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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.
05/2005/TT-BTC
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Hanoi,
January 11, 2005
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CIRCULAR
GUIDING THE TAX REGIME APPLICABLE TO FOREIGN ORGANIZATIONS
WITHOUT VIETNAMESE LEGAL PERSON STATUS AND FOREIGN INDIVIDUALS DOING BUSINESS
OR EARNING INCOMES IN VIETNAM
Pursuant to Value Added Tax
(VAT) Law No. 02/1997/QH9; Law No. 07/2003/QH11 Amending and Supplementing a Number
of Articles of the VAT Law; the Government’s Decree No. 158/2003/ND-CP of
December 10, 2003 detailing the implementation of the VAT Law; Decree No.
148/2004/ND-CP of July 23, 2004 amending and supplementing a number of articles
of the Government’s Decree No. 158/2003/ND-CP of December 10, 2003 detailing
the implementation of the VAT Law and the Law Amending and Supplementing a
Number of Articles of the VAT Law;
Pursuant to Enterprise Income Tax Law No. 09/2003/QH11; the Government’s Decree
No. 164/2003/ND-CP of December 22, 2003 detailing the implementation of the
Enterprise Income Tax Law; Decree No. 152/2004/ND-CP of August 6, 2004 amending
and supplementing a number of articles of the Government’s Decree No.
164/2003/ND-CP of December 22, 2003 detailing the implementation of the
Enterprise Income Tax Law;
Pursuant to the Government’s Decree No. 77/2003/ND-CP of July 1, 2003 defining
the functions, tasks, powers and organizational structure of the Finance
Ministry;
The Finance Ministry hereby guides the performance of the tax obligations by
foreign organizations without Vietnamese legal person status and foreign
individuals doing business or earning incomes in Vietnam as follows:
A. SCOPE OF
APPLICATION
I.
APPLICABLE SUBJECTS
The guidance provided in this
Circular shall apply to the following subjects:
1. Foreign organizations without
Vietnamese legal person status, foreign individuals providing independent
professional services in Vietnam, even in Vietnam’s territorial seas, areas
beyond and attached to Vietnam’s territorial seas, and in accordance with
Vietnam’s laws and international law under which Vietnam has sovereignty over
the exploration and exploitation of natural resources in the seabed, soil under
the seabed and water above. Such businesses are carried on under contracts,
agreements or commitments with Vietnamese organizations or individuals or with
other foreign organizations or individuals currently doing business in Vietnam.
Foreign organizations or
individuals supplying goods through goods-forwarding spots situated
within the Vietnamese territory, even in Vietnam’s territorial seas, areas
beyond and attached to Vietnam’s territorial seas, and in accordance with
Vietnam’s laws and international law under which Vietnam has sovereignty over
the exploration and exploitation of natural resources in the seabed, soil under
the seabed and water above; or supplying goods accompanied with services
provided in Vietnam, such as installation, trial operation, warranty,
maintenance, replacement, training or other services accompanying the supplied
goods, including also cases where the provision of the above-said services is
or is not included in the value of the goods supply contracts, shall also be
taxpayers under the guidance of this Circular.
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Foreign organizations and
individuals falling into the applicable subjects defined in Section I, Part A
of this Circular shall, depending on the specific contexts mentioned below, be
referred to as foreign contractors or foreign subcontractors for short.
II.
NON-APPLICABLE SUBJECTS
The guidance provided in this
Circular shall not apply to:
1. Foreign organizations without
Vietnamese legal person status, doing business in Vietnam under the Law on
Foreign Investment in Vietnam, the Petroleum Law or the Law on Credit
Institutions.
2. Foreign organizations or
individuals supplying goods to Vietnamese organizations and/or individuals in
the following forms:
- Goods delivery at foreign
border gates whereby the sellers bear all responsibilities, expenses and risks
related to the export and delivery of goods at the foreign border gates and the
buyers bear all responsibilities, expenses and risks related to the receipt and
transport of goods from the foreign border gates to Vietnam.
- Goods delivery at Vietnamese
border gate whereby the sellers bear all responsibilities, expenses and risks
related to the goods up to the point of delivery at the Vietnamese border gates
and the buyers bear all responsibilities, expenses and risks related to the
receipt and transport of goods from the Vietnamese border gates.
3. Foreign individuals having
incomes taxable under the legislation on income tax on high income earners,
including foreign individuals entering Vietnam to work under labor contracts
signed with Vietnamese organizations or individuals; foreign individuals
earning in Vietnam incomes liable to income tax on high income earners
(excluding income items listed at Point 2, Section I, Part A of this Circular);
foreign individuals doing business or earning incomes in Vietnam but having no
documents evidencing that they are licensed to provide independent professional
services relevant to their activities that bring about incomes derived in
Vietnam.
Documents evidencing that
individuals are licensed to provide independent professional services include
independent professional service licenses, tax registration certificates or tax
identification numbers issued by the countries of which the foreign individuals
are residents.
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III. IMPOSED
TAXES
Foreign organizations or
individuals doing business or earning incomes in Vietnam shall perform the tax
obligations prescribed by current tax laws, including:
1. Value added tax (VAT) on
VAT-liable goods and services;
2. Special consumption tax (SCT)
on SCT-liable goods and services;
3. Enterprise income tax (EIT)
on incomes from business activities in Vietnam, incomes earned in Vietnam;
4. Export tax, import tax on
export or import goods;
5. Income tax on high-income
earners, imposed on taxable incomes of individuals employed by foreign
contractors, foreign subcontractors or foreign individuals doing business or
earning incomes in Vietnam but having no documents evidencing that they are
licensed to provide independent professional services;
6. Other taxes, charges and
fees.
The contents of this Circular below
shall only concretely guide the payment of VAT and EIT by foreign organizations
and foreign individuals providing independent professional services in the
course of doing business in Vietnam or earning incomes in Vietnam. For other
kinds of tax, charge and fee, foreign organizations and individuals shall
comply with current legal documents.
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In this Circular, the following
terms are construed as follows:
1. Foreign contractors mean foreign
organizations without Vietnamese legal person status, foreign individuals
providing independent professional services, doing business or earning incomes
in Vietnam under written contracts or agreements between them and Vietnamese
organizations or individuals (the Vietnamese parties).
2. Subcontractors mean
organizations or individuals providing independent professional services and
signing written agreements with foreign contractors to perform part of the jobs
under the contracts.
Subcontractors include foreign
subcontractors and Vietnamese subcontractors.
3. Vietnamese parties include:
- State enterprises established
under the State Enterprise Law;
- Enterprises established under
the Enterprise Law;
- Foreign-invested enterprises
and foreign parties to business cooperation contracts under the Law on Foreign
Investment in Vietnam;
- Petroleum contractors
operating under the Petroleum Law;
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- Foreign organizations licensed
to operate in Vietnam or their representatives;
- Other organizations and
individuals in Vietnam.
4. Contracts mean contracts or
agreements between foreign contractors and Vietnamese parties.
5. Subcontracts mean contracts
or agreements between subcontractors and foreign contractors.
6. Incomes earned in Vietnam
mean incomes in any form paid to foreign contractors or subcontractors by the
Vietnamese parties under the agreements signed between the foreign contractors
and the Vietnamese parties (except for the cases of goods supply stated at
Point 2, Section II, Part A of this Circular), regardless of the locations of
business establishments through which foreign contractors or subcontractors
carry on their business activities.
7. Royalties mean incomes in any
form paid for the use right, the intellectual property right transfer and
technology transfer (including money amounts paid for the right to use works,
the transfer of copyright over, and the right to own, works; the industrial
property right transfer; technology transfer); including also the transfer of
the use right in the form of leasing machinery, equipment or means of
transport.
7.1. Copyright, the right to own
works are defined in Chapter I, Part Sixth of the Civil Code of the Socialist
Republic of Vietnam and guiding documents.
7.2. Industrial property rights
are defined in Chapter II, Part Sixth of the Civil Code of the Socialist
Republic of Vietnam and guiding documents.
7.3. Technology transfer is
defined in Chapter III, Part Sixth of the Civil Code of the Socialist Republic
of Vietnam and guiding documents.
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8. Interests mean incomes of the
lenders from loans in any form regardless of whether such loans are or are not
secured with mortgage, the lenders are or are not entitled to receive the
profits of the borrowers; deposit interests (except for deposit interests of
foreign individuals and deposit interests arising from the deposit accounts of
Vietnam-based diplomatic missions, representative offices of international
organizations, and non-governmental organizations for maintenance of their
operation in Vietnam), including also rewards (if any) accompanying deposit
interests; interests paid for deferred payment as stipulated in the economic
contracts.
Interests also include charges
payable by the Vietnamese parties as stipulated in the loan contracts.
B. TAX
CALCULATION BASES AND METHODS
I. FOR
FOREIGN CONTRACTORS AND SUBCONTRACTORS IMPLEMENTING VIETNAMESE ACCOUNTING
REGIME
Foreign contractors and
subcontractors applying Vietnamese accounting regime shall pay value added tax
by tax deduction method and enterprise income tax on the basis of declared
turnover as well as expenses for determination of taxable incomes.
1. Value added tax (VAT):
The tax calculation bases are
taxable price and VAT rate.
Taxable price means the selling
price of VAT-liable goods or services of foreign contractors or foreign
subcontractors, exclusive of VAT.
VAT rates for VAT-liable goods
or services sold shall be those set in the VAT Law and guiding documents.
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2. Enterprise income tax (EIT):
The tax calculation bases are taxable
income and EIT rate.
Taxable income is business
income plus (+) other income (if any). Taxable income is turnover used for the
calculation of taxable income minus (-) reasonable expenses related to goods
and service production and business activities in the taxable period and
determined on the principles provided for in the EIT Law and guiding documents.
The applicable EIT rate is 28%
as prescribed in the EIT Law.
Foreign contractors and
subcontractors shall declare and pay EIT under the provisions of the EIT Law,
guiding documents and the guidance in Section I, Part C of this Circular.
3. For foreign contractors or
subcontractors that have permanent establishments in Vietnam, keep invoices and
documents and fully reflect on accounting books turnover from goods and
services sold; the value of goods and services bought, output VAT; deductible
input VAT and payable VAT, they shall register with the tax offices to pay VAT
by deduction method as guided at Point 1, Section I, Part B of this Circular
and to pay EIT as guided at Point 2, Section II, Part B of this Circular.
If foreign contractors or
subcontractors having registered and paid taxes as guided in Section I, Part B
of this Circular continue to sign contracts or subcontracts, they shall
continue the tax registration and payment as guided in Section I, Part B of
this Circular.
The determination that foreign
contractors or subcontractors have permanent establishments in Vietnam shall
comply with the provisions of the Enterprise Income Tax Law and guiding
documents.
II. FOR
FOREIGN CONTRACTORS AND SUBCONTRACTORS NOT IMPLEMENTING VIETNAMESE ACCOUNTING
REGIME
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1. Value added
tax (VAT):
The tax calculation bases are
added value of VAT-liable goods or services and VAT rate:
Payable VAT amount = Added value
x VAT rate
1.1. Added value:
The added value of VAT-liable
goods or services shall be determined to be VAT-liable turnover multiplied by
the percentage (%) of added value on turnover.
- VAT-liable turnover means
total turnover received by foreign contractors or subcontractors from the
supply of goods or provision of services liable to VAT before subtracting
payable tax amounts, including also expenses (if any) paid by the Vietnamese
parties on behalf of the foreign contractors or subcontractors. Where, as agreed
upon in the contracts, turnover received by foreign contractors or
subcontractors is exclusive of payable VAT (the contract value is exclusive of
tax), VAT-liable turnover must be converted into VAT-inclusive turnover
determined according to the following formula:
VAT-
Turnover exclusive of VAT
liable
= ————————————————
turnover
percentage % of
1 - added
value
x VAT rate
on turnover
Particularly, when determining
VAT-liable turnover received by foreign contractors or subcontractors from
service, construction or installation contracts accompanying the supply of
machinery, equipment and supplies, the value of the following machinery,
equipment and supplies shall be allowed to be subtracted therefrom:
+ Machinery, equipment and/or
special-used transport means included in the technology chains and construction
supplies of types not yet locally produced for the creation of fixed assets of
the Vietnamese parties being enterprises;
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+ Aircraft, ships, drilling
derricks of types not yet locally produced, which are hired from abroad
by the Vietnamese parties for production and business;
+ Equipment, machinery, spare
parts, special-use transport means and supplies of types not yet locally
produced, which will be supplied to organizations and individuals engaged in
the exploration, prospection and development of oil and gas mines.
The bases for determination of
the above-said import goods of foreign contractors and subcontractors not to be
liable to VAT shall be the lists of machinery, equipment, construction
supplies, supplies and spare parts which can be locally produced, issued by the
Planning and Investment Ministry. The value of import goods to be subtracted
from taxable turnover shall be determined under the provisions of the Law on
Export Tax, Import Tax.
Where foreign contractors sign
contracts with Vietnamese subcontractors to assign part of the value of the
jobs stipulated in the contracts signed with the Vietnamese parties, VAT-liable
turnover of the foreign contractors shall exclude the value of the jobs
performed by the Vietnamese subcontractors. This provision shall, however, not
apply to foreign contractors that sign contracts with suppliers in Vietnam to
purchase goods and/or services for the performance of the contracts.
- The percentages of added value
on taxable turnover for several business lines are as follows:
Ordinal
number
Business
lines
Percentage
(%) of added valueon taxable turnover
1
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10
2
Services
50
3
a/ Construction, installation
involving the supply of materials and raw materials, or machinery and
equipment accompanying construction projects
30
b/ Construction, installation
not involving the supply of materials and raw materials, or machinery and
equipment accompanying construction projects
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4
Other production and business
activities, transportation
25
- For contracts or subcontracts
each covering various business activities, the application of the percentage of
added value on taxable turnover to the determination of payable valued added
tax must be based on the VAT-liable turnover of each business activity carried
on by foreign contractors or subcontractors in accordance with the provisions
of the contracts. Where it is impossible to separate the value of each business
activity, the VAT rate applicable to the business activity subject to the
highest tax rate shall apply to the whole value of the contract.
1.2. VAT rates:
VAT rates for VAT-liable goods
and services sold shall be those prescribed in the VAT Law and guiding
documents.
Foreign contractors and
subcontractors liable to pay VAT by method of direct calculation based on added
value, as prescribed at this Point 1, shall not be allowed to deduct VAT with
regard to goods and services bought for the performance of contracts signed
with the Vietnamese parties.
2. Enterprise
income tax (EIT):
The tax calculation bases are
EIT-liable turnover and percentage (%) of EIT calculated on taxable turnover.
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2.1. EIT-liable turnover:
- EIT-liable turnover means
total turnover before subtracting payable taxes (if any), exclusive of VAT,
which is received by foreign contractors or subcontractors. EIT-liable turnover
may include also expenses (if any) paid by the Vietnamese parties on behalf of
the foreign contractors or subcontractors.
Where, as agreed upon in the
contracts or subcontracts, turnover received by foreign contractors or
subcontractors is exclusive of payable EIT, EIT-liable turnover shall be
determined according to the following formula:
EIT-
Turnover exclusive of EIT
liable
=
—————————————————————
turnover
1 - percentage of EIT calculated on taxable turnover
Example: Contractor A provides
the Vietnamese party the service on supervision of the volume of construction
of cement plant Z under a contract worth USD 300,000 in tax-exclusive value.
Besides, the Vietnamese party arranges accommodations and working offices for
managerial staff of the foreign contractor, with a value of USD 23,000. Under
the contract, the Vietnamese party shall be responsible for paying EIT and VAT
on behalf of the foreign contractor. The determination of the EIT and VAT
payable by the foreign contractor shall be as follows:
a/ Determination of taxable
turnover:
EIT-
300,000 + 23,000
liable
=
———————— = USD 340,000.00
turnover
(1 - 0.05)
VAT-
340,000
liable
=
——————— = USD
357,894.73
turnover
(1 - 50% x 10%)
b/ Determination of payable
taxes:
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- Payable VAT amount =
357,894.73 x 50% x 10% = USD 17,894.73 (2)
Total (1) + (2) = USD
34,894.73
* Determination of EIT-liable
turnover in a number of specific cases:
a/ Where a foreign contractor
signs a subcontract with a Vietnamese subcontractor to assign part of the value
of the jobs under a contract signed with the Vietnamese party, the foreign
contractor’s taxable turnover shall be exclusive of the value of the jobs
performed by the Vietnamese subcontractor. This provision shall, however,
not apply to foreign contractors that sign contracts with suppliers in Vietnam
to purchase goods and/or services for the performance of the contracts.
b/ EIT-liable turnover in the
case of letting out machinery, equipment and/or transport means shall be
exclusive of expenses directly paid by the lessors such as means insurance,
maintenance, registry certification and means or machinery operators, if these
expenses are evidenced with vouchers.
Particularly, EIT-liable
turnover in the case of charter of sea-going ships shall be determined as
follows:
+ If the charteree has to pay
such expenses as those for the operator, insurance, maintenance, registry
certification, EIT-liable turnover for the sea-going ship charter shall be
equal to 50% of the charter money.
+ If the charterer has to pay
such expenses as those for the operator, insurance, maintenance, registry
certification, EIT-liable turnover for the sea-going ship charter shall be
equal to 20% of the charter money.
c/ EIT-liable turnover of
foreign airlines engaged in air transport in Vietnam shall be the freight
actually collected for the number of passengers and the volume of cargoes
actually boarded and loaded aboard the aircraft of these airlines from the
departure airports in Vietnam to the overseas destination airports, which are
the final destination airports of the passengers and cargoes under the
contracts or transport documents, directly transported by the foreign
airlines which sell air transport in Vietnam, and such destination
airports are not airports at which the passengers and cargoes stop for the
transit purpose.
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Particularly, interests on loans
under foreign-loan contracts signed before January 1, 1999 shall not be taxed
under the guidance of this Circular. In cases where these contracts see
adjustments or extensions:
+ If the debt extension or the
debt term adjustment results in no change in the interest rate and payment
conditions already agreed upon in the loan contract and the extended time for
short-term debts neither exceeds a production and business cycle nor 12 months
or the extended time for medium-term or long-term debts does not exceed half of
the lending term as agreed upon in the loan contract, interest thereon shall not
be liable to EIT.
+ In case of signing a new loan
contract which, however, provides for a loan in replacement of the old loan
with the same lender and more favorable interest rate and payment conditions
compared to the old loan contract, interest thereon shall not be liable to EIT.
+ If the debt extension or the
debt term adjustment results in no change in the interest rate and payment
conditions already agreed upon in the loan contract but the extended time for
the debts exceeds the above-said maximum extended time, interests that arise as
from the expiration of the above-said maximum extended time shall be liable to
EIT.
+ For cases of adjustment of
loan contracts resulting in changes in the contracts’ principal contents such
as interest rate, lending mode, payment conditions, interests that arise as
from the time of termination of the validity of the original loan contracts
shall be liable to EIT.
2.2. Percentage (%) of EIT
calculated on taxable turnover:
Ordinal
number
Business
lines
Percentage
(%)of EIT on taxable turnover
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Commerce: distribution, supply
of goods, raw materials, supplies, machinery, equipment in Vietnam
1
2
Services
5
3
Construction
2
4
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2
5
Interests
10
6
Royalties
10
- For contracts or subcontracts
each covering various business activities, the application of the EIT
percentage to the determination of payable EIT must be based on the EIT-liable turnover
of each business activity carried on by foreign contractors or subcontractors
in accordance with the provisions of the contracts. Where it is impossible to
separate the value of each business activity, the EIT percentage applicable to
the business activity subject to the highest tax rate shall apply to the whole
value of the contract.
- Particularly for contracts for
supply of machinery, equipment accompanied with installation guidance, training
and/or trial operation services, if the value of machinery and equipment is not
separated from that of the services, the common EIT percentage of 2%
(applicable to other production and business activities) shall apply to the
whole value of the contracts.
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+ The value of machinery and
equipment supplied for the project: USD 50 million
+ The value of technological
chain design, other designs: USD 5 million
+ The value of workshops, other
auxiliary systems, construction, installation: USD 10.5 million
+ The value of installation
supervision and guidance: USD 3 million
+ The value of technical
training, trial operation services: USD 1.5 million.
In this case the application of
the VAT and EIT percentages is as follows: For the value of machinery and
equipment, the percentage applicable to commerce (exclusive of VAT for
machinery and equipment of types not yet locally produced) shall apply; for the
value of design, installation supervision, training, trial operation services,
the percentage applicable to services shall apply; for the value of
construction and installation jobs (USD 10.5 million) the tax percentage
applicable to the construction industry shall apply.
C. TAX
REGISTRATION, DECLARATION AND PAYMENT, TAX SETTLEMENT
I. FOR
FOREIGN CONTRACTORS AND SUBCONTRACTORS IMPLEMENTING VIETNAMESE ACCOUNTING
REGIME
1. Tax registration:
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A tax registration dossier shall
consist of:
+ The application for a tax
identification number, under the current guidance of the Finance Ministry on
tax identification number registration for foreign contractors;
+ The tax registration
declaration, made according to form No. 04-DK-TCT issued together with the
Finance Ministry’s Circular No. 80/2004/TT-BTC of August 13, 2004 guiding the
grant of taxpayers’ tax identification numbers;
+ A copy of the contract or
subcontract and a Vietnamese-language summary of the contract with the main
contents, namely the scope of work, the contract’s value (including detailed
appendices constituting the contract’s value, if any), payment mode, contract
term, obligations and responsibilities of the parties to the contract. Foreign
contractors or subcontractors shall be responsible before law for the accuracy
of the contents sent to the tax offices;
+ A copy of the business license
or professional service license (if any) granted by a competent Vietnamese
agency;
+ Copies and the Vietnamese
translations of the business license or independent professional service
license (for foreign contractors, subcontractors being individuals) and the tax
registration certificate issued by the country of which the foreign contractor
is a resident;
The above-said copies must be
signed and certified as true copies by competent representatives of foreign
contractors or subcontractors.
The Vietnamese parties shall
have to notify the tax offices of the registration by the foreign contractors
or subcontractors to directly pay taxes to the tax offices within 10 working
days as from the signing of the contracts.
After receiving the complete dossiers
as stated above, the tax offices shall grant tax registration certificates to
taxpayers and send one copy of the tax registration certificate of the foreign
contractors or subcontractors to the Vietnamese parties or the foreign
contractors. Tax registration certificates granted by the tax offices to
foreign contractors or subcontractors shall serve as certification that foreign
contractors or subcontractors directly perform their tax obligations with the
tax offices and the Vietnamese parties, or that foreign contractors shall not
be responsible for deducting and paying taxes on behalf of foreign contractors
or subcontractors as from the time of receipt of the copies of the tax
registration certificates of the foreign contractors or subcontractors. Where
arise payments to foreign contractors pending the receipt by the Vietnamese
parties of the copies of the foreign contractors’ tax registration
certificates, the Vietnamese parties shall temporarily deduct and pay VAT and
EIT amounts payable by the foreign contractors, which are determined under the
guidance in Section II, Part B of this Circular, before making such payments to
the foreign contractors.
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Foreign contractors and
subcontractors shall declare and pay VAT by tax deduction method in accordance
with the provisions of the VAT Law and guiding documents and declare and pay
EIT in accordance with the provisions of the EIT Law and guiding documents.
Foreign contractors and
subcontractors falling into the subjects defined at Point 3, Section I, Part B
of this Circular shall declare and pay VAT by tax deduction method in
accordance with the provisions of the VAT Law and guiding documents and declare
and pay EIT by imposition method guided at Point 2, Section II, Part C of this
Circular.
Where a foreign contractor or
subcontractor has its office of management in one locality but performs the
construction and installation contract in another, it shall declare and
temporarily pay VAT according to current regulations in the locality where
exists the construction and installation project and settle VAT and EIT in the
locality where its office of management is based.
3. Tax settlement:
Foreign contractors or
subcontractors applying Vietnamese accounting regime shall settle VAT and EIT
in accordance with the provisions of the VAT Law, the EIT Law and guiding
documents.
Other foreign contractors or
subcontractors, which directly pay VAT by deduction method and pay EIT as
imposed to the tax offices, shall settle taxes for each contract. Within 10
working days after the termination of the contracts, foreign contractors or
subcontractors shall submit settlement declarations for each kind of tax
according to regulations to the tax offices that directly manage the tax
collection.
II. FOR
FOREIGN CONTRACTORS AND SUBCONTRACTORS NOT IMPLEMENTING VIETNAMESE ACCOUNTING
REGIME
The tax registration,
declaration and payment as well as settlement by foreign contractors and
subcontractors not implementing Vietnamese accounting regime shall be made by
the Vietnamese parties.
1. Tax
payment registration:
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A tax payment registration
dossier shall consist of:
+ The tax registration
declaration used for the Vietnamese party paying taxes on behalf of the foreign
contractors under the Finance Ministry’s current guidance on registration of
tax identification numbers by foreign contractors; enclosed with the list of
foreign contractors and/or subcontractors, made according to a set form;
+ A copy of the contract or
subcontract and a Vietnamese-language summary of the contract with the main
contents, namely the scope of work, the contract’s value (including detailed
appendices constituting the contract’s value, if any), payment mode, contract
term, obligations and responsibilities of the parties to the contract. The
Vietnamese parties and foreign contractors shall be responsible before law for
the accuracy of the contents sent to the tax offices;
+ A copy of the business license
or professional service license (if any) granted by a competent Vietnamese
agency;
+ Copies and the Vietnamese
translations of the business license or independent professional service
license (for foreign contractors, subcontractors being individuals) and the tax
registration certificate issued by the country of which the foreign contractor
is a resident;
The above-said copies must be
signed and certified as true copies by competent representatives of the
Vietnamese parties or foreign contractors.
For construction contracts: The
Vietnamese parties shall additionally compile a tax registration dossier for
each foreign contractor and send one set to the tax office of the locality
where the Vietnamese parties base their offices of management for supervision
and one set to the tax office of the locality where exist the construction
projects for tax registration, declaration, payment and settlement on behalf of
the foreign contractors and/or subcontractors.
Particularly, the tax
registration dossiers of foreign airlines shall each consist of:
+ The tax registration declaration,
made under the Finance Ministry’s current guidance on registration of tax
identification numbers by foreign contractors;
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2. Tax
declaration, deduction and payment:
Within 15 working days as from
the date of making payments for the foreign contractors, the Vietnamese parties
shall make written declarations, determining the VAT and EIT amounts payable by
the foreign contractors, and pay the declared tax amounts into the state
budget.
Where a foreign contractor has
foreign subcontractors, the Vietnamese party shall determine the VAT and EIT
amounts payable by the foreign contractor and subcontractors, deduct and pay
them on behalf of the foreign contractor and subcontractors.
Where many foreign contractors
and subcontractors are involved in performing a contract and the contractors
need to have their payable tax amounts separately determined, the Vietnamese
party shall make registration in order to be granted separate tax
identification numbers for separate tax declaration and payment for each
foreign contractor or subcontractor. The Vietnamese party shall write the VAT
and EIT amounts payable by each foreign contractor or subcontractor separately
in the state budget remittance papers.
The VAT amounts already paid by
the Vietnamese parties on behalf of the foreign contractors shall be the input
VAT amounts of the Vietnamese parties and be deducted in accordance with the
VAT Law and current guiding documents. Documents for the determination of the
deductible input VAT amounts of the Vietnamese parties shall be VAT payment
invoices or state budget remittance papers, affixed with the stamps of the
state treasuries certifying the paid VAT amounts.
Where the Vietnamese parties concurrently
sign many contracts, the tax declaration and payment on behalf of foreign
contractors shall be made separately for each contract.
Where the Vietnamese parties
fail to declare, deduct and pay VAT and EIT for foreign contractors and/or
subcontractors, they shall be subject to retrospective collection, sanctioned
under current regulations and must pay such tax amounts for the foreign
contractors.
The Vietnamese parties must
neither deduct VAT and EIT amounts retrospectively collected and paid on behalf
of foreign contractors from their payable VAT amounts nor account them as
expenses when determining their business results and payable EIT amount.
3. Tax
declaration and payment in some specific cases:
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3.2. For foreign airlines
engaged in air transport in Vietnam, the EIT declaration and payment shall be
as follows:
Within the first 10 days of the
first month of the quarters of a year (January, April, July and October), the
foreign airlines’ representative offices permitted to sell transport or the
foreign airlines’ agents shall make EIT declarations (according to a set form)
and send them to the tax offices of the localities where they are based and pay
the declared tax amounts into the state budget.
Where a foreign airline organizes
transport sale agents in Vietnam, its representative office must submit the
list of the names and addresses of such agents together with the agency
contracts (copies) to the tax offices of the localities where the airline’s
representative office permitted to sell transport is based.
3.3. Tax declaration and payment
procedures in cases where foreign contractors enter into partnerships with
other partners or with Vietnamese economic entities to do business in Vietnam
on the basis of contracts:
- Where the partners set up an
executive board, which practices cost accounting, has bank accounts and is
responsible for issuing invoices; or if the Vietnamese economic entity to the
partnership is responsible for practicing cost accounting for the whole partnership
and distributing profits to the partners, the partnership’s executive board, or
the Vietnamese economic entity, shall have to declare, pay and settle VAT and
EIT according to the above-said provisions for the whole turnover received
under the contract.
- Where the partnership’s
partners apply the mode of turnover sharing, product sharing, or accept to
jointly perform the contractual job but each of them performs a separate part
of the job and issues its own invoices for its turnover portion, each partner
may directly register its tax payment with the tax offices as guided in Part B
and Part C of this Circular.
The Vietnamese parties shall
have to declare, deduct and pay VAT and EIT on behalf of foreign contractors
and subcontracts that do not directly register tax payment with the tax
offices.
3.4. Where foreign contractors
or subcontractors have registered their tax payment in the capacity as subjects
applying Vietnamese accounting regime but fail to strictly comply with the
regulations on accounting, invoices and documents, resulting in the lack of
bases for the accurate determination of their VAT and EIT obligations, the tax
offices shall determine the tax obligations of these foreign contractors or
subcontractors under the guidance applicable to foreign contractors and
subcontractors not implementing Vietnamese accounting regime.
3.5. Vietnam-based
representative offices of foreign organizations which carry on business
activities, which turn them into permanent establishments as prescribed in the
EIT Law and current guiding documents, shall have to make declaration and
registration with the tax offices as guided in Section I, Part C and calculate
and pay taxes as guided in Section II, Part B of this
Circular.
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The tax settlement shall be made
for each contract. The Vietnamese party shall have to settle tax amounts
payable by foreign contractors and subcontractors within 20 working days as
from the date of termination of the contracts.
Dossiers of tax settlement for
foreign contractors or subcontractors addressed to the tax offices where the
tax registration and payment on behalf of the foreign contractors or
subcontractors are made shall each consist of:
+ The tax settlement
declaration, made according to a set form;
+ The list of foreign
contractors and/or subcontractors participating in the performance of the
contract (made according to a set form).
+ The declaration on tax
settlement for foreign contractors shall be made in three copies and sent to
the tax office. Where a tax settlement dossier is incomplete, within three
working days the tax office must notify in writing the Vietnamese party thereof
for supplementation. Within 15 working days as from the date of receipt of the
complete dossier, the tax office shall settle the tax amounts payable by the
foreign contractor or subcontractor and send to the Vietnamese party two copies
of such tax settlement. The Vietnamese party shall keep one copy and send
another to the foreign contractor. Where more than one foreign contractor and/or
subcontractor participate in the contract performance, the Vietnamese party
shall have to make copies of the tax settlement and send them to the involved
foreign contractors and/or subcontractors.
Tax settlement data shall serve
as official certification of the fulfillment of the tax obligations by foreign
contractors and subcontractors. Where, as stipulated in the contract,
additional payments must be made between the Vietnamese party and the foreign
contractor after the contract liquidation, the tax settlement for the foreign
contractor and/or subcontractor shall be also based on the contract value upon
the expiration of the contract. Once the Vietnamese party has actually made
such additional payments to the foreign contractor, it shall have to declare and
pay taxes on the additional payments.
If, upon tax settlement, the
payable tax amount is bigger than the temporarily paid VAT or EIT amount, the
Vietnamese party shall pay the deficit into the state budget within five
working days as from the date of receipt of the tax settlement.
If, upon tax settlement, the
payable tax amount is smaller than the paid amount, the Finance Ministry shall
refund the overpaid amount to the foreign contractor or subcontractor through
the Vietnamese party or a lawful representative authorized by the foreign
contractor or subcontractor. A dossier of request for tax refund shall consist
of:
+ The written request for tax
refund, clearly stating the reason for tax refund (made according to a set
form);
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+ The contract settlement and
liquidation minutes (a copy certified and sealed by a competent
representative);
+ The tax settlement, with the
certification by the local tax office of the payable, paid and overpaid VAT and
EIT tax amounts of the whole contract.
+ Written certification of the
paid tax amount by the state treasury.
Dossiers of request for tax
refund shall be sent to the local Taxation Departments where the Vietnamese
parties have made registration and paid taxes on behalf of the foreign
contractors. The Taxation Departments shall have to check and determine the tax
amounts to be refunded to the foreign contractors or subcontractors, then send
documents thereon to the Finance Ministry (the General Department of Taxation)
together with the foreign contractors’ or subcontractors’ dossiers of request
for tax refund.
Within 30 days as from the date
of receipt of complete dossiers, the Finance Ministry shall refund the overpaid
tax amounts to the foreign contractors and subcontractors.
Where the Vietnamese party has deducted
the VAT amount overpaid by the foreign contractor, when the foreign contractor
receives the VAT refund decision, the Vietnamese party must return the VAT
amount which the foreign contractor is refunded.
D. HANDLING
OF VIOLATIONS AND SETTLEMENT OF COMPLAINTS
I. HANDLING
OF VIOLATIONS
Foreign contractors and
subcontractors and the Vietnamese parties shall have to strictly observe the
provisions of current tax laws and the guidance in this Circular.
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The Vietnamese parties that fail
to fully and on schedule declare, and notify the tax offices of, information on
contracts and subcontracts shall be sanctioned for declaration violations. If
the state’s tax money is lost due to the above-said fault of the Vietnamese
parties, the Vietnamese parties shall be sanctioned according to the
regulations on sanctioning of administrative violations in the tax domain.
II.
SETTLEMENT OF COMPLAINTS
Complaints about taxation under
this Circular shall be handled by the local tax offices directly managing the
tax collection. A complainant who is not satisfactory with the handling by the
tax office directly managing the tax collection may send a written complaint to
the General Department of Taxation and the Finance Ministry. The handling
decisions of the Finance Minister are final ones. Pending the issuance of the
handling decisions of competent authorities, the complainants must still comply
with the conclusions made by the local tax offices directly managing the tax
collection.
Complaints about taxation
related to the provisions of a treaty signed between the Vietnamese Government
and the Government of another country shall be settled according to the
complaint and dispute settlement procedures provided for in such treaty.
E.
ORGANIZATION OF IMPLEMENTATION
I.
RESPONSIBILITIES OF TAXPAYERS
1. Foreign contractors and
subcontractors (for cases of direct tax payment), or the Vietnamese parties
(for cases of tax payment on behalf) shall strictly comply with the provisions
on tax and tax payment method registration as guided in this Circular. In case
of relocation of business place or office of management, they must carry out
tax registration procedures required for such relocation with the
provincial/municipal tax offices according to current regulations.
2. In the course of doing
business, the Vietnamese parties, foreign contractors and subcontractors must
observe the regulations on tax declaration and settlement as guided in this
Circular and current guiding documents.
3. To fully produce accounting
books and documents as well as necessary materials related to tax calculation
and settlement when it is so requested by the tax offices.
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II.
RESPONSIBILITIES OF TAX OFFICES
1. To guide taxpayers to
register and declare taxes according to the prescribed regime, notify them of
budget accounts and indexes for payment of different kinds of tax.
2. To check tax declarations,
accounting books and vouchers as well as materials necessary for tax
calculation.
3. To notify taxpayers in cases
where the latter:
- Have not yet sent tax
declarations and tax settlements or have sent incomplete ones;
- Have not yet paid taxes on
schedule or have paid insufficient tax money.
4. To request taxpayers to
supply accounting books, invoices, documents and other dossiers and materials
related to the tax calculation and payment; to request credit institutions,
banks, other concerned organizations as well as individuals to supply materials
related to the tax calculation and payment by business establishments.
5. To be entitled to impose
payable tax amounts on taxpayers that fail to voluntarily declare on set
schedule, or incompletely or inaccurately declare, or fail to fully and
accurately supply information related to the tax calculation or in cases where
revenues are affected by financial and commercial relations under unfair transaction
contracts.
6. To supervise and inspect the
tax payment and settlement by foreign contractors and subcontractors according
to current law provisions.
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8. To be responsible for
enforcing tax legislation, ensure honesty, accuracy and objectivity.
9. To confirm tax amounts
already paid by foreign contractors and subcontractors and take responsibility
for the accuracy of the certified tax amounts.
III.
CERTIFICATION OF PAID TAX AMOUNTS
Certificates of tax amounts
already paid in Vietnam directly by foreign contractors and subcontractors
shall be granted after the foreign contractors and subcontractors have fulfilled
the tax obligations according to annual tax settlements. The tax offices shall
grant such certificates within 10 working days after making tax settlement.
Certificates of tax amounts
already paid by the Vietnamese parties on behalf of foreign contractors and
subcontractors shall be granted after the foreign contractors and
subcontractors have fulfilled the tax obligations according to the tax
settlement made for each contract. The tax offices shall grant such
certificates within 10 working days after making tax settlement. For contracts
or subcontracts performed over many years, the foreign contractors or
subcontractors that need to be granted certificates of tax amounts paid every
fiscal year, shall request the local tax offices to grant such certificates.
The tax offices shall grant certificates to the foreign contractors or
subcontractors within 10 days after receiving the requests of the Vietnamese
parties or foreign contractors or subcontractors.
The certification of paid tax
amounts shall be made according to a set form.
Where tax inspection gives rise
to the tax payment by foreign contractors or subcontractors different from the
tax settlement and the tax amounts already certified, the tax offices must make
readjustment accordingly.
IV. REMUNERATION
FOR TAX DEDUCTION AND PAYMENT
1. The Vietnamese parties that
sign the contracts shall have to deduct tax amounts payable by the foreign
contractors or subcontractors not registering to implement Vietnamese
accounting regime and pay them into the budget as guided in Section II, Part C
of this Circular.
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2. For EIT amounts of foreign
contractors or subcontractors deducted and paid into the state treasuries by
the Vietnamese parties, the Vietnamese parties shall enjoy a remuneration equal
to 0.8% of the deducted EIT amounts, which shall, however, not exceed VND 50
million per tax deduction and payment.
This remuneration shall be
deducted from the collected tax amounts before they are remitted into the state
treasuries and be used to cover expenses for tax declaration, deduction and
payment and to reward individuals involved in the tax declaration and payment
management.
V.
IMPLEMENTATION EFFECT
This Circular takes effect 15
days after its publication in the Official Gazette and replaces the Finance
Ministry’s Circular No. 169/1998/TT-BTC of December 22, 1998 and Circular No.
95/1999/TT-BTC of August 6, 1999, which guide the tax regime applicable to
foreign organizations and individuals doing business in Vietnam not in any
investment forms under the Law on Foreign Investment in Vietnam.
For contracts and subcontracts
already signed with foreign contractors and subcontractors before the effective
date of this Circular, the determination of the tax payment method, payable tax
amounts and tax settlement shall continue to comply with the guidance in
Circular No. 169/1998/TT-BTC of December 22, 1998 and Circular No.
95/1999/TT-BTC of August 6, 1999 till the termination of the contracts. Where
as from January 1, 2005, the contracts or subcontracts already signed before
the effective date of this Circular are extended, the tax calculation,
declaration and payment as from the date of extension of the contracts shall
comply with the guidance of this Circular.
Where the Socialist Republic of
Vietnam enters into an international treaty or agreement which contains
provisions on the tax payment by foreign contractors or subcontractors
different from the guidance in this Circular, the provisions of such
international treaty or agreement shall apply. Foreign contractors and
subcontractors shall send written requests to the tax offices where they
register their taxes for the performance of the tax obligations as agreed upon
in the above-said international treaties or agreements. On the basis of such
requests and the signed international agreements, the tax offices shall issue
documents confirming that the foreign contractors and subcontractors are
allowed to perform the tax obligations under the concerned international
agreements or to perform the tax obligations in accordance with current tax
laws.
FOR
THE FINANCE MINISTER
VICE MINISTER
Truong Chi Trung
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