Question

Are foreign contractors required to pay Foreign Contractor Tax (FCT) in Vietnam ? Law office in Danang, Vietnam advise on the FCT in Vietnam ?

Answer

Foreign Contractor Tax (FCT) in Vietnam ?

Tax obligation of foreign contractor in Vietnam

Foreign enterprises (Foreign contractors, Foreign sub-contractors) that are business organizations shall pay Value Added Tax (VAT), Corporate Income Tax (CIT); Foreign contractors, Foreign sub-contractors that are business people shall pay Value Added Tax (VAT), Personal Income Tax (PIT) in accordance with the law on personal income tax; 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 (Article 5 Circular No. 103/2014/TT-BTC dated August 6, 2014).

If the foreign enterprise has established a branch in Vietnam, it shall pay FCT using declaration method, that means, paying VAT using deduction method, paying CIT according to declared revenue and expense to determine taxable income  (Section 2 Article 8 Circular No. 103/2014/TT-BTC dated August 6, 2014).

If the foreign enterprise has not established a branch in Vietnam, it shall pay FCT using the direct method, that means, paying VAT and CIT according to fixed rates  (Section 3 Article 11 Circular No. 103/2014/TT-BTC dated August 6, 2014).

For FCT using the direct method:

Direct VAT rates on revenue applied to various business lines:

No.	Business lines	VAT rate (%)
1	Services, rental of machinery and equipment, insurance; construction, installation exclusive of raw materials, machinery and equipment.	5
2	Production, transportation, services attached to goods; construction, installation inclusive of raw materials, machinery and equipment.	3
3	Other business lines	2

(Clause 2 Article 12 Circular No. 103/2014/TT-BTC dated August 6, 2014)

Direct CIT rates on taxable revenue applied to various business lines:

No.	Business lines	CIT rate ( % )
1	Trading: distribution, supply of goods, raw materials, supplies machinery and equipment; distribution of goods, raw materials, supplies, machinery and equipment attached to services in Vietnam (including those provided in the form of domestic exports, except for goods processed under processing contracts with foreign entities); supply of goods under Incoterms	1
2	Lease of machinery and equipment, insurance, lease of oilrig	5
3	Restaurant, hotel, casino management services	10
4	Derivative financial services	2
5	Lease of aircraft, aircraft engines, parts of aircrafts and ships	2
6	Construction, installation, whether or not inclusive of raw materials, machinery and equipment	2
7	Other business activities, transport (including sea transport and air transport)	3
8	Transfer of securities, certificates of deposit, reinsurance abroad, reinsurance commission	0,1
9	Loan interest	5
10	Income from copyright	10

(Clause 2 Article 13 Circular No. 103/2014/TT-BTC dated August 6, 2014)

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DMS Law firm in Vietnam
Director
(Signed)
Lawyer Do Minh Son