Foreign Contractor Withholding Tax Vietnam

Foreign Contractor Withholding Tax Vietnam: Understanding the Basics

If you are a foreign contractor or service provider who has recently started doing business in Vietnam, it is essential to understand the country`s tax laws. One of the most critical aspects of taxation in Vietnam is the Foreign Contractor Withholding Tax (FCWT). In this article, we will discuss everything you need to know about FCWT in Vietnam.

What is Foreign Contractor Withholding Tax?

Foreign Contractor Withholding Tax (FCWT) is a tax on income earned by non-resident service providers in Vietnam. When a foreign contractor provides services in Vietnam, the Vietnamese entity that hires the contractor is required to withhold a portion of the payment as FCWT. The tax is levied on the gross revenue generated by the contractor in Vietnam and is calculated as a percentage of the total revenue.

Who is Liable to Pay FCWT?

Any foreign contractor or service provider who provides services in Vietnam is liable to pay FCWT. The tax is applicable to a wide range of services, including consulting, engineering, design, and management.

How is FCWT Calculated?

The amount of FCWT to be withheld is calculated as a percentage of the gross revenue earned by the foreign contractor in Vietnam. The current FCWT rate in Vietnam is 5%. However, this rate may vary depending on the type of service provided, as per Clause 3, Article 1, Circular No. 103/2014/TT-BTC. In some cases, the rate may be reduced or waived as per the applicable tax treaty signed between Vietnam and the country of the foreign contractor.

How to Register for FCWT?

Foreign contractors who provide services in Vietnam are required to register for FCWT within ten days from the date of commencing the provision of services. To register, the foreign contractor needs to submit an application to the local tax authority in Vietnam. The application needs to include:

– A copy of the contract between the service provider and the Vietnamese entity hiring the contractor.

– A copy of the tax registration certificate of the Vietnamese entity hiring the contractor.

– A copy of the business registration certificate or equivalent document of the foreign contractor.

Once the application is approved, the foreign contractor will receive a tax code for FCWT payment purposes.

Conclusion

Foreign Contractor Withholding Tax (FCWT) is an essential aspect of taxation in Vietnam that foreign contractors and service providers need to understand. The tax is levied on income earned by non-resident service providers in Vietnam, and the current rate is 5%. It is essential to comply with the registration and payment requirements of FCWT to avoid any legal issues in Vietnam. By understanding the basics of FCWT, foreign contractors can ensure compliance and avoid any unwarranted tax liabilities.

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