarding VAT: The rate of VAT calculated on taxable turnover is as follows:

For machinery and equipment: The company shall declare and pay VAT at the customs office when carrying out import procedures.

For services: Construction design, construction, installation (not including materials, machinery and equipment), testing and commissioning, training, warranty, package management and other services : Apply rate is 5%

For transportation services; construction and installation with contracted materials, machinery and equipment: the rate of 3% is applied.

- Regarding corporate income tax: The CIT rate calculated on taxable turnover is as follows:

For machinery and equipment: the rate of 1% is applied

For services: Construction design, testing and testing, training, warranty, package management and other services: Apply rate is 5%

For transportation, construction and installation services with a contract or not covering raw materials, machinery and equipment: the rate of 2% is applied.

Contractor tax in case of using subcontractors (Official Letter No. 2044 / TCT-CS dated 28 / 05 / 2018 of General Department of Taxation)

The company is a foreign subcontractor performing the work specified in the Contractor Contract signed with the Main Contractor and assigning a part of the work value to Vietnamese subcontractors that these Vietnamese subcontractors are not part of. in the list of contractors and the corresponding items listed together with the contractor contract signed between the main contractor and the Vietnamese party, the company's EIT-liable turnover shall not be deducted from the work value and value. hiring machinery, equipment, labor ... performed by Vietnamese subcontractors.

Exchange rate for calculating foreign contractor tax - FCT (Official Letter No. 2586 / TCT-CS dated June 28, 6 of the General Department of Taxation and Official Letter No. 2018 / CT-TTHT dated July 48097, 10 of Hanoi Tax Department )

From the date of 01 / 01 / 2015, in case foreign contractors have accounts opened at commercial banks (commercial banks) in Vietnam arising in foreign currencies, they must be converted into Vietnam dong at the buying rate of Commercial banks where foreign contractors open accounts at the time of payment transactions arise.

In case the foreign contractor does not open an account at a commercial bank in Vietnam but receives revenue in foreign currency (US dollars) paid by the Vietnamese party to a foreign contractor via bank account In the Vietnamese trade of the Vietnamese Party, the selling rate of the commercial bank where the Vietnamese party opens an account to convert the taxable revenue of the foreign contractor from the US dollar into Vietnam dong shall be applied according to regulations. determined. For turnover converted from other foreign currencies into Vietnam dong, the cross-currency exchange rate of Vietnam dong and a number of other foreign currencies shall be used to determine tax calculation values ​​according to the provisions of Article 3 Decision -NHNN.

Service of delivery from Vietnam to abroad (Official Letter No. 2157 / TCT-CS dated 04 / 6 / 2018 of General Department of Taxation)

In case a company in Vietnam signs a postal transport cooperation contract with another company overseas to transport and deliver postal items (including customs permits, newspapers, magazines, books, documents , printing documents, samples and commercial products) in two directions from Vietnam to abroad and vice versa, contractor tax (FCT) is applied to delivery services in the direction of Vietnam to overseas. the above regulations. In case of division of charges for international postal service payments between Vietnam and foreign countries according to the provisions of the Post Law and the International Post Agreements to which the Socialist Republic of Vietnam is a signatory. This service is performed outside of Vietnam and is not subject to Circular No. 103/2014 / TT-BTC.

Issuing tax codes to declare and pay contractor tax according to the mixed method (Official Letter No. 3065 / TCT-KK dated 09 / 8 / 2018 of the General Department of Taxation)

Where foreign traders do not have a presence in Vietnam, they want to participate in business activities in the form of foreign contractors not establishing legal entities in Vietnam and signing through commercial contracts with Vietnamese customers. It must be granted a certificate of registration of the right to export and import according to the provisions of Decree No. XNXX / 90 / ND-CP dated April 28, 2012, of the Government stipulating the export and import right of Foreign traders have no presence in Vietnam. After being granted a certificate of registration of export and import rights granted by a competent agency, foreign traders shall make tax registration according to the provisions of Clause 2007 Article XNXX of Circular 31 / 5 / TT-BTC. .

The contractor tax declaration and payment (FCT) according to the mixed method of foreign traders after tax registration comply with the guidance in Official Letter No. 4431 / TCT-KK dated September 23, 9. of the General Department of Taxation on contractor tax declaration.