25 Tháng Tư, 2024

Declaration and payment of foreign contractor tax

Vietnam has become a vibrant market for technology companies, advertising agencies, and diverse service providers such as music, film, cloud storage, images, etc. The promising outlook of the Vietnamese market is increasingly driving service providers to aim for long-term commitment, but along with that comes the requirement for transparency regarding tax declaration and income in Vietnam.

Therefore, in 2022, major contractors such as Meta (Facebook), Google, Microsoft, TikTok, Netflix, etc., have registered tax codes and directly paid taxes in Vietnam, promoting a healthy business environment and increasing tax management within this difficult-to-control digital commerce and platform-based capital environment.

However, not all foreign service providers meet the conditions or have sustainable investment plans in Vietnam. These providers have not yet registered tax codes. Therefore, users of services in Vietnam will need to register, declare, and pay taxes as before with Facebook, Google.

Here is the process for declaring and paying foreign contractor tax (“FCT”)

Step 1: Registering the tax code for contractors (applicable to all contractors with whom Vietnamese companies have signed contracts).

Within 10 working days from the date of signing the contract, the Vietnamese company is responsible for registering with the tax authority directly to register the tax code for contractors.

Based on Article 33.2 of the Tax Administration Law 2019: “2. If taxpayers register tax directly with tax offices, the tax registration time limit is 10 working days from the following date:  c) The liability arises for withholding tax and paying tax on its behalf; organizations submit on behalf of individuals under contracts, business cooperation documents;”.
Based on Article 5.3.(e) of Circular 105/2020/TT-BTC: “Organizations and individuals that withhold and pay tax on behalf of according to the provisions of Point g, Clause 2, Article 4 of this Circular shall be granted a 10-digit tax code (hereinafter referred to as the tax code to pay on behalf of) to declare and pay tax. on behalf of foreign contractors, foreign sub-contractors, overseas suppliers, organizations and individuals with business cooperation contracts or documents. Foreign contractors and foreign sub-contractors specified at Point dd, Clause 2, Article 4 of this Circular that are declared and paid by the Vietnamese party on behalf of the contractor shall be granted a 13-digit tax code according to the tax code paid on behalf of the foreign contractor. Vietnamese party to confirm fulfillment of house tax obligations in Vietnam.”

*Documents for registering the tax code for contractors include:

  • Form 04.ĐK.TCT
  • A photocopy of the signed contract between Vietnam and the foreign contractor (accompanied by a notarized copy of the business license for certainty)
  • List of contractors, foreign subcontractors paying tax through Vietnamese companies Form BK04-ĐK-TCT Submit to the directly managing Tax authority.

Article 7.6 of Circular 105/2020/TT-BTC: “For taxpayers who are organizations and individuals withholding tax payments on behalf of and organizations and individuals authorized to collect by tax authorities specified at Points g, m, Clause 2, Article 4 of this Circular, submit tax registration dossiers. at the tax office as follows: a) Organizations, individuals withholding tax on behalf of foreign contractors, foreign sub-contractors submit tax registration dossiers at tax agencies directly managing. A tax registration dossier includes: – Tax registration declaration form No. 04.1-DK-TCT issued together with this Circular; – A list of contracts of foreign contractors and foreign sub-contractors paying tax through the Vietnamese party, form No. 04.1-DK-TCT-BK.”  

No later than 03 working days from the date of receiving complete documents, the tax authority will issue a tax code according to form 11-MST.

Step 2: Declaring contractor taxes:

FCT are declared for each payment occurrence. (For example, if the cost to be paid to the foreign party is 1,000,000 VND, but only 600,000 VND has been paid, then the contractor tax is calculated and declared on the amount of 600,000 VND).

The basis for determining the amount paid is the service contract and transaction invoice through the network or bank account statement and reconciliation.

The calculation and declaration of contractor taxes are carried out according to Circular 103/2014/TT-BTC, with the VAT and CIT tax rates for service provision activities being 5%).

In cases where Vietnam pays the foreign contractor multiple times within a month, it is possible to register tax declaration monthly instead of declaring each payment occurrence. Registration for monthly contractor tax declaration must have a letter sent to the Tax authority.

No later than 10 days from the date of payment to the foreign contractor, the Vietnamese company must submit a tax declaration for contractor tax. In the case of monthly declaration, the deadline for submitting the contractor tax declaration is no later than the 20th day of the following month in which the tax obligation arises.

Declaration form: 01/NTNN (Form 01.NTNN)

Based on Article 8.4.(n) of Decree 126/2020/ND-CP: “In cases where Vietnam pays the foreign contractor multiple times within a month, it is allowed to declare monthly instead of declaring each payment occurrence”.

Step 3: Settling contractor taxes:

No later than the 45th day from the end date of the contract, the enterprise must submit a tax settlement for contractor taxes.

*The dossier includes:

  • Settlement declaration form (Form 02.NTNN);
  • List of contractors participating in the contract; Forms 02-1.NTNN and 02-2.NTNN  
  • List of tax submission documents;
  • Contractor contract liquidation document;
  Based on Article 44.4 of the Tax Administration Law 2019: “The time limit for submitting tax declaration dossiers in case of operation termination, contract termination or enterprise reorganization is 45 days after the event occurs.”.  
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