How to calculate foreign contractor tax in Vietnam?

Contractor tax is no longer a new tax for businesses today. However, there are still many businesses that are confused and do not really understand this type of tax. Grasping that mentality, Viet An tax Agent would like to share with customers about contractor tax through the article below. Specifically:

What is contractor tax?

Foreign Contractor Tax (FCT) is a tax applied to foreign organizations and individuals (not operating under Vietnamese law) that generate income from providing services or services associated with goods in Vietnam.

Subjects who submit withholding tax

According to the provisions of Article 1 of Circular 103/2014/TT-BTC dated August 6, 2014, it is stipulated as follows:

Subjects submitting to contractor tax include:

• Foreign business organizations with permanent establishments in Vietnam or without permanent establishments in Vietnam; Foreign individuals doing business who are residents of Vietnam or not residents of Vietnam (hereinafter collectively referred to as Foreign Contractors, Foreign Subcontractors) doing business in Vietnam or having income arising in Vietnam on the basis of contracts, agreements, or commitments between foreign contractors and Vietnamese organizations and individuals or between foreign contractors and foreign subcontractors to perform part of the work of Contractor contract;
• Foreign organizations and individuals supply goods in Vietnam in the form of on-site import and export and generate income in Vietnam on the basis of contracts signed between foreign organizations individuals and businesses 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 where the seller bears risks related to goods entering the Vietnamese territory;
• Foreign organizations and individuals carry out part or all of the business activities of distributing goods and providing services in Vietnam in which the foreign organizations and individuals are still the owners of the goods delivered to them. The Vietnamese organization is either responsible for the costs of distribution, advertising, marketing, service quality, quality of goods delivered to the Vietnamese organization or determines the selling price of goods or service provision price; including cases of authorizing or hiring a number of Vietnamese organizations to perform part of distribution services and other services related to the sale of goods in Vietnam;
• Foreign organizations and individuals use Vietnamese organizations and individuals to negotiate and sign contracts in the name of foreign organizations and individuals;
• Foreign organizations and individuals exercise the right to export, import, and distribute in the Vietnamese market, buy goods for export, and sell goods to Vietnamese traders according to commercial law.

Taxes payable

• A foreign contractor or subcontractor is a business organization that carries out tax obligations:
• Value Added Tax (VAT)
• Corporate Income Tax (CIT)
• Foreign contractors and subcontractors are business individuals who carry out tax obligations:
• Value Added Tax (VAT)
• Personal Income Tax (PIT)

How to calculate foreign contractor tax in Vietnam according to Gross price

Contractor tax at Gross price is the value of the contract between a Vietnamese enterprise and a foreign contractor that generates income in Vietnam, including tax.

Note: Calculate VAT for contractors first, then calculate CIT for foreign contractors

• How to calculate VAT:

• How to calculate CIT:

How to calculate foreign contractor tax in Vietnam according to Net price

Contractor tax based on Net price is the value of the contract between a Vietnamese enterprise and a foreign contractor that generates income in Vietnam excluding tax.

Note: Calculate corporate income tax for foreign contractors first and then calculate VAT.

• How to calculate CIT:

• How to calculate VAT:

Percentage rate to calculate VAT on revenue

Rate (%) of corporate income tax calculated on taxable revenue

Above is the advice of Viet An Tax Agent for the questions “how to calculate foreign contractor tax in Vietnam?”. Customers who need advice and support regarding tax services please contact us for quick and timely answers.