Organizations and individuals from abroad (hereinafter referred to as Organizations, individuals) conducting business or earning income in Vietnam are subject to Vietnam’s tax policies. The tax policies for these entities are stipulated in Circular No. 103/2014/TT-BTC dated August 6, 2014.
1. Subjects Covered by the Circular
- Foreign contractors, dependent foreign contractors (hereinafter referred to as Contractors) conducting business in Vietnam and Contractors earning income in Vietnam based on contracts, agreements, or commitments.
- Organizations and individuals providing goods in Vietnam through import and export on the spot, with income generated from transactions involving contracts in Vietnam. This excludes cases of processing and exporting goods to foreign organizations or individuals.
- Organizations and individuals engaged in the distribution of goods in Vietnam under international commercial terms. Under these terms, the seller must bear risks related to the goods.
- Organizations and individuals conducting business activities in distributing goods and providing services in Vietnam. These entities have ownership rights and responsibility for distribution costs, advertising, marketing, and the quality of goods or services. This includes cases where organizations or individuals authorize or hire Vietnamese organizations to perform services related to selling goods in Vietnam.
- Organizations and individuals negotiating and signing contracts in Vietnam on behalf of foreign organizations or individuals.
- Organizations and individuals exercising import and export rights, distribution rights in the Vietnamese market, purchasing goods for export, and selling to Vietnamese traders.
2. Subjects Not Covered by the Circular
- Organizations and individuals doing business in Vietnam according to the provisions of the Investment Law, Petroleum Law, Credit Institutions Law.
- And Organizations and individuals providing goods to Vietnamese organizations without providing accompanying services in Vietnam under two forms: delivery at foreign border gates and delivery at Vietnamese border gates.
- Organizations and individuals earning income from services provided and consumed outside of Vietnam.
- Organizations and individuals providing repair services for transportation means, such as aircraft, aircraft engines, aircraft components, ships, and maritime equipment, machinery, and equipment, including undersea cables and transmission equipment.
- Foreign organizations and individuals providing advertising and marketing services, excluding online advertising and marketing.
- Organizations and individuals using bonded warehouses, inland container depots (ICDs) for the purpose of warehousing, supporting international transportation activities, transshipment, and storage of goods, or providing subcontracting services.
3. Types of Taxes Applied in the Tax Policy
- For foreign business organizations: They need to fulfill Value Added Tax (VAT) and Corporate Income Tax (CIT) obligations.
- And for foreign individuals doing business: They need to fulfill VAT and Personal Income Tax (PIT) obligations.
- As well as other taxes, fees, and charges as prescribed by current laws and regulations.
4. Real-Life Cases Applying Tax Policies to Foreign Contractors
Hanoi City Tax Department determined Kyh Vina Co., Ltd. from South Korea did not have a permanent establishment in Vietnam. However, the company was still conducting business and earning income in Vietnam. Since it did not fall under the category of entities exempt from Circular No. 103/2014/TT-BTC, the company was required to comply with Vietnam’s tax policies.
(Extracted from official document number 14456/CTHN-THTT, dated March 24, 2023, by the Hanoi City Tax Department)
Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: hmlf.vn Email: miller@hmlf.vn
