Taxes applying to foreign contractors

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Question: Who are the two supplemented objects subjected to tax treatment in accordance with Circular 103?

What are some cases not subjected to tax applying to foreign contractors?

How much value added tax (VAT) applying to foreign contractors?

Answer:

Circular 103 supplements two objects subject to tax treatment including:

· Foreign organizations and individuals conducting a part of the whole distribution of goods and provision of services into Viet Nam in which such organizations and individuals are still owners of the goods delivered to Vietnamese organizations or bear the cost for distribution, advertising, promotion and quality of goods and services in Viet Nam (including the case of authorization or hiring Vietnamese parties to conduct a part of distribution services or other services related to the supply of goods in Viet Nam)

· Foreign organizations and individuals through Vietnamese organizations and individuals to conduct negotiations and sign contracts under the foreign organizations and individuals’ names; or perform export, import and distribution rights in Viet Nam or purchase of goods for export or for sale to Vietnamese traders under the commercial law.

Addition of some cases not subject to tax

· Where the sellers delivers goods at the border of Viet Nam or overseas without attached services conducted in Viet Nam even in cases of having warranty conditions under the sellers’ obligations and responsibilities;

· Foreign organizations and individuals which use bonded warehouses and inland container depots (ICD) as storage of goods for ancillary supporting international transportation, transit, cross-border transportation or other enterprises’ processing are added to list of objects not subjecting to tax under this Circular.

VAT calculation

In accordance with the rates of revenue, as from October 1, 2014, VAT payable will be calculated on the VAT taxable revenue instead of calculating VAT payable basing on the added value as stipulated in Circular 60.

Percentages for VAT calculation are specified from 2-5% depending on the lines of businesses.

Circular 103 took effect from October 1, 2014./.