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MINISTRY
OF FINANCE
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SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom – Happiness
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No.169/1998/TT-BTC
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Hanoi,
December 22, 1998
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CIRCULAR
PROVIDING GUIDANCE ON TAXES APPLICABLE TO FOREIGN
ORGANISATIONS AND INDIVIDUALS DOING BUSINESS IN VIETNAM, WHICH ARE NOT
SUBJECTED TO INVESTMENT FORMS REGULATED IN THE LAW ON FOREIGN INVESTMENT IN
VIETNAM
Pursuant to Law on Value Added Tax
02/1997/QH9 dated May 10, 1997; Law on Corporate Income Tax 03/1997/QH9 dated
May 10, 1997;
Pursuant to Decree No.28/1998/ND-CP dated May 11, 1998 of the Government
providing detailed regulations on the implementation of the Law on Value Added
Tax; Decree N0.30/1998/ND-CP dated May 13, 1998 of the Government providing
detailed regulations on the implementation of the Law on Corporate Income Tax;
Pursuant to relevant legal documents;
The Ministry of Finance hereby provides guidance on the implementation of tax
obligations applicable to foreign organisations and individuals doing business
in Vietnam, which are not subject to investment forms regulated in the Law on
Foreign Investment in Vietnam:
A. SCOPE OF APPLICATION
I- APPLICATION OF THIS
CIRCULAR:
Tax obligations stated in this circular are
applicable to foreign organisations and individuals doing business in Vietnam,
which are not subject to investment forms regulated in the Law on Foreign
investment in Vietnam.
II- THIS CIRCULAR IS NOT SUBJECT
TO:
- Foreign organisations and individuals that
provide aeroplane and ship repairing services for Vietnamese organisations and
individuals abroad;
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- Foreigners in Vietnam working for Vietnamese
organisations or individuals under employment contracts, or those who are sent
to Vietnam to work and paid by foreign organisations and individuals. These
foreigners are obliged to pay individual income tax.
If the Socialist Republic of Vietnam joins an
international organisation or signs an international treaty with one or more
nations, and these charters or treaties provide relevant regulations other than
those stated in this circular, the regulations in the charter or treaty and in
other documents guiding the implementation of such charter or treaty shall be
applied.
III- TERMS MENTIONED IN THIS
CIRCULAR ARE DEFINED AS FOLLOWS:
1. "Contractor" is a foreign
organisation or individual operating a business in Vietnam, which is not
subject to investment forms regulated in the Law on Foreign Investment in
Vietnam. Business operations of a contractor can be carried out through
contracts signed between them and a Vietnamese organisation or individual,
hereinafter referred to as the Vietnamese contract signing party.
Contractor includes foreign organisations and
individuals that provide oil and gas services in accordance with the Law on Oil
and Gas.
2. "Sub-contractor" is an organisation
or individual that provides services for the contractor or carries out parts of
work for the contractor.
3. "Vietnamese contract signing party"
includes:
- Legal organisations established under
Vietnam’s laws;
- Joint venture companies, wholly foreign
invested companies and their partners operating under the Law on Foreign
Investment in Vietnam;
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- Joint venture banks and branches of foreign
banks in Vietnam licensed by the State Bank of Vietnam;
- Affiliates of foreign companies operating in
Vietnam;
- Foreign organisations in Vietnam;
Other organisations and individuals in Vietnam.
4. "Contract" is a contract signed
between a contractor and the Vietnamese contract signing party.
5. "Subcontract" is a contract signed
between a sub-contractor and the contractor.
6. "Technology transfer" is a mode of
selling and buying technology under contracts on technology transfer agreed in
accordance with lawful regulations. The seller is responsible for transferring
all the general knowledge about the technology, or to provide machinery,
equipment, services and training courses attached to the technology to the
buyer. The buyer is responsible for paying the seller for the transferred
technology and knowledge under the mutually agreed conditions stated in the
contract on technology transfer.
Technology transfer includes:
a) Transferring industrial property: inventions,
active solutions, industrial forms, and trade marks that are under the
protection of Vietnam�s
laws, and are allowed to be transferred.
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c) Transferring logical solutions to production
process, and technological renovation.
d) Providing services supporting technology
transfer so as the buyer can improve their production technological capacity,
and/or services described in specific contracts, including:
- Support in choosing technology, guiding the
installation of equipment, testing production lines of the transferred
technology;
- Consulting in technology management, business
management, and guiding the implementation of the transferred technology;
- Training and helping improve professional and
management skills of technical workers, technicians and managers on the
transferred technology.
e) Machines, equipment and technical facilities
attached to the above-mentioned description.
B. TAX OBLIGATIONS APPLIED
TO FOREIGN CONTRACTORS AND SUBCONTRACTORS APPLYING VIETNAM'S ACCOUNTING SYSTEM
I. TAX OBLIGATIONS:
1. Value added tax (VAT): Foreign
contractor and sub-contractor pay VAT in the mode of tax regulated by the Law
on VAT and other existing guidance documents.
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The followings are some specific VAT calculation
cases:
+ If the contractor agrees to have a part of the
contract value paid in other goods and services, the price subject to VAT is
the price including the value of goods and services provided to the contractor
as agreed in the signed contract.
For instance: Contractor A signed a construction
observation services providing contract with a Vietnamese company. According to
the contract, the Vietnamese party has to pay US$100,000 to the contractor, and
in addition to this, accommodation and catering services for the contractor’s
two experts are also paid by the Vietnamese party. In this case, the price
subject to VAT will be: $100,000 + the sum paid for the accommodation and
catering services for the contractor’s two experts.
+ If the contractor signs a business
co-operation contract with a Vietnamese partner and takes the responsibility
for sharing the profit under the form of dividing the turnover, after each time
the shared turnovers is divided, as per in the contract, the turnover receiver
is required to issue VAT receipts applied to the sum of shared turnover, which
will be sent to the Vietnamese contract signing party. Based on the settled
receipts, the turnover receiver will be responsible for balancing the turnover
and outgoing VAT, which will be used as a basis to calculate VAT which the
contractor has to pay.
2. Corporate Income Tax (CIT): the contractor
and sub-contractor have to pay CIT as regulated by the Law on CIT and other
existing guidance documents.
2.1 With respect to incomes subject to tax
applied to foreign airlines currently operating and providing aviation
transportation services in Vietnam, these incomes include all incomes which the
airline earns from providing aviation transportation services in Vietnam, and
are calculated on the basis of sharing the firm’s total income earned from its
world-wide aviation transportation services to aviation transportation
activities in Vietnam. The income allotted to aviation transportation
activities in Vietnam must be respective to the proportion between the firm�s aviation transportation
turnover in Vietnam and its total transportation turnover.
The aviation transportation turnover in Vietnam
includes all already paid transportation charges calculated according to the
real number of passengers and commodities transported by the airline from a
Vietnam airport to an overseas airport which must be the final destination of
the passengers and commodities as agreed in the signed contract or
transportation documents officially materialised by the foreign airline
operating and providing aviation transportation services in Vietnam, but not
airports which are the transit destinations of the passengers and commodities.
In cases when the foreign airline does not provide documents to be taken as a
basis to share incomes subject to tax, the income bearing tax will be fixed at
five per cent of the firm�s
total transportation turnover in Vietnam.
2.2 Corporate Income Tax rate:
The business income tax rate is defined in
accordance with the guidance provided in Item V.1 of Circular No.99/1998/TT-BTC
dated July 14, 1998 by the Ministry of Finance.
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3. Such other taxes as import - export taxes and
individual income tax are subject to the regulations of laws and ordinances on
tax and existing guidance documents.
II. TAX DECLARATION AND
REGISTRATION PROCEDURES
1. Tax registration procedures:
Within a period of 20 days since the date of
signing contracts with the Vietnamese party or the main contractor, the
contractor or the sub-contractor has to register tax and ask for a granting tax
code with the local taxation body where its head-office is located. Tax
registration procedures include:
+ A tax registration declaration according to
Form No.04-DK-TCT promulgated in connection with Circular No.79/1998/TT-BTC
dated June 12, 1998 by the Ministry of Finance.
+ A copy of the contract signed with the
Vietnamese party or the main contractor. With respect to oil and gas service
contracts or contracts concerning technical and professional activities, a copy
of the contract’s summary is required, including some main contents with concrete
targets, such as objectives to carry out the contract, payment mode, contract
deadline, and obligations as well as responsibilities of parties involved in
signing the contract. Foreign organisations and individuals must take
responsibility for these contents.
+ A copy of the business license or other
operational licenses granted by the Vietnam’s authorised body (if any).
+ A dispatch by the Ministry of Finance
approving the accounting system. Procedures asking for the approval of the
accounting system are carried out in accordance with regulations applied to
foreign-invested enterprises as stipulated in Circular No.60 TC/CDKT dated
September 1, 1997 by the Ministry of Finance, in which investment licenses are
allowed to be replaced by business licenses or other operational licenses
granted by Vietnam's authorised bodies (These procedures are not applied to
foreign airlines' representative offices licensed to provide semi
transportation services).
Within a period of five days since the date of fully
receiving the above-listed documentation, the authorised taxation body has
responsibility for granting a certificate on tax code to the tax payer.
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2. Tax declaration :
Foreign contractor and sub-contractor have
responsibility for declaring to pay VAT and CIT in accordance with guidelines
provided in the legal document regulating and providing guidelines on the
implementation of the laws on VAT and CIT.
With respect to foreign airlines operating and
providing aviation transportation services in Vietnam, the declaration to pay
the CIT is carried out as follows:
- Within a period of the first 10 days of each
quarter (Solar calendar), meaning that within the first 10 days of January,
April, July and October, the foreign airline’s representative office allowed to
provide semi transportation services or agencies must declare their CIT
according to Form No.01/NT-TCT promulgated in connection with this circular
with the local taxation body where its head-office is located and put the
declared tax into the State Budget. In case when foreign airlines set up some
semi transportation agencies, the foreign airlines have to send a list
including names and addresses of these semi transportation agencies and copies
of agency contracts to the local taxation bodies where the firms’ semi transportation
offices are located. Based on the list of agencies, the local taxation body is
responsible for managing and collecting taxes levied on agency operation in
accordance with existing regulations and laws.
C. TAX OBLIGATIONS APPLIED
TO FOREIGN CONTRACTORS AND SUB-CONTRACTORS NOT APPLYING VIETNAM’S ACCOUNTING
SYSTEM
I. TAX OBLIGATIONS:
1. Value Added Tax: Foreign contractor,
sub-contractor operating business and subject to VAT in Vietnam must pay VAT
directly calculated on the added value.
Payable
VAT = Added value x VAT rate
a- Added value of each sector must be calculated
in accordance with the percentage of the taxable turnover as follows:
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Business sectors
VAT rate on turnover
(%)
1
Commerce (including services on water, food, foodstuff
and chemical materials supplies for oil and gas contractors)
10
2
Services
50
3
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50
4
Services on construction and installation with
providing materials, equipment and machinery.
30
5
Other services on production and transportation.
25
b- VAT rate: Specific regulations state in Article
8 of the Law on VAT and other existing guidance documents.
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CIT shall be calculated in accordance with the
percentage of taxable turnover of each business sector as follows:
No.
Business sectors
CIT rate on turnover
(%)
1
Commerce (including services on water, food,
foodstuff and chemical materials supplies for oil and gas contractors)
1
2
Services
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3
Services on production, transportation, construction
(including services on surveys, design and supervisions).
2
4
Lending rate
10
5
Copyright income
10
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Taxable turnover for calculation of VAT and CIT is
the turnover received by contractor, including the tax and expenses payable by
the Vietnamese party for the contractor. If the contractor receives a turnover
that does not include payable tax, the taxable turnover shall be calculated as
follows:
Taxable turnover
=
Real received turnover
1 - (% of added value on
turnover x VAT rate + % of CIT on turnover)
E.g.: Foreign contractor A signs a contract to
construct hotel Z in the mode of turn-key. Hotel Z has to pay contractor A US$200,000.
In addition, the hotel has to pay for accommodation and food expenses of
$50,000 for experts of the contractor. According to the contract, hotel Z is
responsible for paying all the taxes applicable by the state of Vietnam for the
operations of contractor A.
According to the above formula, taxable turnover
of contractor A is as follows:
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=
$263,158
1- (0.3 x 0.1- 0.02)
For some cases, taxable turnover shall be
calculated as follows:
- If the contractor gives parts of his
contracted work to Vietnamese sub-contractors, his taxable turnover will not
include the value of the contracts fulfilled by the sub-contractors. If the
sub-contractor is a foreign organisation and/or an individual, the taxable
turnover will be the lumpsum he receives. The foreign sub-contractor must not
pay tax, if he has written proof that the contractor has paid taxes on the
turnover fulfilled by them.
- With respect to leases of machinery, equipment
and transportation means, turnover subject to tax excludes expenditures
directly paid by the lessee, such as vehicle insurance, maintenance services,
registration certification and salary paid for machinery operators or vehicle
drivers.
- With respect to express mail services
(including goods and postal items), taxable turnover is all collected from
these activities.
- Lending rate is all incomes earned from loans
under any form of lending, including incomes from securities, and bonds.
Lending rate includes all charges which the Vietnamese contract signing party
has to pay in accordance with regulations of the lease.
- Copyright income is all sums paid for the
contractor under any forms for transferring technologies, industrial property
right, or the usage of or the right to use the copyright of an art - cultural
and scientific works, including movies or all kinds of tapes used for radio and
television broadcasting programmes via contracts in writing in accordance with
existing regulations and laws. In cases when the copyright income earner is an
individual, the individual must pay individual income tax applied to the income
earned from the possession of copyright in accordance with regulations
stipulated in the Ordinance on Tax applied to high income earners.
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Import and export tax and individual income tax
are also paid according to the regulations, laws and ordinances on tax and
existing guidance documents.
II. TAX DECLARATION AND
REGISTRATION PROCEDURES:
1. Tax registration procedures:
Within a period of 10 days since the date of
signing the contract with the contractor, the Vietnamese contract signing party
must declare and register the contractor's activities in Vietnam with the
authorised taxation body according to Form 02NT-TCT promulgated in connection with
this circular.
2. Tax declaration:
Within a period of five days since the date of
paying for the contractor, the Vietnamese contract signing party must declare
VAT and corporate income tax according to Form 03 NT-TCT promulgated in
connection with this circular and has responsibility for putting the declared
taxes into the State Budget. VAT paid by the Vietnamese contract signing party
instead of the contractor is the incoming VAT applied to the Vietnamese
contract signing party and is deducted in accordance with guidelines provided
on Circular No.89/1998/TT-BTC dated June 27, 1998 by the Ministry of Finance
when fixing the VAT which the Vietnamese party has to pay.
With respect to contractors and subcontractors
operating in the field of oil and gas exploration and development, the
Vietnamese Oil and Gas Corporation is authorised by the Ministry of Finance to
deduct and collect tax. The local taxation body has responsibility for
providing guidelines and examining the tax deduction and collection carried out
by the Vietnam Oil and Gas Corporation’s members.
III. TAX BALANCE:
The tax collection is balanced in accordance
with each contract. Within a period of at least 10 days since the date of
liquidating the contract, the contractor ( in cases when the contractor
directly registers to pay tax) or the Vietnamese party must balance the tax to
send to the authorised taxation body.
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In cases when balancing the tax, the tax subject
to the payment is lower than paid tax, the Ministry of Finance has
responsibility for returning the overpaid tax to the tax payer. Tax returning
procedures include the following documents:
- An application for having the overpaid tax
returned, which includes reasons. In cases when the Vietnamese party is
authorised by the contractor to prepare procedures to ask for a tax return, a legal
letter of attorney is required.
- Minutes to balance tax and liquidate the
contract:
- Local taxation bodies’ certificates on the
total tax subject to tax and the total paid tax of the entire contract.
- State Treasury’s certificates on the paid tax of
the contract.
Within a period of 30 days since the date of
receiving the above-said documentation, the Ministry of Finance has
responsibility for returning the overpaid tax to the Vietnamese party’s
account.
D. VIOLATION TREATMENT AND
COMPLAINT SETTLEMENT
I. VIOLATION TREATMENT:
Foreign organisations and individuals operating
and doing business in Vietnam (including foreign sub-contractors) and
Vietnamese contract signing parties have responsibility for properly
implementing every regulation of existing legal documents and laws on tax and
guidelines provided in this circular.
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II. COMPLAINT SETTLEMENT:
All complaints on tax, pursuant to this
circular, are handled by the taxation body directly managing and collecting
tax. If having yet to be satisfied with the settlement of the taxation body
directly managing and collecting tax, the claimant can send complaints to the
General Department of Taxation and Ministry of Finance. The Finance Ministry’s
settlement measure is the final decision. While waiting for the decision by the
authorised body, the claimant still has to seriously implement the decision
issued by the local taxation body which directly manage and collect tax.
Complaints on tax related to regulations of an
Agreement signed between the Government of Vietnam and the government of
another country are handled according to procedures applied to the complaint
and dispute settlement regulated in the Agreement.
E. IMPLEMENTATION
I. The Vietnamese party by which tax is deducted
and put into the State Budget instead of the contractor is provided a wage equal
to 0.8 per cent of the already collected tax. The wage is deducted from the
collected tax before being put into the State Budget and used to pay for
expenditures arising from the tax collection and payment and reward individuals
involved in the tax collection and payment.
II. The circular comes into force from January
1, 1999. The lending rate is only applied to lending contracts signed from
January 1, 1999.
With respect to on-going contracts and
sub-contracts signed before January 1, 1999, all sums paid to the contractor
and sub-contractors before January 1, 1999 are subject to the tax obligations
regulated in guidance documents at the point of time that the payment is
carried out. All sums paid to the contractor and subcontractor since January 1,
1999 are subject to the tax obligations regulated in this circular. In cases
when the main contractor paid turnover tax applied to construction and assembly
activities for the total value of the contract before January 1, 1999, the
sub-contractor is not required to pay VAT applied to the amount of money paid
by the main contractor from January 1, 1999.
This circular replaces the following circulars
by the Ministry of Finance: Circular No.08 TC/TCT dated February 5, 1994
proving guide-lines on tax applied to copyright incomes; Circular No.37 TC/TCT
dated May 10, 1995 providing guidelines on the regulation on tax applied to
foreign organisations and individuals doing business in Vietnam which are not
subjected to investment forms regulated in the Law on Foreign Investment in
Vietnam; Circular No.61 TC/TCT dated October 23, 1996 providing guidelines on
tax obligations applicable to foreign organisations and individuals leasing
machinery, equipment and transportation means in Vietnam; and Circular No.83
TC/TCT dated December 25, 1996 providing guidelines on the implementation of
turnover and revenue tax applied to foreign organisations and individuals
providing express mail services (including goods and postal items) in Vietnam.
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P/P MINISTER OF
FINANCE
DEPUTY MINISTER
Phan Van Trong