Tiếng Việt
中文 (中国)
Client’s inquiry: Could you advise us on taxes on cross-border service in Vietnam?
ASL LAW’s ADVICE
Dear Ms. Ji,
Regarding your inquiries on tax issues on cross-border services provided by ___ LLC (hereafter refer as Client) to a Vietnamese company, we would like to give you our advice on this issue as follows:
The foreign contractor who has no commercial presence in Vietnam but has income from Vietnam will be levied Value Added Tax and Corporate Income Tax.
Under Circular 103/2014/TT-BTC dated 06 August 2014 guidelines for the fulfillment of tax liability of foreign entities doing business in Vietnam or earning income in Vietnam, ___ LLC will be considered as a foreign entity earning income in Vietnam. Therefore, ___ LLC will be responsible for Value added tax and Corporate Income Tax based on a direct method or fixed rate on revenue.
VALUE ADDED TAX (VAT)
Based on specific products or services provided, foreign contractors are subjected to VAT rates. Accordingly, providing consulting services, ___ LLC will be an implied value-added tax rate of 5% on their income earned from Vietnam according to Vietnamese law.
Depending on mutual agreement among Clients and their customers on the contract value, the calculation will be as follows:
Case 1: if the contract value is including VAT, Vietnam entities will calculate VAT based on the contract value, fill in the tax declaration and make payment to the Vietnam authority:
VAT = (CONTRACT VALUE + OTHER INCOME including VAT) × 5%
Case 2: If contract value is excluding VAT, Vietnam entities will calculate gross income for the purpose of VAT:
GROSS INCOME = (CONTRACT VALUE + OTHER INCOME excluding VAT) / (1-5%)
Then, VAT will be as follow:
VAT = GROSS INCOME × 5%
Please note that the entities who are responsible for VAT will be in mutual agreement, however, Vietnamese entities are responsible for filling in tax declarations and making payments to Vietnam Authority.
CORPORATE INCOME TAX (CIT)
Based on specific products or services provided, Foreign contractors are subjected to CIT rates. Accordingly, your service is subject to the tax rate of 5%.
Depending on mutual agreement among Clients and their customers on the contract value, the calculation will be as follows:
Case 1: if the contract value is including CIT and VAT, Vietnam entities will calculate CIT based on the contract value, fill in tax declaration and make payment to the Vietnam authority.
CIT = (CONTRACT VALUE – VAT) × 5%
Case 2: If contract value excluding CIT and VAT, Vietnam entities will calculate gross income for the purpose of CIT:
GROSS INCOME = (CONTRACT VALUE)/(1-5%)
Then, CIT will be as follow:
CIT = GROSS INCOME × 5%
Case 3: If contract value is excluding CIT but including VAT, Vietnam entities will calculate gross income for the purpose of CIT:
GROSS INCOME excluding VAT = (CONTRACT VALUE – VAT)/(1-5%)
Then, CIT will be as follow:
CIT = GROSS INCOME excluding VAT × 5%
Please note that the entities who are responsible for CIT will be in mutual agreement, however, Vietnamese entities are responsible for filling in tax declarations and making payments to Vietnam Authority.
This advice is only for internal use and exclusively for ___ LLC. ASL Law is not responsible for the contents of the Advice used by any person, organization, or government agency for any purpose other than those of this Advice.
In case, you have any further requirements, please contact us for answers.
ASL LAW is the top-tier Vietnam law firm for doing business in Vietnam. If you need any advice, please contact us for further information or collaboration.
