ACCA – F6TAXATION

FOREIGN CONTRACTOR TAX

Part E

Learning Objectives

On completion of this course, you will be able to:

1. Identify the scope of the foreign contractor tax (FCT) regime

a. Applicable and non-applicable objects/ transactions

b. Explain the inter-relationship between FCT regime and CIT, VAT and PIT

c. Define the terms “Foreign contractor”, “Sub-contractor”, “Income arising in Vietnam”, “Income from the transfer of ownership or right to use assets”, “Royalty”, and “Loan interest”

Learning Objectives

2. Compute the FCT liabilities

a. Computation of VAT and CIT liabilities for foreign contractors adopting the Vietnamese Accounting System (VAS)

b. Computation of VAT and CIT liabilities for foreign contractors NOT adopting the Vietnamese Accounting System (VAS)

c. Application of the double taxation relief provisions in the context of the FCT regime

Key Points

Scope of the Foreign Contractor Tax (FCT) regime

Applicable and non-applicable objects/ transactions

Inter-relationship between the FCT regime and CIT, VAT and PIT

Definition of a number of terms

Computation of FCT liabilities

For foreign contractor adopting the VAS

For foreign contractor not adopting the VAS

Administration of the FCT regime Registration procedures applicable to foreign contractors

Applicable objects/ transactions

WHO ARE FOREIGN CONTRACTORS (1/3)

Foreign organisations with or without a permanent establishment(PE) in Vietnam, and foreign individuals being a resident or a non-resident of Vietnam (briefly called Foreign Contractors ), doing business in VN or having income arising fromVietnam on a basis of a contract (or an agreement, a commitment) signed with a Vietnamese organisation or individual

Applicable objects/ transactions

WHO ARE FOREIGN CONTRACTORS (2/3)

Foreign organisations with or without a permanent establishment (PE) in Vietnam, and foreign individuals being a resident or a non-resident of Vietnam, (briefly called Foreign Sub-Contractors ), doing business in Vietnam or having income arising fromVietnam on a basis of a contract (or an agreement, a commitment) signed with a Foreign Contractor to perform a part of the Foreign Contractor’s contract

Applicable objects/ transactions

WHO ARE FOREIGN CONTRACTORS (3/3)

What is a permanent establishment?

The determination of a permanent establishment of a foreign contractor/ sub-contractor is in accordance with the Corporate Income Tax (CIT) Law

What is a resident individual?

The determination of a resident individualof a foreign individual is in accordance with the Personal Income Tax Law (PIT)

Applicable objects/ transactions

WHO ARE SUB-CONTRACTORS?

Sub-contractors comprise foreignsub-contractors and Vietnamesesub-contractors

Applicable objects/ transactions

SOME DEFINITIONS

What is a contractor’s contract?

A contract (agreement, commitment) signed between a foreign contractor and a Vietnamese party

What is a sub-contractor’s contract?

A contract (agreement, commitment) signed between a foreign contractor with a sub-contractor

Applicable objects/ transactions

WHO ARE FCT PAYERS? (1/6)

1

2

Applicable objects/ transactions

WHO ARE FCT PAYERS? (2/6)

Foreign parties : Foreign contractors and/or foreign sub-contractors who do business in Vietnam (including the sea territories) or have income arising from VN

The business activities are conducted on a basis of:

a contractor’s contract signed with a Vietnamese organisation/ individual, or

a subcontractor’s contract signed with another foreign organisation/ individual who is currently doing business in VN

Applicable objects/ transactions

WHO ARE FCT PAYERS? (3/6)

Vietnamese parties include:

Organisations established and operated under the laws of VN;

Organisations registered for business operations under the laws of VN;

Business organisations/ individuals buying services, or services accompanied with goods;

Organisations/ individuals paying income sourced from Vietnam on a basis of a contractor’s or a sub-contractor’s contract

Applicable objects/ transactions

WHO ARE FCT PAYERS? (4/6)

Vietnamese parties , specifically: Companies established under the laws of VN like Law on

Enterprises, Law on Investment, Law on Co-operatives

Economic organisations owned by political organisations, socio-political organisations, social organisations, social-professional organisations, armed forces, not-for-profit organisations and other organisations

Petroleum contractors operating under the Law on Petroleum

Applicable objects/ transactions

WHO ARE FCT PAYERS? (5/6)

Vietnamese parties , specifically:

Branch of foreign companies licensed to operate in VN

Foreign organisations or representative of foreign organisations licensed to operate in VN

Booking office and representative office of foreign airlines operating in Vietnam

Organisations/ individuals providing ocean shipping services for foreign ocean shipping companies, agents of foreign forwarding companies, foreign express delivery companies

Applicable objects/ transactions

WHO ARE FCT PAYERS? (6/6)

Vietnamese parties , specifically:

Securities companies, securities issuing companies, fund management companies, commercial banks where securities investment funds have opened securities investment accounts

Other organisations in Vietnam and individuals doing business in Vietnam

Non-applicable

THERE ARE 4 CASES

objects/ transactions

1. Foreign organisations/ individuals doing business in VN under the Law on Investment , Law on Petroleum , Law on Credit Organisations

2. Foreign organisations/ individuals providing goods to a Vietnamese party, without accompanying services to be carried out in VN – See Example 2

3. Foreign organisations/ individuals having income from services that are provided and consumed outside VN –Ex. 3

4. Foreign organisations/ individuals providing a number of services to a Vietnamese party where the services are performed outside VN – See Example 4

Non-applicable objects/ transactions

EXAMPLE OF CASE 2

“ Provision of goods without accompanying services ” means

Goods are delivered at a foreign border gate where:

The seller is responsible for delivering goods to a foreign border gate

The buyer is responsible for receiving and bringing goods to

Goods are delivered at a Vietnamese border gate where:

The seller is responsible for delivering goods to a Vietnamese border gate

The buyer is responsible for receiving and bringing goods to VN

Non-applicable objects/ transactions

EXAMPLE OF CASE 3

“ Having income from services provided and consumed outside Vietnam ”

Company A of Vietnam makes a payment to Company H of Hong Kong for the stevedoring services when the fleet Compnay A anchored in Hong Kong

In this case case the stevedoring services are provided and consumed in Hong Kong, therefore Company H is not subject to FCT

Non-applicable objects/ transactions

EXAMPLE OF CASE 4

“Services provided to Vietnamese organisations/ individuals that are performed outside VN”include:

Repair of means of transportation, equipment (with or without replacement materials, accessories)

Advertising, marketing services

Investment and trade promotion (xúc tiế n đầ u t ư và tm

Brokerage services for selling goods (môi gi

Training services

ớ i bán hàng)

Fees sharing of international tele-communication, leased lines, leased satellite channels (chia c ước thanh toán)

Basis & Methods of Tax Assessment

2 important issues:

1

2

Services and goods subject and/ or not subject to FCT

Methods of tax assessment: Self-assessment vs Withholding

Basis & Methods of Tax Assessment

Issue 1

Basis & Methods of Tax Assessment

SERVICES SUBJECT TO VAT

Services and/or services attached to goods that are provided in VN by a foreign contractor and consumed in

VN that are provided outside VN by a foreign contractor and

consumed in VN Goods provided into the territory of VN , or goods attached

with services to be carried out in VN such as installation, commissioning, warranty, maintenance, …

Goods are subject to VAT at the import stage: services are subject to FCT (whether in 1 or 2 separate contracts)

If the value of goods is not stated, VAT is imposed on the total

Basis & Methods of Tax Assessment

SERVICES SUBJECT TO VAT - Example

Company V in VN enters into a contract with Company F in overseas, to buy a line of equipment for a cement project in VN, at a total cost of USD100 million , of which USD20 million is the fee for installation, commissioning and maintenance

Company V will be responsible for paying VAT of the line of equipment at the import stage

Company F will be responsible for pay VAT on the cost of services of USD20 million ,

Company F will pay FCT on the total contract value of USD100 million if the cost of services is not clearly stated

Basis & Methods of Tax Assessment

SERVICES SUBJECT TO CIT

Income from provision of services and/or income from provision of services attached to goods in VN

Income from provision of goods into the territory of VN , or income from provision of goods attached with services to be carried out in VN such as installation, commissioning, warranty, maintenance, …

The provision of services, irrespective of whether or not it is included in the contract of provision of goods, the FCT will still be imposed on the total cost of services and goods

Basis & Methods of Tax Assessment

SERVICES SUBJECT TO CIT - Example

Company V in VN enters into a contract with Company F in overseas, to buy a line of equipment for a cement project in VN, at a total contract value of USD100 million , of which USD20 million is the fee for installation, commissioning and maintenance.

Company F will pay CIT on USD80 million being the value of equipment and USD20 million being the services fees, at different deemed CIT rates

Company F will pay CIT on the total contract value of USD100 million at one single rate, if the cost of services is not clearly stated in the contract

Basis & Methods of Tax Assessment

SERVICES SUBJECT TO CIT

Other income sourced from VN, under any form, irrespective of the place where the business is carried on:

Income from commissioning, warranty, maintenance, …

Royalty income

Income from disposal of fixed assets

Compensation of offense of economic contracts

Interest income

Securities income

Basis & Methods of Tax Assessment

What is royalty income?

Royalty income is income paid for the “use right”, for the “transfer of intellectual property rights” and for “technology transfer” (including payments for the right to use, for “transfers of rights of an author”, and “rights of the owner of a work”; for “transfer of industrial property rights”; for “technology transfer”)

“Right of an author”, “rights of the owner of a work”, “industrial property rights”, “technology transfer” are stipulated in the Civil Code of the VN

Basis & Methods of Tax Assessment

What is interest income?

Is “income of lenders earned from loans” in any form, irrespective of whether such loans are secured by a mortgage or whether the lenders are entitled to income of the borrower; income from interest on deposits (except interest on deposits of foreign individuals, etc…), including any bonuses accompanying deposits; and income from interest on late payments on economic contracts

Interest income includes all the charges payable by the Vietnamese party in accordance with the loan agreement

Basis & Methods of Tax Assessment

Issue 2

1

2

3

Basis & Methods of Tax Assessment

SELF-ASSESSMENT METHOD

Conditions for self-assessment Having a PE in VN or being a resident individual in VN

Doing business in VN for a period from 183 days and above

Keeping Vietnamese accounting system (VAS)

While the old contract is on-going , a new contract is entered

After the old contract is completed , a new contract is entered and meets all the above-mentioned conditions

Many contract are entered at the same time , one of them satisfy the above-mentioned conditions

Basis & Methods of Tax Assessment

SELF-ASSESSMENT METHOD

VAT filing and payments

File and pay VAT like a Vietnam-based company

Register for VAT, receive a tax code and buy VAT invoices

Net VAT payable is the VAT output minus (-) the VAT input

CIT filing and payments

File and pay CIT like a Vietnam-incorporated company

Pay provisional CIT on a quarterly basis

Pay final CIT at the end of the year

Basis & Methods of Tax Assessment

WITHHOLDING METHOD

Withholding tax applied to the following cases

Having NO PE in Vietnam or being a Non-resident individual of Vietnam

Doing business in Vietnam less than 183 days

Keeping no Vietnamese accounting system

Notes:

The Vietnamese party is responsible for registration and payment of VAT and CIT on behalf of the foreign contractor within 20 days from day of signing foreign contractor’s contract

Withholding Method

APLICABLE TAXES

For organisations

For individuals

Value added tax

Corporate income tax

Value added tax

Personal income tax

Withholding Method

ASSESSMENT OF VAT PAYABLE

The basis for assessment of VAT payable is the value addedand the VAT rates

VAT Payable

= Value Added *

VAT Rates

Value Added

= Taxable turnover * Deemed value

added Rate

Withholding Method

TAXABLE TURNOVER FOR VAT (1/8)

Taxable turnover for VAT calculation of a foreign contractor is the total turnover from provision of service, or services attached to VAT-able goods, before all types of tax (including VAT), receivable by a foreign contractor or a foreign sub-contractor, plus ( + ) all the costs born by a Vietnamese partyof a foreign contractor and/or a foreign sub-contractor, if any

on behalf

Withholding Method

TAXABLE TURNOVER FOR VAT (2/8)

In case of a NET contract, the taxable turnover must be grossed up following the below formula

Taxable Turnover =

Turnover before VAT

1 – (% deemed value added x VAT rate)

See Example on the next Slide

Withholding Method

TAXABLE TURNOVER FOR VAT (3/8)

Example

Foreign contractor X enters into a supervision service with a Vietnamese party to build a cement plant in VN, at a contract value of USD300,000 . In addition, the Vietnamese party also provides the accommodation for foreign engineers during their stay in VN amounting to USD40,000 . This is a net contract.Taxable turnover for VAT is determined as follows:

Taxable turnover =

300,000 + 40,000

1 – (50% x 10%)= 357,894.73

Withholding Method

TAXABLE TURNOVER FOR VAT (4/8)

The taxable turnover of a foreign contractor will not includethe cost of work sub-contracted to a foreign sub-contractor or a Vietnamese sub-contractor who pays taxes on a self-assessment basis

The taxable turnover of a foreign contractor will not excludethe costs of goods and services purchased in VN from Vietnamese suppliers in order to implement a project

See Example on the next Slide

Withholding Method

TAXABLE TURNOVER FOR VAT (5/8)

Example

Foreign contractor F enters into a construction service with a Vietnamese party to build a cement plant in VN, at a contract value of USD10 million . Foreign contractor F sub-contracts a part of work to a Vietnamese contractor, at a cost of USD1 million . Taxable turnover for VAT calculation of Foreign contractor F is as follows:

Taxable turnover for VAT = USD10 mil - USD1 mil = USD9 mil

Withholding Method

TAXABLE TURNOVER FOR VAT (6/8)

The taxable turnover of a foreign contractor will include the cost of work sub-contracted to a foreign sub-contractor if the latter registers and pays taxes on a withholding method

And in this case, the foreign sub-contractor is notbe responsible for paying the VAT on the part of work being sub-contracted

Withholding Method

TAXABLE TURNOVER FOR VAT (7/8)

For forwarding services , the taxable turnover will not include the freight payable to international transportation companies (airlines, …)

For express delivery services , the taxable turnover is total freight received by the foreign contractor in case of outbounddelivery services (from VN to overseas)

Withholding Method

TAXABLE TURNOVER FOR VAT (8/8)

For property leasing , such as machinery, equipment, means of transportation, taxable turnover will be the total lease amount

Taxable turnover will not include the costs directly paid by the lessor such as insurance, maintenance, registration, operator, transportation (from overseas to VN) if supporting documents are available

Withholding Method

DEEMED VALUE ADDED RATES (1/4)

No Business activities Deemed value added (%)

1

2

3

4

Services, equipment leasing, insurance

Construction, installation with materials or equipment

Construction, installation without materials or equipment

Transportation, manufacturing, other businesses

50

30

50

30

Withholding Method

DEEMED VALUE ADDED RATES (2/4)

The deemed value added rateswill apply to a foreign contractor’s contract and/ or a foreign sub-contractor’ s contract that includes many activities (including non VAT-able ones) as follows:

A specific value added rate will apply to a specific activity if the value of each activity is clearly stated

The highest value added rate of the activity and the highest VAT rate will apply to the total contract value if the value of each activity is not clearly stated

Withholding Method

DEEMED VALUE ADDED RATES (3/4)

The deemed value added ratewill apply to a contract that provide goods accompanied by services like installation, commissioning, warranty, maintenance, … as follows:

A specific value added rate will apply to a specific service if the value of such service is separated from the value of the goods (which is not subject to VAT)

The highest value added rate (30%) will apply to the total contract value if the value of services is not separated from the value of the goods (a lump-sum contract)

Withholding method

DEEMED VALUE ADDED RATES (4/4)

Example

Korean contractor K enters into a contract with a Vietnamese party to provide a line of equipment attached with services suchas installation, commissioning, etc. at a lump sum amount of USD10 million

Korean contractor K does not adopt the Vietnamese accounting system

Korean contractor K will pay VAT at 30% deemed value added on the total contract value of USD10 million

Withholding method

ASSESSMENT OF CIT PAYABLE

The basis for CIT assessment is the Taxable turnover and the Deemed CIT rates (%)

CIT Payable

= Taxable turnover

* Deemed CIT rates

What is Taxable turnover ?

What are Deemed CIT rates ?

Withholding method

TAXABLE TURNOVER FOR CIT (1/12)

Taxable turnover for CIT calculation purposes of a foreign contractor is the total turnover from the provision of services or services attached to goods receivable by a foreign contractor or a foreign sub-contractor, before all types of tax , but after VAT payable , plus ( + ) all the costs born by a Vietnamese party on behalf of a foreign contractor and/or sub-contractor, if any

Withholding method

TAXABLE TURNOVER FOR CIT (2/12)

In case of a NET contract, the taxable turnover must be grossed up in accordance with the below formula

Taxable turnover =

Turnover before CIT

(1 – % deemed CIT rate)

See Example on the next Slide

Withholding method

TAXABLE TURNOVER FOR CIT (3/12)

Example

Foreign contractor F enters into a supervision service contract (NET) with a Vietnamese party to construct a cement plant in VN at a contract amount of USD300,000 . The Vietnamese party also provides accommodation for foreign engineers during their stay in VN amounting to USD23 000 . The taxable turnover for CIT calculation is as follows:

Taxable 300,000 + 23,000turnover = (1 – 0.05) = 340,000

Withholding method

TAXABLE TURNOVER FOR CIT (4/12)

Taxable turnover of a foreign contractor will not includethe cost of work and the cost of equipment sub-contracted to aforeign sub-contractor or a Vietnamese sub-contractor who pays tax on a self-assessment basis – SeeExample

The taxable turnover of a foreign contractor will not excludethe costs of goods and services purchased in VN from Vietnamese suppliers in order to implement a project

See Example on the next Slide

Withholding method

TAXABLE TURNOVER FOR CIT (5/12)

Example Foreign contractor F enters into a construction service with a

Vietnamese party to construct a cement plant in VN at a contract amount of USD10 million . Foreign contractor Fsub-contracts a part of work to a Vietnamese contractor, at a cost of USD1 million . The taxable turnover of Foreign contractor F is calculated as follows:

Taxable turnover for CIT = USD10 mil - USD1 mil = USD9 mil

Withholding method

TAXABLE TURNOVER FOR CIT (6/12)

For property leasing , such as machinery, equipment, means of transportation, the taxable turnover will be the total lease amount

Taxable turnover will not include the costs directly paid by the lessor such as insurance, maintenance, registration, operator, transportation (from overseas to VN) if supporting documents are available

For foreign airlines companies , the taxable turnover is the total sales of air tickets, airways bills and other receipts – See next slide for example

Withholding method

TAXABLE TURNOVER FOR CIT (7/12)

Example Airlines Company F has a total sales of USD100,000 for the

1st quarter 2009, of which, sale of air tickets: USD85,000 sale of airways bills: USD10,000 sales of MCO (Miscellaneous Charges Order): USD5,000 . The airlines also receives airport fees of USD1,000for the State, and accept tickets returned from customers amounting to USD2,000 . Taxable turnover of airlines company F is calculated as follows:

Taxable turnover =100,000 - (1,000 + 2,000)= 97,000

for CITNote: See FCT declaration for airlines in Cir. 134

CỘ NG HOÀ XÃ H Ộ I CH Ủ NGH ĨA VI Ệ T NAM

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T Ờ KHAI N Ộ P THU Ế

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Mã số thu ế

Tài kho ả n ti ền g ử i số : Mở t ạ i Ngân hàng

PHẦ N KÊ KHAI THUẾ

Đơ n vị tính: Đồ ng Việt Nam

STT Ch ỉ tiêu S ố phát sinh quí này Số luỹ kế nă m

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AIR

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Circ

ular

134

/200

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FC

T

Withholding method

TAXABLE TURNOVER FOR CIT (8/12)

For sea transport firms , the taxable turnover is the total fees earned from transporting passengers, cargoes from a port in Vietnam to a final destination port, and other income, if any

The total fees mentioned above do not include:

the fees that a foreign transport firm has been assessed for CIT at a Vietnamese port, and

The fees earned by a Vietnamese sea transport company that participates in the process of transportation

Withholding method

TAXABLE TURNOVER FOR CIT (9/12)

Example

Company A (VN) , agent of a foreign sea transport firm, i.e. Company F , to transport goods, issue invoices and collect feesCompany B (VN), through Company A , hires Company F to transport goods from VN to USA at a fee of USD100,000Company A hires Company B to transport goods from VN to Singapore in order for Company F to continue to transport goods from Singapore to USD, at a fee of USD20,000 .Taxable turnover of Company Fis calculated as follows: USD100,000 - USD20,000 = USD80,000

Withholding method

Company A (VN): Agent of a foreign sea transport firm - Company F - to transport goods and collect fees

USD100,000VN SIN

Company B (VN) : Transporting goods from VN to SIN

USD20,000Company F : Transporting goods from VN to USA

USA

Taxable turnover for CIT: 100,000 – 20,000 = 80,000

Withholding method

TAXABLE TURNOVER FOR CIT (9/12)

Transport Enterprise

VN

Agent AAgent A SIN

VAT Invoice

USD100.000

VAT Invo USD80.000

ice

BB

US

USD20.000 Taxable turnover for FCT: 80.000

Company VN

10% VAT on freight

Company NNNN

Withholding method

TAXABLE TURNOVER FOR CIT (10/12)

For forwarding services , the taxable turnover will not includethe freight payable to international transportation companies (airlines, …)

For express delivery services , the taxable turnover is total freight received by the foreign contractor in case of outbounddelivery services (from VN to overseas)

For re-insurance services , the taxable turnover is the total re-insurance premium payment to overseas

Withholding method

TAXABLE TURNOVER FOR CIT (11/12)

For securities activity , the taxable turnover is:

For securities transfer : the total transfer proceeds (excluding non-taxable bonds)

For interest from bonds transfer : the total transfer proceeds (excluding non-taxable bonds)

For interest payment from offshore loans:

Any contract signed after 1/1/1999 : taxable

Any contract signed before 1/1/1999 : depending on the extension of loan contracts – See next Slide for details

Withholding method

TAXABLE TURNOVER FOR CIT (12/12)

Extended contracts that are not subject to FCT: If the extension does not change the interest rate, terms of

payment and the maximum time not exceeding operating cycle: For short-term loans: no more than 12 months For medium and long-terms: no more than ½ time of the old

loan If a new contract is signed, it must be more favorable than the old

contractExtended contracts that are subject to FCT:

If a new contract changes interest rate, payment terms, etc… If the extended contract exceeds the time frame

Withholding method

DEEMED CIT RATES (1/6)No Business Activities Deemed

Rates (%)1

2

3

4

5

6

7

8

9

Commerce: distribution, provision of goods attached with servicesServices, equipment leasing, insurance

Construction

Transportation, manufacturing, others

Lease of aircraft, aircraft engines, aircraft accessories

Re-insurance

Securities transfer

Interest income

Royalty income

1

5

2

2

2

2

0.1

10

10

Withholding Method

DEEMED CIT RATES (2/6)

The deemed CIT ratewill apply to a foreign contractor’s contract that includes many activities as follows:

A specific deemed CIT rate will apply to a specific activity if the value of each activity is clearly stated

The highest deemed CIT rate will apply to the total contract value if the value of each activity is not clearly stated (a lump-sum contract)

Withholding Method

DEEMED CIT RATES (3/6)

The deemed CIT ratewill apply to a contract that provide goods accompanied by services like installation, commissioning, warranty, maintenance, … as follows:

A specific deemed CIT rate will apply to a specific service and a specific deemed CIT rate will apply to goods, if the value of services is separated from the value of the goods

The highest deemed rate (2%) will apply to the total contract value if the value of services is not separated from the value of the goods (a lump-sum contract)

Withholding method

DEEMED CIT RATES (4/6)

Example

Foreign contractor F provides equipment accompanying with services to a Vietnamese party to build a cement plant in VN, at a total contract value of USD70 mil , of which USD50 mil is equipment, USD5 mil is design, USD10.5 milis construction, USD3 mil is supervision and USD1.5 milis training servicesDeemed CIT rates applied to this contract are as follows: 1%for equipment, 5% for design, 2% for construction, 5% for supervision, and 5% for trainingDeemed CIT rate of 2% will apply on the total contract value if the contract does not specify clearly

Hybrid method

CIRCULAR 197/2009/BTC-TT DATED 9/10/2009

Allows foreign contractors paying VAT on a self-assessment basis and CIT on a deemed basis

Effective 45 days after this Circular is gazetted

REQUIREMENTS

Foreign contractors must adopt the Vietnamese accounting system

Register to pay FCT under the hybrid method

Within 20 days from signing a contract, the Vietnamese party must notify the local tax office where the foreign contractor has registered in writing

Special method

JOINT OPERATING COMMITTEE

Where a joint operating committee(JOC) is set up by the parties in a business co-operation , the responsibility for paying FCT is regulated as follows:

The JOC will keep accounting books, open bank accounts, issue VAT invoices and pay taxes

Or the Vietnamese party will be responsible for keeping accounting book, sharing profits to each party, then either the JOC or the Vietnamese party will be liable for paying FCT on the total contract value

Special method

JOINT OPERATING COMMITTEE

Where the parties do not set up a joint operating committee(JOC), each party will accounts for its own work performed or its turnover shared, or products shared, then:

Each party will be responsible for determination of its taxable turnover

And each party will be responsible for registration, filing and paying its own taxes

Tax administration

Registration and tax code

Follow the Law on Tax Administration No. 78/2006and Circular 85/2007 dated 18 July 2007 of the Ministry of Finance

Tax filing, tax payment and tax withheld

Follow the Law on Tax Administration No. 78/2006and Circular 60/2007 dated 14 June 2007 of the Ministry of Finance

Handling of tax violations and tax complaints

Follow the Law on Tax Administration No. 78/2006and Circular 61/2007 dated 14 June 2007 of the Ministry of Finance and the Law on Complaints

Foreign Contractor Tax (FCT)

Law on VAT No 13/2008/QH12 dated 3 June 2008

Law on CIT No. 14/2008/QH12 dated 3 June 2008

Law on tax administration No. 78/2006/QH11 dated 29 November 2006

Circular 134/2008 dated 31 December 2008 of the Ministry of Finance

Circular 197/2009 dated 9 October 2009 of the Ministry of Finance