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FCT ACCORDING TO CIRCULAR NO. 20/2026/TT-BTC
Under Thông tư 20/2026/TT-BTC, the calculation of Foreign Contractor Tax (FCT) has been updated compared to Thông tư 103/2014/TT-BTC, particularly regarding the direct method.
Previous Regulation
- FCT was generally applied under the direct method
- However, the taxable revenue for CIT purposes was determined in a way similar to the deduction method
👉 Specifically:
Taxable revenue for CIT excluded VAT
📌 This resulted in:
- A method that was not fully “direct” in nature
- Practical confusion in application
New Regulation under Circular 20/2026
The new Circular clarifies the approach:
👉 Applying the true nature of the direct method:
- VAT: calculated directly on revenue
- CIT (for foreign individuals/household businesses): calculated directly on revenue
✅ Key change:
- Taxable revenue no longer excludes VAT
- The calculation becomes simpler and more consistent
Quick Comparison
| Under Circular 103 | Under Circular 20 | ||||||||||||||||||
| Contract value inclusive of CIT and VAT incurred in Vietnam | |||||||||||||||||||
| VAT | = | Contract value | x | VAT rate (%) | VAT | = | Contract value | x | VAT rate (%) | ||||||||||
| CIT | = | (Contract value | - | VAT | x | Tỷ lệ % thuế TNDN | CIT | = | Contract value | x | CIT rate (%) | ||||||||
| Contract value inclusive of CIT in Vietnam | |||||||||||||||||||
| VAT | = | Contract value | x | VAT rate (%) | VAT | = | Contract value | x | VAT rate (%) | ||||||||||
| 1 - VAT rate (%) | 1 - VAT rate (%) | ||||||||||||||||||
| CIT | = | Contract value | x | CIT rate (%) | CIT | = | Contract value | x | CIT rate (%) | ||||||||||
| 1 - VAT rate (%) | |||||||||||||||||||
| Contract value exclusive of VAT and CIT in Vietnam | |||||||||||||||||||
| CIT | = | Contract value | x | CIT rate (%) | CIT | = | Contract value | x | CIT rate (%) | ||||||||||
| (1 - CIT rate (%)) | [1 -( VAT rate (%) + CIT rate (%)) | ||||||||||||||||||
| VAT | = | Contract value | x | VAT rate (%) | VAT | = | Contract value | x | VAT rate (%) | ||||||||||
| (1 - CIT rate (%)) | x | (1 - VAT rate (%)) | [1 -(VAT rate (%) + CIT rate (%)) | ||||||||||||||||
