Foreign contractor tax is a tax applied to foreign individuals and organizations when generating income or doing business in Vietnam. In today’s article, join Pham Consult to find out what is contractor tax? When do foreign enterprises not have to pay bidding tax according to the provisions of Circular 103/2014/TT-BTC and implement tax reduction and tax exemption under the Double Taxation Avoidance Agreement (Tax Agreement) for contractors? foreign.
1. What is the definition of contractor tax?
Contractor tax is understood as a tax applied to foreign contractors and foreign subcontractors when generating income or doing business in Vietnam. Foreign contractors are organizations established under foreign laws or individuals with foreign nationality participating in bidding in Vietnam according to the 2013 Bidding Law.
Foreign subcontractors according to the provisions of Clause 2, Article 3 of Circular 103/2014/TT-BTC, foreign subcontractors belong to the group of subcontractors. Subcontractor is a contractor participating in implementing a bidding package under a contract signed with the main contractor. A special subcontractor is a subcontractor that performs important work of the bidding package proposed by the main contractor in the bidding documents and proposal documents based on the requirements stated in the bidding documents and request documents. according to the Bidding Law 2013.
2. Subjects of application of foreign contractor tax
Pursuant to Article 1 of Circular 103, the subjects of foreign contractor tax are specifically regulated as follows:
– Foreign business organizations with permanent establishments in Vietnam or without permanent establishments in Vietnam; Foreign individuals doing business who are residents of Vietnam or not residents of Vietnam (foreign contractors, foreign subcontractors) doing business in Vietnam
Or have income arising in Vietnam on the basis of contracts, agreements or commitments between the contractor and Vietnamese organizations and individuals. Or between a contractor and a subcontractor to perform part of the work of the Contractor Contract;
– Foreign organizations and individuals supply goods in Vietnam in the form of on-site import and export and generate income in Vietnam on the basis of contracts signed between foreign organizations and individuals and businesses in Vietnam. Vietnam, except in cases of processing and exporting goods to foreign organizations and individuals
Or distribute goods in Vietnam or provide goods according to the delivery conditions of international commercial terms in which the seller bears risks related to goods entering the territory of Vietnam;
– Foreign organizations and individuals that carry out part or all of the business of distributing goods and providing services in Vietnam (including foreign organizations and individuals that are still the owners of the goods) assigned to Vietnamese organizations)
Or be responsible for distribution, advertising, marketing costs, service quality and quality of goods delivered to Vietnamese organizations or determine selling prices or service provision prices;
Including cases of authorizing or hiring a number of Vietnamese organizations to perform part of distribution services and other services related to sales in Vietnam.
– Foreign organizations and individuals use organizations and individuals in Vietnam to negotiate and sign contracts in the name of foreign individuals and organizations;
– Foreign organizations and individuals exercise the right to export – import and distribute in the Vietnamese market, purchase goods for export and sell goods to Vietnamese traders according to commercial law.
3. Cases where contractor tax is not required as prescribed in Circular 103
Pursuant to Article 2 of Circular 103/2014/TT-BTC, subjects not subject to contractor tax include the following cases:
(1) Foreign individuals and organizations doing business in Vietnam according to the provisions of the Investment Law, Petroleum Law and Laws on Credit Institutions;
(2) Foreign individuals and organizations provide goods to individuals and organizations in Vietnam without accompanying services performed in Vietnam in the following forms:
– Delivery and export of goods at foreign border gates and the seller bears all responsibility for costs and risks related to delivery and export of goods at border gates; The buyer is responsible for all costs and risks related to receiving and transporting goods from the border gate to Vietnam;
– Delivery and export of goods at Vietnam border gate and the seller is responsible for all costs and risks related to the goods until the point of delivery;
(3) Foreign individuals and organizations have income from services provided and consumed by Vietnamese people;
(4) Foreign individuals and organizations providing the following services to Vietnamese individuals and organizations whose services are performed abroad:
– Repair of transportation equipment (such as aircraft, aircraft engines, aircraft spare parts, ships) or machinery and equipment (including transmission equipment and submarine cables) whether or not including, accessories, accompanying replacement equipment;
– Advertising and marketing, except via the Internet;
– Investment and trade promotion;
– Brokerage to sell goods and provide services abroad;
– Training except for online training;
– Payment fees for international postal services according to the Postal Law and international postal treaties to which the Socialist Republic of Vietnam is a signatory and this service is performed abroad;
(5) External individuals and organizations use bonded warehouses or inland ports (ICDs) as warehouses to support international transportation, transit, border-gate transfer, storage or processing by other businesses.
4. Procedures and documents for tax exemption and tax reduction under the Double Tax Avoidance Agreement for foreign contractors
Pursuant to Clause 1, Article 62 of Circular 80/2021/TT-BTC guiding the Law on Tax Administration and Decree 126/2020/ND-CP guiding the Law on Tax Administration issued by the Ministry of Finance regulating procedures and Tax exemption and tax reduction documents under the Double Taxation Avoidance Agreement for foreign contractors (For direct method) are as follows:
Within 15 days before the tax declaration deadline, the foreign contractor or the Vietnamese party that signs the contract or pays income to the foreign contractor shall send the tax agency directly managing the Vietnamese party a dossier requesting exemption. tax, tax reduction under the Tax Agreement. Records include:
– 01 written request according to form No. 01/HTQT issued with Appendix I of this Circular;
– 01 original (or certified copy) of Certificate of residence issued by the Tax Authority of the country of residence immediately before the year of notification of tax exemption or reduction under the Agreement that has been consularly legalized;
– 01 copy of contracts signed with individuals and organizations in Vietnam with confirmation from the taxpayer;
– 01 Power of Attorney in case the taxpayer authorizes a legal representative to carry out procedures for applying the Tax Agreement;
– 01 copy of reinsurance contracts implemented during the year certified by the taxpayer (including planned contracts and unplanned contracts sent to tax authorities) but not yet submitted to tax authorities;
– List of contracts by each type according to form No. 02-1/TBH-TB issued with Appendix I of this Circular.
At the time of submitting the official request, the taxpayer will classify contracts and send a list of contracts according to each type (with certain criteria); Only send one copy of each type of contract certified by the taxpayer as a sample.
Taxpayers are responsible for this statistic; Power of attorney in case the taxpayer authorizes a legal representative to carry out procedures for applying the Tax Agreement.
Above is the content related to foreign contractor tax. Through the article, we hope readers have clearly understood the regulations on exemptions, reductions and subjects not subject to contractor tax according to current regulations of Vietnamese law. Hope this information will help your work.