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Tax Newsletters February 27, 2021

Contractor tax policy on the expense of equipment and machinery installation

Dispatch No. 1452/CT-TTHT issued by Hanoi Department of Taxation on January 12, 2021

In case the company in Vietnam signs a contract to purchase equipment and materials with a foreign contractor ("FCT"), in which the foreign party provides equipment, machinery, and services for commissioning, installation, manufacturing and contract which can separate equipment, machinery, the value and other services, thus the FCT for "services related to the provision of commissioning, installation, and manufacturing services that the seller appoints experts to perform in Vietnam” is calculated according to the ratio of taxable turnover as follows:

* Corporate Income Tax (CIT): the rate for CIT calculation which is applicable to machinery and equipment installation, is 2%; the rate which is applicable to other services, is 5%;

* Value Added Tax (VAT): the rate for VAT calculation which is applicable to service industries, is 5%

Please see the attached file for detailed information