Contractor tax in case of on-site import and export

Contractor tax in case of on-site import and export Based on Clause 2 Article 1 of Circular 103/2014/TT-BTC, Foreign organizations and individuals that supply goods in Vietnam through on-site import and export and generate income in Vietnam based on contracts signed between foreign organizations and individuals with businesses in Vietnam (except for cases of processing and exporting goods for foreign organizations and individuals) or distribute goods in Vietnam or supply goods under the delivery conditions of international commercial terms - Incoterms that the seller bears the risks associated with the goods arriving in Vietnam.

Case 1: Foreign company X signs a contract to purchase fabric from Vietnamese company A and designates Vietnamese company A to deliver the goods to Vietnamese company B (according to the regulations of the law on on-site import and export). Company X generates income in Vietnam based on the contract signed between Company X and Company B (Company X sells fabric to Company B).

In this case, Company X is subject to the regulations of this Circular and Company B is responsible for declaring, deducting, and paying taxes on behalf of Company X according to the regulations of this Circular.

Based on OFFICIAL LETTER No. 1613/CT-TTHT dated February 10, 2015 of Ho Chi Minh City Tax Department,

In case a company signs a contract to purchase goods (raw materials) from foreign companies, and the foreign companies designate another company in Vietnam to deliver the goods to the purchasing company through on-site import and export, the foreign companies are subject to contractor tax according to the regulations. Before paying foreign companies, the purchasing company is responsible for calculating, deducting, and declaring contractor tax to be paid to the state budget as follows:

• VAT: If the company has already paid import VAT, it is not required to deduct contractor VAT.

• CIT = Revenue subject to CIT x CIT rate (1%).

The deadline for declaring and paying taxes on behalf of contractors for each occurrence of tax liability is no later than the 10th day from the payment date to the contractor.

Lawyer Duong Minh Hoa 

Ho Chi Minh City Bar Association