Foreign Contractor Tax - FCT Passcards - ACCA F6 TX VN Jun24

Cases Subject to FCT

a/ Services which is performed/consumed in VN,
b/ Supplying Goods
- attached with services
- applying incoterms that risks of goods is transferred inside territory of VN
- in-country export and import
c/ Others

In-country export/import subject to FCT

FC X >> buy goods << VN A
FC X >> sell goods >> VN B
VN A >> delivers goods >> VN B
=> FC X has income subject to FCT

Supplying Goods subject to FCT

* When FC provides goods in VN:
- Remain the owner
- Responsible for distribution costs, advertising, marketing, QoS
- Fixing prices
* When FC exercises in-country import-export
* When Through VN parties to negotiate and sign contract by FC name

Taxable Income for VAT

- Services consumed in VN
- Import goods and services.
-- If goods subject to Import VAT, FCT VAT is not applicable.
-- If goods and services does not split in contract. VAT applicable on full contract price

Taxable Income for CIT

- Services consumed in VN
- Import goods and services. Not Split, apply full

Calculation Methods for FC type

- Qualified FC (PE 183, Tax Code, VAS): VAT Credit method and CIT 20%.
- Non-Qualified FC: Deemed VAT/CIT. Hybid (PE183, SVAS): Credit VAT and Deemed CIT

VAT/CIT Rates in multiple business contract

- If split, apply separately.
- If not split, applying highest rate or M&E (V3%/C2%) or leasing M&E (V5%/C5%)

Deemed Method Calculation - Gross Both

[ 1 ] VAT Payable = amount * rate
[ 2 ]CIT Payable = ( amount - VAT amount) * rate

Terms: Contract value included tax, VN Party must withholding

Deemed Method Calculation - Net Both

[ 1 ] CIT Payable = amount / ( 1 - rate)
[ 2 ] VAT Payable = ( amount + CIT ) / ( 1 - rate )

Terms: Contract quoted on Net basis, FC must receive contract amount

Withheld VAT/CIT

* Withheld VAT can be creditable by VN party
* Withheld CIT can be deductible expense in CIT

In-country export/import is not subject to FCT

FC Z >> processing goods << VN G
FC X >> further processing goods >> VN E
VN A >> delivers goods >> VN B
=> FC Z is not subject to FCT

Sales at Bonded Warehouse

- Delivering goods at BWH for distribution purpose, FCT is applied.
- Delivering goods at BWH for processing purpose, FCT is not applied.

Cases not subject to FCT

- Cross-border sales: Transferring liabilities, risks and costs at border gate
- Free warranty which is obligation of seller
- Services performed and consumed outside VN, even provided to VN Party:
-- Reparing, advertising (excluding internet), investment, brokerage, training, lease line/satelite

Deemed Method Calculation - Gross CIT + Net VAT

[ 1 ] CIT Payable = amount * rate
[ 2 ] VAT Payable = ( amount ) / ( 1 - CIT rate ) * VAT rate

Terms: Quoted on contract

Taxable Revenue Deductions

- Value of work undertaken by VN sub-contractors and FSC adopting deduction method (VAS) or hybrid method (SVAS)
- Supported documents
- Purchase supplies in VN for FC contractual obligation is not applicable

Foreign airlines taxable revenue

- CIT Revenue: Sale - [Govt. behalf] - Refund
- V0%/C2%

Royalties, license

- VAT Exempt

- CIT as 10%

Foreign sea transport taxable revenue

- Total fee for passenger and cargo in VN to final port/disembarkation
- Excluding payable fee to VN parties or other FC subjects to FCT
- V0%/C2%

International freight forwarding services taxable revenue

- Whole excluding fees payables to the aviation or sea transportation firm.
- V5%/C5%

International delivery services taxable revenue

- From VN to abroad, FCT applied
- From abroad to VN, FCT not applied
- VN Party conduct service and share portion to a FC, that portion is subject to FCT
- V5%/C5%

Reinsurance, securities taxable revenue

- Reinsurance Outward: Premium
- Reinsurance Inward: Commission
- Securities: Selling amount of securities, certificate of deposit
- V0% / C0.1%

Interest swap taxable revenue

- Differences between interest receivables and payables by the FC in a single year
- V0%/C2% (derivatives instrument)

Treasury bills taxable revenue

- Final quantity at year end
- Weighted average purchase price = Calculate FIFO residual weighted value by trading price
- Turnover = [Face value] - [Weighted average purchase price]
- V0%/C5%

VAT exemption service

- Airline
- Sea transport
- Reinsurance, securities
- Interest swap
- Treasury bills

Administration - Deduction method

- FCT filling is carried out by the FCs
- Registration: 20 days since contract signing date
- Declaration, payment: comply with CIT/VAT administration requirement. If VAT incurred before tax code is granted => non-creditable => VN party declares deemed method
- Finalization: as CIT requirement.

Administration - Deemed method

- FCT filling is carried out by the VN parties on behalf of FCs
- Registration: 10 days since contract signing date
- Declaration, payment: 10 days each payment or 20th day of following month if there are many payments
- Finalization: 45 days following the liquidation of the contract

Double Tax Agreement

- Condition: business activities of FC are treated as "business profits" and not through PE
- Timing: 15 days from deadline of FCT declaration. VN parties is required to submit a notification dossier about DTA exemption to ta tax authorities, including:
-- a notification form
-- copy of service agreement
-- certified copy of residency certificate of FC in the country having a DTA with VN