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THE
MINISTRY OF FINANCE
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SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No.
134/2008/TT-BTC
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Hanoi,
December 31, 2008
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CIRCULAR
GUIDING THE PERFORMANCE OF TAX OBLIGATIONS APPLICABLE TO
FOREIGN ORGANIZATIONS AND INDIVIDUALS DOING BUSINESS OR EARNING INCOMES IN
VIETNAM
Pursuant to the Socialist
Republic of Vietnams current laws and ordinances on taxes, fees and charges and
the Governments decrees detailing laws and ordinances on taxes, fees and
charges;
Pursuant to June 3, 2008 Law No. 13/2008/QH12 on Value-Added Tax; and the
Governments Decree No. 123/2008/ND-CP of December 8, 2008, detailing and
guiding a number of articles of the Value-Added Tax Law;
Pursuant to June 3, 2008 Law No. 14/2008/QH12 on Enterprise Income Tax; and the
Governments Decree No. 124/2008/ND-CP of December 11, 2008, detailing and
guiding a number of articles of the Law on Enterprise Income Tax;
Pursuant to the Governments Decree No. 118/2008/ND-CP of November 27, 2008,
defining the functions, tasks, powers and organizational structure of the
Ministry of Finance;
The Ministry of Finance guides
the performance of tax obligations applicable to foreign organizations and
individuals doing business or earning incomes in Vietnam as follows:
A. SCOPE OF
APPLICATION
I. APPLICABLE
SUBJECTS
1. Application of this
Circular
The guidance under this Circular
is applicable to the following subjects (other than those specified in Section
II. Part A of this Circular):
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- Foreign businesses with or
without Vietnam-based permanent establishments; and resident or non-resident
foreign businessmen doing business in Vietnam or earning incomes in Vietnam
under contracts, agreements or commitments between them and foreign contractors
to perform part of contractor agreements (below collectively referred to as
foreign subcontractors).
2. Taxpayers
Taxpayers under the guidance of
this Circular include:
2.1. Foreign contractors and
subcontractors satisfying the conditions specified at Point 1, Section II, Part
B of this Circular that do business or earn incomes in Vietnam, including
Vietnams territorial seas, areas beyond and attached to Vietnams territorial
seas, and in accordance with Vietnams laws and international laws, under which
Vietnam has sovereignty over the exploration and exploitation of natural
resources in the seabed, soil under the seabed and water above. Such business
is done under contractor contracts with Vietnamese organizations or individuals
or under subcontractor contracts with other foreign organizations or
individuals currently doing business in Vietnam.
Foreign contractors and subcontractors
shall be identified as having Vietnam-based permanent establishments or as
residents in Vietnam according to the Law on Enterprise Income Tax, the Law on
Personal Income Tax and their guiding documents.
When double taxation avoidance
agreements which the Socialist Republic of Vietnam has signed otherwise define
permanent establish-ments
and residents, those agreements prevail.
2.2. Organizations established
and operating under the law of Vietnam, organizations registering operation
under the law of Vietnam, other organizations and businessmen buying services
or services accompanying goods, or paying incomes generated in Vietnam under
contractor or subcontractor contracts (below collectively referred to as
Vietnamese parties), including:
- Businesses established under
the Enterprise Law, the State Enterprise Law (now the Enterprise Law), the Law
on Foreign Investment in Vietnam (now the Investment Law) and the Law on
Cooperatives;
- Economic institutions under
political organizations, socio-political organizations, social organizations,
socio-professional organizations, armed units, non-business organizations and
other organizations;-
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- Branches of foreign companies
licensed to operate in Vietnam;
- Foreign organizations or
representatives of foreign organizations licensed to operate in Vietnam;
- Vietnam-based booking offices
and agents of foreign airlines licensed for Vietnam-inbound and -outbound
transportation on their own or in partnership;
- Organizations and individuals
trading in shipping services of foreign shipping agencies; Vietnam-based agents
of foreign forwarding and warehousing and delivery firms;
- Securities companies,
securities issuing organizations, fund management companies and commercial
banks where securities investment funds or foreign organizations open
securities investment accounts;
- Other organizations in
Vietnam;
- Individual producers and
businessmen in Vietnam.
Before paying foreign
contractors, taxpayers specified at Point 2.2, Section I, Part A of this
Circular shall credit value-added tax and withhold enterprise income tax in
accordance with Section III, Part B of this Circular.
3. Applicable taxes
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3.2. Foreign contractors and
subcontractors being business individuals shall pay VAT under this Circular and
personal income tax under the law on personal income tax.
3.3. Foreign contractors and
subcontractors shall pay other taxes, fees and charges in accordance with other
current legal documents on taxes, fees and charges.
II.
NON-APPLICABLE SUBJECTS
This Circular is not applicable
to:
1. Foreign organizations and
individuals doing business in Vietnam under the Investment Law, the Petroleum
Law and the Law on Credit Institutions.
2. Foreign organizations and
individuals supplying goods for Vietnamese organizations and individuals
without accompanying services in Vietnam in the following forms:
- Goods delivery at foreign
border gates: Sellers are liable for all obligations, expenses and risks
related to the export and delivery of goods at foreign border gates; buyers are
liable for all obligations, expenses and risks related to the receipt and
transportation of goods from foreign border gates to Vietnam.
- Goods delivery at Vietnamese
border gates: Sellers are liable for all obligations, expenses and risks
related to the transportation of goods to places of delivery at Vietnamese
border gates; buyers are liable for all obligations, expenses and risks related
to the receipt and transportation of goods from Vietnamese border gates.
3. Foreign organizations and
individuals earning incomes from services provided and used outside Vietnam.
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Company H of Hong Kong provides
the service of arranging cargos at ports in Hong Kong for the international
fleet of Company A in Vietnam. Company A has to pay charges for this service to
Company H.
In this case, such service is
provided and used in Hong Kong and, therefore, is not subject to taxes in
Vietnam.
4. Foreign organizations and
individuals providing overseas the following services form Vietnamese
organizations and individuals:
- Repair of means of transport
(aircraft, aircraft engines, spare parts of aircraft and ships), machinery,
equipment (including sea cables, transmission equipment) with or without
accompanying spare parts of supplies and equipment;
- Advertising, marketing;
- Investment and trade
promotion;
- Brokerage for goods sale;
- Training;
- Division of charges (paid
charges) for international post and telecommunications services, which are
provided outside Vietnam, among Vietnamese and foreign parties under the
Ordinance on Post and Telecommunication; lease of foreign transmission lines
and satellite frequency bands.
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In this Circular, the terms
below are construed as follows:
1. Contractor contract means a
contract, agreement or commitment between a foreign contractor and a Vietnamese
party.
2. Subcontractor contract means
a contract, agreement or commitment between a subcontractor and a foreign
contractor.
Subcontractors include foreign
and Vietnamese subcontractors.
B. TAX BASES
AND TAX CALCULATION METHODS
I. VAT-LIABLE
OBJECTS AND EIT-LI ABLE INCOMES
1. VAT-liable objects
1.1. Services or services
accompanying VAT-liable goods provided by foreign contractors or subcontractors
under contractor or subcontractor contracts for production, business and
consumption in Vietnam (other than those specified in Section II, Part A of
this Circular), comprising:
- Services or services
accompanying VAT-liable goods provided in Vietnam by foreign contractors or
subcontractors for consumption in Vietnam.
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1.2. When goods are supplied
under a contract by mode of goods delivery at a place in the Vietnamese territory
(including Vietnams territorial seas, areas beyond and attached to Vietnams
territorial seas on which, under the law of Vietnam and in accordance with
international laws. Vietnam has sovereignty over the exploration and
exploitation of natural resources in the seabed, soil under the seabed and
water above); or these goods are supplied together with services provided in
Vietnam, such as installation, trial operation, warranty, maintenance and
replacement and other services accompanying goods supply, even when the
provision of those services is included or not included in the value of the
goods supply contract, the goods value is only subject to VAT at the stage of
importation under regulations while the service value is subject to VAT under
the guidance of this Circular. When it is impossible to separate the value of
goods from that of accompanying services, the contracts total value will be
subject to VAT.
For example:
Enterprise A in Vietnam signs
with overseas enterprise B a contract to buy machinery and equipment for a
cement plant project. The contracts total value is USD 100 million, including
USD 80 million worth of machinery and equipment (including VAT-liable equipment
with a 10% tax rate) and USD 20 million worth of installation instruction and
supervision, and warranty and maintenance services.
When importing the machinery and
equipment, enterprise A - the importer - has paid VAT for the VAT-liable
equipment.
Company Bs VAT payment for the
value of the contract signed with enterprise A shall be determined as follows:
- VAT shall be calculated based
on the service value (USD 20 million), not on the value of imported machinery
and equipment.
- When it is impossible to
separate the value of machinery and equipment from that of services, VAT shall
be calculated based on the contracts total value (USD 100 million).
2. EIT-liable incomes
2.1. Foreign contractors or
subcontractors incomes earned from the provision of services or services
accompanying goods in Vietnam under foreign contractor or subcontractor
contracts (other than goods and services specified in Section II, Part A of
this Circular).
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For example:
Company A in Vietnam signs with
overseas company B a contract to buy machinery and equipment for a cement plant
project. The contracts total value is USD 100 million (VAT-exclusive),
including USD 80 million worth of machinery and equipment and USD 20 million
worth of installation instruction and supervision and warranty and maintenance
services.
Company Bs EIT obligations for
the contract value shall be determined as follows:
- EIT shall be calculated
separately for the machinery and equipment value (USD 80 million) and the
service value (USD 20 million) at respective EIT rates under regulations.
- When it is impossible to
separate the value of machinery and equipment from that of services, EIT shall
be calculated based on the contracts total value (USD 100 million) at EIT rates
under regulations.
2.3. Foreign contractors or
subcontractors incomes generated in Vietnam are incomes received in any form
under foreign contractor or subcontractor contracts (other than cases of
service provision specified in Section II, Part A of this Circular), regardless
of the places of business activities of foreign contractors or subcontractors,
including:
- Incomes from the transfer of
rights over asset ownership or use.
- Incomes from copyrights are
those in any form paid for the use or transfer of intellectual property rights
and technology transfer (including amounts paid for the use and transfer of
author rights and work owner rights; transfer of industrial property rights;
and technology transfer).
Author rights, work owner
rights, industrial property rights and technology transfer are defined in the
Civil Code of the Socialist Republic of Vietnam and its guiding documents.
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- Incomes from loan interests,
which are a lenders incomes earned from loans provided in any form, whether or
not those loans are guaranteed with mortgage and lenders are entitled to
borrowers rights over revenues; incomes from deposit interests (other than
those of foreigners and those arising from deposit accounts to maintain
operation in Vietnam of diplomatic missions and representative agencies of
international organizations and non-governmental organizations in Vietnam),
including bonuses attached to deposit interests (if any); incomes from
interests for deferred payment under contracts.
Loan interests include fees
payable by Vietnamese parties under loan contracts.
- Incomes from securities
investment.
- Fines and compensations
received from contract breaching parties.
- Other incomes under law.
II. VAT
PAYMENT ACCORDING TO THE CREDIT METHOD, EIT PAYMENT BASED ON TURNOVER AND
EXPENSE DECLARATION FOR EIT-LIABLE INCOME DETERMINATION
1. Subjects of and conditions
for application
Foreign contractors and
subcontractors shall pay taxes according to Section II, Part B of this Circular
if they satisfy the following conditions:
(i) Having a permanent establishment
or being a resident in Vietnam;
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(iii) Applying the Vietnamese accounting
system.
A Vietnamese party signing a
contract with a foreign contractor, or a foreign contractor signing a contract
with a foreign subcontractor shall notify in writing a tax agency of the
foreign contractors or subcontractors VAT payment according to the credit
method and EIT payment based on turnover and expense declaration for EIT-liable
income determination within 20 working days from the date of signing the
contract.
2. Value-added tax shall be paid
in accordance with the Value-Added Tax Law and its guiding documents.
3. Enterprise income tax shall
be paid in accordance with the Law on Enterprise Income Tax and its guiding
documents.
4. A foreign contractor or
subcontractor performing tax obligations according to Section II, Part B of
this Circular, which signs another foreign contractor or subcontractor contract
in Vietnam while still performing the old foreign contractor or subcontractor
contract, shall continue declaring and paying taxes according to Section II,
Part B of this Circular.
A foreign contractor or
subcontractors shall perform tax obligations according to Section II, Part B of
this Circular for a new contractor or subcontractor contract which is signed
after the termination of the old contractor or subcontractor contract if it satisfies
the conditions specified at Point 1, Section II, Part B of this Circular.
When a foreign contractor or
subcontractor concurrently performs several contracts one of which satisfies
the conditions for the foreign contractor or subcontractor to pay taxes
according to Section II, Part B of this Circular, other contracts (including
ineligible ones) are also subject to tax payment according to Section II, Part
B of this Circular.
III. VAT
PAYMENT ACCORDING TO THE TAX CALCULATION METHOD DIRECTLY BASED ON ADDED VALUE.
EIT PAYMENT ACCORDING TO THE PERCENTAGE BASED ON TURNOVER
1. Subjects of and conditions
for application
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A Vietnamese party shall make
tax registration with a tax agency to pay taxes for a foreign contractor or
subcontractor within 20 working days from the contract signing.
2. Value-added tax
Tax bases are the added value of
services or services accompanying VAT-liable goods and VAT rate.
Payable VAT amount = Added value
x VAT rate
2.1. Added value
The added value of services or
services accompanying VAT-liable goods is the turnover for VAT calculation
multiplied by the percentage (%) of the added value to turnover.
2.1.1. Turnover for VAT
calculation
a/ Turnover for VAT calculation
is the total turnover received by a foreign contractor or subcontractor from
the provision of services or services accompanying VAT-liable goods inclusive
of payable taxes, including expenses (if any) paid by a Vietnamese party for
the foreign contractor or subcontractor.
b/ Determination of turnover for
VAT calculation in some specific cases:
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Turnover
for VAT calculation
=
VAT-exclusive
turnover
1
- The percentage of added value to turnover x VAT rate
For example:
Foreign contractor A provides a Vietnamese
party with the service of supervising construction of cement plant Z. The
contracts tax-exclusive value is USD 300,000. In addition, the Vietnamese party
arranges accommodations and working places for the foreign contractors
supervisors at the cost of USD 40,000. Under the contract, the Vietnamese party
shall pay VAT for the foreign contractor.
The foreign contractors
VAT-liable turnover shall be determined as follows:
To determine taxable turnover:
VAT
liable turnover
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300,000
+ 40.000
=
USD 357,894.73
(1
- 50% x 10%)
b2/ When a foreign contractor
signs a contract with a Vietnamese or foreign subcontractor, which pays taxes
under Section II, Part B of this Circular, to assign part of the work value under
a contractor contract signed with a Vietnamese party, the foreign contractors
turnover for VAT calculation is exclusive of the value of work and machinery
and equipment performed by the Vietnamese or foreign subcontractor.
The Vietnamese or foreign subcontractor
shall declare and pay taxes under Points 2 and 3, Section II, Part B of this
Circular.
This regulation is not
applicable when a foreign contractor signs contracts with suppliers in Vietnam
to purchase goods and services for the performance of the contractor contract.
For example:
Foreign contractor A signs with
a Vietnamese party a contract to build cement plant Z with a total value of USD
10 million (inclusive of VAT). Under the contract, foreign contractor A shall
assign the installation (under the contractor contract signed with the
Vietnamese party) valued at USD 1 million to Vietnamese subcontractor B.
In this case, foreign contractor
As turnover for VAT calculation shall be determined as follows:
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b3/ When a subcontractor is a
foreign subcontractor paying taxes under Section III, Part B of this Circular,
a foreign contractors turnover for VAT calculation is the total turnover it
receives under the contract signed with a Vietnamese party. The foreign
subcontractor is not required to pay VAT for the value of work it performs
under the contract it signs with the foreign contractor.
b4/ For international forwarding
and warehousing services, the turnover for VAT calculation is exclusive of
international freights payable to carriers (by air or sea).
b5/ For international delivery
services from Vietnam to overseas, the turnover for VAT calculation is the
total turnover received by a foreign contractor.
2.1.2. Added value percentages:
a/ The percentages of added
value to turnover for VAT calculation for a number of business lines:
No.
Business
line
Percentage
(%) of added value to turnover for VAT calculation
1
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50
2
a/ Construction, installation
with materials or machinery, equipment attached to construction works
30
b/ Construction, installation
without materials or machinery, equipment attached to construction works
50
3
Transportation, production,
other business
30
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b 1/ For a contractor or
subcontractor contract covering different business activities or part of the
contract value is not subject to VAT, the application of the percentages of
added value to turnover for VAT calculation upon determining payable VAT shall
be based on the turnover for VAT calculation of each business activity
performed by the foreign contractor or subcontractor under the contractor or
subcontractor contract. When it is impossible to separate the value of one
business activity from another, the highest added value percentage for the
business lines and the highest tax rate for the total contract value shall be
applied.
b2/ For a contract to supply
machinery and equipment together with installation instruction, training,
operation and trial run services, if it is possible to separate the value of
machinery and equipment from that of services upon determining payable VAT, the
added value percentages relevant to each part of the contract value shall be
applied. When il
is impossible to separate the value of machinery and equipment from that of
services, the added value-VAT calculation turnover percentage of 30% shall be
applied.
For example:
South Korean contractor H, which
does not apply the Vietnamese accounting system, signs with enterprise B in
Vietnam a USD 10 million contract to supply machinery and equipment together with
installation and trial operation services. When it is impossible to separate
the value of machinery and equipment from that of installation and trial
operation services under this contract, the applicable added value percentage
is 30%.
b3/ Turnover for VAT calculation
in the case of lease of machinery, equipment and vehicles is the total rents.
When the turnover of machinery, equipment and vehicle lease includes expenses
directly paid by the lessor,
such as vehicle insurance, maintenance, registry certification, machinery and
equipment operators and transportation of machinery and equipment from overseas
to Vietnam, the turnover for VAT calculation is exclusive of those expenses if
documents evidencing the expenses are available.
2.2. VAT rates
VAT rates for VAT-Iiable
goods and services are the tax rates prescribed in the Value-Added Tax Law and
its guiding documents.
Foreign contractors and
subcontractors paying VAT according to the method of calculation directly based
on added value under Point 1, Section III, Part B of this Circular are not
entitled to VAT credit for goods and services bought for the performance of
foreign contractor and subcontractor contracts (including VAT for subcontractor
contracts performed by Vietnamese subcontractors).
3. Enterprise income tax
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Payable EIT amount = Turnover
for EIT calculation x EIT rate based on turnover for EIT calculation
3.1. Turnover for EIT
calculation
a/ Turnover for EIT calculation
Turnover for EIT calculation is
the total turnover exclusive of VAT and inclusive of payable taxes (if any)
received by a foreign contractor or subcontractor. Turnover for EIT calculation
also includes expenses (if any) paid by a Vietnamese party for a foreign
contractor or subcontractor.
b/ Determination of turnover for
EIT calculation in some specific cases:
b1/ When, under a contractor or
subcontractor contract, the turnover received by a foreign contractor or
subcontractor is exclusive of payable EIT, turnover for EIT calculation shall
be determined according to the following formula:
Turnover
for EIT calculation
=
EIT-exclusive
turnover
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For example:
Foreign contractor A provides a
Vietnamese party with the service of supervising construction of cement plant
Z. The contracts tax-exclusive value is USD 300,000. In addition, the
Vietnamese party arranges accommodations and working places for the foreign contractors
supervisors at the cost of USD 23,000. Under the contract, the Vietnamese party
shall pay EIT and VAT for the foreign contractor. The foreign contractors
payable EIT shall be determined as follows:
Determination of turnover for
EIT calculation:
Turnover
for EIT calculation
=
300,000
+ 23,000
= USD 340,000
(1-0.05)
b2/ When a foreign contractor
signs a contract with a Vietnamese or foreign subcontractor, which pays taxes under
Section II, Part B of this Circular, to assign part of the work value under a
contractor contract signed with a Vietnamese party, the foreign contractors
turnover for EIT calculation is exclusive of the value of work and machinery
and equipment performed by the Vietnamese or foreign subcontractor.
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This regulation is not
applicable when a foreign contractor signs contracts with suppliers in Vietnam
to purchase goods and services for the performance of the contractor contract.
For example:
Foreign contractor A signs with
a Vietnamese party a contract to build cement plant Z with a total value of USD
10 million (exclusive of VAT). Foreign contractor A shall assign the
installation (under the contractor contract signed with the Vietnamese party)
valued at USD 1 million to Vietnamese subcontractor B.
In this case, foreign contractor
As turnover for EIT calculation shall be determined as follows:
Turnover for EIT calculation =
USD 10 million - USD 1 million = USD 9 million
b3/ When a subcontractor is a
foreign subcontractor which pays taxes under Section III, Part B of this Circular,
the foreign contractors turnover for EIT calculation is the total turnover it
receives under the contract signed with a Vietnamese party. The foreign
subcontractor is not required to pay EIT for the value of work it performs
under the contract it signs with the foreign contractor.
b4/ Turnover for EIT calculation
in the case of lease of machinery, equipment and vehicle is the total rents.
When the turnover of machinery, equipment and vehicle lease includes expenses
directly paid by the lessor,
such as vehicle insurance, maintenance, registry certification, machinery and
equipment operators and transportation of machinery and equipment from overseas
to Vietnam, the turnover for EIT calculation is exclusive of those expenses if
documents evidencing the expenses are available.
b5/ Foreign airlines turnover
for EIT calculation is passenger ticket sales, aviation bills of lading and
other incomes (other than amounts collected for the State or organizations
under law) generated in Vietnam from the transportation of passengers, cargoes
and other objects by flights of those airlines or joint flights.
For example:
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Foreign airline As turnover for
EIT calculation of the first quarter of 2009 shall be determined as follows:
Turnover for EIT calculation =
100,000 -(1,000 + 2,000) = USD 97,000
Foreign airlines booking offices
and agents in Vietnam shall declare EIT according the form attached to this
Circular (not printed herein) and remit the declared taxes into the state
budget.
b6/ A foreign shipping firms
turnover for EIT calculation is the total freights for the passenger and cargo
transportation and other surcharges it receives from a Vietnamese port of
loading to the final port of unloading (including freights for shipments
transported through intermediate ports) and/or freights collected from the
transportation of cargoes between Vietnamese ports.
Freights used as a basis for
calculating EIT are exclusive of freights already calculated for EIT at
Vietnamese ports for foreign ship owners and freights paid to Vietnamese
transportation enterprises for their transportation of cargoes from a
Vietnamese port to an intermediate port.
For example:
Company A is an agent of foreign
shipping firm X. Under the transportation agent contract. Company A, on behalf
of firm X, may receive cargoes to be transported overseas, issue bills of
lading and collect freights.
Vietnamese enterprise B hires
firm X (via company A) to transport cargoes from Vietnam to the United States
at a freight of USD 100,000.
Company A hires a ship of a
Vietnamese enterprise or a foreign ship to transport cargoes from Vietnam to
Singapore at a freight of USD 20,000 and from Singapore cargoes will be
transported to the United States by a ship of firm X.
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EIT-liable turnover = 100,000 -
20.000 = USD 80,000
b7/ For international forwarding
and warehousing services, turnover for EIT calculation is exclusive of
international freights paid to carriers (by air or sea).
b8/ For international delivery
services from Vietnam to Overseas, turnover for EIT calculation is the total
turnover received by a foreign contractor.
b9/ For reinsurance services,
turnover for EIT calculation is overseas reinsurance premiums.
b10/ For the transfer of
securities, turnover for EIT calculation shall be determined as follows:
+ Total sales of securities at
the time of transfer, for the transfer of securities (other than tax-exempt
bonds);
+ Total sales of bonds
(including the face value inscribed on bonds and received bond interests) at
the time of receiving interests, for bond interests.
b11/ Loan interests under
foreign loan contracts signed prior to January 1, 1999, are not subject to
taxes under this Circular.
+ For the extension or
rescheduling of a debt period without changes in interests and payment
conditions under a loan contract and the extended time of the debt period of a
short-term loan is maximum equal to a production and business cycle, but must
not exceed 12 months and the extended time of the debt period of a medium- or
long-term loan is maximum equal to of the loan term under a loan contract, loan
interests are not subject to EIT.
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+ For the extension or
rescheduling of a debt period without changes in interests and payment
conditions under a loan contract, but such extended time exceeds the time limit
prescribed above, loan interests arising during the time beyond the prescribed
time limit are subject to EIT.
+ For the modification of a loan
contract together with changes in principal contents of the contract, such as
interests, lending mode, payment conditions and loan term, loan interests
arising after the termination of the effect of the principal loan contract are
subject to EIT.
3.2. EIT rate (%) based on
turnover for EIT calculation
a/ EIT rate (%) based on
turnover for EIT calculation
No.
Business
line
EIT
rate (%) based on turnover for EIT calculation
1
Trade: distribution and supply
of goods, raw materials, supplies, machinery and equipment accompanying
services in Vietnam
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2
Services, machinery and
equipment lease, insurance
5
3
Construction
2
4
Other production and business
activities, transportation (by sea and air)
2
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Lease of aircraft, aircraft
engines, spare parts of aircraft, ships
2
6
Reinsurance
2
7
Securities transfer
0.
1
8
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10
9
Copyright incomes
10
b/ EIT rate (%) based on
turnover for EIT calculation in some specific cases:
b 1/ For a contractor or
subcontractor contract covering different business activities, the application
of EIT rates based on turnover for EIT calculation upon determining payable EIT
shall be based on EIT-liable turnover of each business activity performed by
the foreign contractor or subcontractor under the contract. When it is
impossible to separate the value of one business activity from another, the
highest EIT rate for the business lines shall be applied for the total contract
value.
b2/ For a contract to supply
machinery and equipment together with installation instruction, training,
operation and trial run services, if it is possible to separate the value of
machinery and equipment from that of services, tax rates shall be applied
separately for each part of the contract value. When it is impossible to
separate the value of machinery and equipment and that of services, the 2% EIT
rate based on turnover for EIT calculation shall be applied.
For example:
Foreign contractor A signs with
a Vietnamese party a USD 70-million contract to build power plant F. The
contract value includes:
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+ USD 5 million worth of
technology line design and other designs.
+ USD 10.5 million worth of
workshops, other supporting facilities, construction and installation.
+ USD 3 million worth of
installation supervision and instruction services.
+ USD 1.5 million worth of
technical training and trial operation services.
When it is possible to separate
the value of machinery and equipment from that of services, the EIT rate shall be
applied as follows: the machinery and equipment value is subject to the rate
for trade; the value of designing, installation supervision, training and trial
operation services, to the rate for service; the construction and installation
value (USD 10.5 million), to the rate for construction.
When it is impossible to
separate those values, the 2% EIT rate shall be applied for the total contract
value (USD 70 million).
4. Tax declaration and payment
for foreign contractors entering into multi-partner partnerships or
partnerships with Vietnamese economic organizations to do business in Vietnam
under contractor contracts
- When partners set up an
executive board which makes cost-accounting, opens bank accounts and issues
invoices; or a Vietnamese economic organization to a partnership makes common
cost-accounting and divides profits to partners, such executive board or
Vietnamese economic organization shall declare, pay and finalize VAT and EIT
for the total turnover under a contractor contract according to regulations.
- When partners share turnover
and products, or receive a work as a whole with each performing a separate work
item and partners can determine their own turnover, each partner may pay taxes
according to Part B of this Circular.
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This Circular takes effect 15
days after its publication in CONG BAO, is applied on January 1, 2009, and
replaces the Finance Ministrys
Circular No. 05/2005/TT-BTC of January 11, 2005, guiding the tax regime
applicable to foreign organizations without Vietnamese legal person status and
foreigners doing or earning incomes in Vietnam, and Circular No. 16/1999/TT-BTC
of February 4, 1999. guiding taxes on freights for the shipping of cargoes by
foreign shipping firms doing business in Vietnam.
In the course of implementation,
units and businesses should promptly report arising problems to the Ministry of
Finance for timely settlement.
FOR THE MINISTER
OF FINANCE
VICE MINISTER
Do Hoang Anh
Tuan