TAXABLE OBJECTS OF FOREIGN CONTRACTORS

TAXABLE OBJECTS OF FOREIGN CONTRACTORS

Contractor tax is understood as a tax levied on foreign contractors and foreign subcontractors (foreign organizations and individuals) with incomes in Vietnam.

According to Circular 103/2014/TT-BTC, contractor tax is applied to the following subjects:

- Foreign contractors and subcontractors doing business in Vietnam or earning incomes in Vietnam under contracts, agreements or commitments between foreign contractors and Vietnamese entity or between foreign contractors and foreign subcontractors to perform part of the main contract.

- Foreign organizations and individuals providing goods under the delivery conditions of international trade terms (Incoterms) for which the seller to be responsible for goods that have been taken into Vietnam’s territory.

- Foreign organizations and individuals providing goods in Vietnam in the form of on-the-spot import and export and earn income in Vietnam.

Example:

- Case 1: Overseas company X signs a contract to purchase cloth from Vietnamese company A, and at the same time designates company A to deliver goods to Vietnamese company B (in the form of on-the-spot import and export as prescribed by law). Company X earns an income in Vietnam under a contract between company X and company B (company X sells cloth to company B).

In this case, company X is subject to contractor tax and company B is responsible for declaring, deducting and paying tax on behalf of company X.

- Case 2: Overseas company Z signs a processing contract with Vietnamese company E (company Z supplies raw materials to company E for processing) and requests company E to deliver goods to Vietnamese company G for further processing (in the form of the spot import and export processing as prescribed by law). After the processing is completed, company G returns the goods to company Z and company Z must pay the processing fee to company G according to the processing contract.

In this case, enterprise Z is not subject to contractor tax as prescribed in Circular 103/2014/TT-BTC.

- Foreign organizations and individuals through Vietnamese organizations and individuals to negotiate and sign contracts in the name of foreign contractors.

- Foreign organizations and individuals that performs the whole or part of distributing goods or providing services in Vietnam in which the foreign organization or individual is still the owner of the goods delivered to the Vietnamese organization or take responsibility for the distribution expenses, advertising, marketing, service quality, quality of goods delivered to Vietnamese organizations or impose prices for sale of goods or prices for provision of services; including the case 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 exercising the right to export, import and distribute in Vietnam, purchase goods for export or sell goods to Vietnamese traders in accordance with the law on trade.