Official Letter 31859/CTBDU-TTHT Regarding Contractor Tax

The Provincial Tax Department has received Official Letter No. 02/CV-GBLIGHT dated December 6, 2024, from G.B Light Vietnam Co., Ltd. (referred to as the "Company") regarding issues related to the contractor tax policy. In response to the content of the letter, the Provincial Tax Department provides the following opinion:

• Based on Clause 2, Article 42 of the Tax Administration Law No. 38/2019/QH14 (effective from July 1, 2020):
  “Taxpayers are responsible for calculating the tax payable, except in cases where tax calculation is performed by the tax authority in accordance with government regulations.”

• Based on Circular No. 103/2014/TT-BTC dated August 6, 2014, of the Ministry of Finance, which guides the implementation of tax obligations for foreign organizations and individuals conducting business in Vietnam or earning income in Vietnam:

  • Article 1, Clause 1, outlines the scope of application:
    “This Circular applies to the following subjects (except in cases specified in Article 2, Chapter I):
    Foreign organizations doing business with or without a permanent establishment in Vietnam; foreign individuals doing business either as residents or non-residents in Vietnam (hereinafter referred to as foreign contractors, foreign sub-contractors) who do business in Vietnam or earn income in Vietnam based on contracts, agreements, or commitments with Vietnamese organizations, individuals, or between foreign contractors and foreign sub-contractors to carry out part of the work in the contractor's agreement.”
  • Article 2, Clause 4, specifies the exceptions:
    “4. Foreign organizations and individuals providing services to Vietnamese organizations or individuals where the services are carried out abroad:
    …
  • Brokerage services: selling goods or providing services abroad.
    Example 7:
    A Vietnamese company signs a contract with a Thai company to provide brokerage services for selling its products in the Thai market or globally. In this case, the brokerage service provided by the Thai company is not subject to this Circular; however, if the Vietnamese company hires the Thai company to broker the sale of its real estate in Vietnam, then the brokerage service is subject to this Circular.”

Based on the above regulations, if the Company signs a contract with a foreign supplier (referred to as the "supplier") to provide brokerage services for selling the Company’s goods within Vietnam, the supplier will be subject to contractor tax registration and payment according to the regulations. The percentage rates for calculating VAT and corporate income tax are guided by Clauses 2 of Article 12 and Clause 2 of Article 13 of Circular No. 103/2014/TT-BTC.

The Company should refer to the above guidance, compare it with its actual business operations, and comply with the regulations accordingly.

This is the opinion of the Bình Dương Provincial Tax Department, which is provided for the Company’s implementation.

See details here.