Guidance on Tax levied on foreign organizations and individuals doing business in Vietnam

On 06/8/2014, the Ministry of Finance issued Circular No. 103/2014 / TT-BTC guiding the implementation of tax obligations applicable to organizations and individuals operating business or having income in Vietnam.

Huong dan ve thue 06.08.2014

Accordingly, VAT will be imposed on services or services associated with goods subject to VAT provided by foreign contractors and subcontractors according to contracts and used for production, sales and consumption in Vietnam.

In case goods are supplied under a contract inside the territory of Vietnam or associated with services conducted in Vietnam such as installation, commissioning, warranty, maintenance, replacement and other services (including free services), whether the provision of such services is in the contract price or not, goods and associated services will only be subject to VAT at the import gate as regulated. If the contract does not separate the value of goods and services (including free services), both will be imposed VAT.

Taxable income of foreign contractors and subcontractors is income arising from the provision and distribution of goods; provision of services or services in association with goods and services in Vietnam according to contracts.

Where goods are delivered inside Vietnam or the supply of goods together with a number of services carried out in Vietnam as advertising and marketing services (marketing), trade promotion activities, after-sales services, installation services, commissioning, warranty, maintenance, replacement and other services (including free services), whether the provision of such services is in the contract price or not, the taxable income of foreign contractors and subcontractors is the total value of goods and services.

The Circular also regulates the direct method of paying VAT (value-added tax) and CIT (corporate income tax).

Revenues from provision of services, machine and equipment leasing, insurance, construction and installation without the supply of raw materials, machinery and equipment will be subject to a VAT rate of 5%. For production, transportation and services in association with products, construction and installation with the supply of raw materials, machinery and equipment, the rate is 3% and other business activities, the rate is 2%.

Trade distribution, goods supply, materials, supplies, machinery and equipment; distribution and goods supply, materials, supplies, machinery and equipment in association with service in Viet Nam will be subject to a corporate income tax rate of 1%; for services, equipment leasing, insurance, oil rig rent, the tax rate is 5%; for other production, business, transportation (including shipping, air transport), the rate is 2%; for the transfer of securities, certificates of deposit, foreign reinsurance, and reinsurance commission, the rate of 0.1% will be applied.

This Circular takes effect from October 1, 2014 and replaces Circular No. 60/2012/TT-BTC dated April 12, 2012 of the Ministry of Finance guiding on tax obligations applicable to foreign organizations or individuals trading or receiving incomes in Vietnam.

Source: The Ministry of Finance Portal