– In accordance with the Ministry of Finance’s Circular No. 103/2014/TT-BTC, published August 6, 2014, outlining the application of tax responsibilities to foreign companies and people conducting business in Vietnam or receiving income from Vietnam:
+ In Article 4, regulations on taxpayers:
1. Foreign contractors and subcontractors who meet the requirements outlined in Article 8, Section 2, Chapter II or Article 14, Section 4, Chapter II conduct business or earn income in Vietnam. The business is carried out under the terms of a contractor agreement with a Vietnamese company or person, or with a foreign company or person conducting business in Vietnam under the terms of a subcontractor agreement.
The determination of foreign contractors, foreign sub-contractors having permanent establishments in Vietnam, or being residents in Vietnam shall comply with the provisions of the Law on Corporate Income Tax, the Law on Personal Income Tax and implementation manuals.
In case the Agreement on avoidance of double taxation to which the Socialist Republic of Vietnam is a signatory contains different provisions on permanent establishments and residents, the provisions of such Agreement shall apply.
2. Organizations established and operating under Vietnamese law, organizations registered to operate under Vietnamese law, other organizations and individuals engaged in production and business: purchase services or services associated with goods or pay incomes generated in Vietnam on the basis of contractor contracts or subcontractors’ contracts; purchase goods in the form of import and export on the spot or under the terms of international trade (Incoterms); distribute goods and provide services on behalf of foreign organizations and individuals in Vietnam (hereinafter referred to as Vietnamese parties) including:
– Business organizations established under the Law on Enterprises, the Law on Investment and the Law on Cooperatives;
– Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, armed units, non-business organizations and other organizations;
– Petroleum contractors working in accordance with the Petroleum Law;
– Branches of foreign companies licensed to operate in Vietnam;
– Foreign companies or their employees who are authorized to conduct business in Vietnam;
– Foreign airlines’ ticket offices and agents in Vietnam which are permitted to arrange transportation to and from Vietnam, either directly or through a joint venture;
– Companies and individuals offering sea transportation services for foreign shipping firms; representatives of freight forwarders and international delivery services in Vietnam;
– Securities company, securities issuer, fund management company, commercial bank where the securities investment fund or foreign organization opens a securities investment account;
– Other organizations in Vietnam;
– Individuals conducting business in Vietnam.
Taxpayers guided in Clause 2, Article 4, Chapter I are responsible for withholding value-added tax and corporate income tax as guided in Section 3 Chapter II before making payments to foreign contractors and foreign sub-contractors.”
+ In Article 8 stipulating the subjects and conditions for applying VAT payment by the deduction method, CIT payment on the basis of revenue and expense declaration to determine taxable income (declaration method):
“Foreign contractors and foreign sub-contractors pay tax according to the guidance in Section 2 Chapter II if they fully satisfy the following conditions:
1. Having a permanent establishment in Vietnam, or being a resident in Vietnam;
2.The duration of business in Vietnam under the contractor contract or sub-contractor contract is 183 days or more from the effective date of the contractor contract or sub-contractor contract;
3. Apply the Vietnamese accounting system and make tax registration, and be granted a tax identification number by the tax authority.”
+ In Article 9 regulating VAT in the declaration method:
“Follow the provisions of the Law on VAT and its guiding documents”
+ In Article 11 stipulations on subjects and conditions for applying VAT payment and CIT payment according to the ratio method on revenue (direct method)
“If a foreign contractor or foreign sub-contractor fails to satisfy one of the conditions mentioned in Article 8 Section 2 Chapter II, the Vietnamese party shall pay tax on behalf of the foreign contractor or foreign sub-contractor according to the guidance at Article 12, Article 13, Section 3, Chapter II.”
+ In Article 14, the subjects and conditions for applying VAT payment by the deduction method, paying CIT according to the percentage of revenue calculated (mixed method)
“Foreign contractors, foreign subcontractors who fully satisfy the two conditions mentioned in Clauses 1 and 2, Article 8, Section 2, Chapter II, and organize accounting according to the provisions of law on accounting and guidance from Ministry of Finance can register with the tax authority to pay VAT by the credit method and pay CIT at the rate of % calculated on the taxable turnover.”
+ In Article 15, regulations on VAT in the mixed method:
“Follow the instructions in Article 9 Section 2 Chapter II.”
Based on the above provisions:
– In case a foreign contractor (e.g. Google, Facebook / Meta, Microsoft / LinkedIn, Netflix…) generates income in Vietnam on the basis of the contract the contractor signed with a Vietnamese company, if the foreign contractor does not satisfy one of the conditions stated in Article 8 Section 2 Chapter II of Circular No. 103/2014/TT-BTC of the MoF, the company in Vietnam shall pay tax on behalf of the foreign contractor.
– In case the foreign contractor meets the conditions to declare directly to the tax agency according to the provisions of Circular No. 103/2014/TT-BTC of the MoF, the company in Vietnam is not required to deduct and pay taxes for foreign contractors on its behalf.