Circular No. 05/2005/TT-BTC guiding the tax regime applicable to foreign organizations without Vietnamese legal entity status and foreign individuals conducting business or generating income in Vietnam.

A. SCOPE OF APPLICATION

The guidelines in this Circular apply to the following entities:

1. Foreign organizations without Vietnamese legal status, foreign independent practitioners conducting business in Vietnam, including within Vietnam's territorial waters, areas outside and contiguous to Vietnam's territorial waters, in accordance with Vietnamese law and international law, where Vietnam has sovereignty over exploration and exploitation of natural resources at the seabed, subsoil, and superjacent waters. Business activities are carried out based on contracts, agreements, or commitments with Vietnamese organizations or individuals or with other foreign organizations or individuals operating in Vietnam.

In cases where foreign organizations or individuals provide goods under the form: the delivery point of goods located within Vietnam's territory, including Vietnam's territorial waters, areas outside and contiguous to Vietnam's territorial waters, where according to Vietnamese law and international law, Vietnam has sovereignty over exploration and exploitation of natural resources at the seabed, subsoil, and superjacent waters; or the provision of goods accompanied by services conducted in Vietnam such as installation, testing, warranty, maintenance, replacement, training, and other services accompanying the provision of goods, including cases where the provision of such services is or is not included in the value of the supply contract subject to taxation as guided in this Circular.

2. Foreign organizations or individuals conducting business but not present in Vietnam, generating income in Vietnam, including income from technology transfer, royalty income, and income from other service activities of foreign individuals not engaged in commercial presence in Vietnam.

Foreign organizations and individuals falling under the application objects mentioned in Section I, Part A of this Circular shall be referred to as foreign contractors or subcontractors depending on the specific context.

The guidelines in this Circular do not apply to:

1. Foreign organizations without Vietnamese legal status conducting business in Vietnam in accordance with the Law on Foreign Investment in Vietnam, the Petroleum Law, and the Law on Credit Institutions.

- Delivery at the border port of the exporting country: the seller bears all responsibilities, costs, and risks related to the export and delivery of goods at the border port of the exporting country; the buyer bears all responsibilities, costs, and risks related to receiving the goods and transporting them from the border port back to Vietnam.

- Delivery at the border port of Vietnam: the seller bears all responsibilities, costs, and risks related to the goods up to the delivery point at the border port of Vietnam; the buyer bears all responsibilities, costs, and risks related to receiving the goods and transporting them from the border port.

3. Foreign individuals having income subject to personal income tax under the law on personal income tax, including: foreign individuals entering Vietnam to work under labor contracts signed with Vietnamese organizations or individuals; foreign individuals having income generated in Vietnam subject to personal income tax for high-income earners (excluding the income items listed in Point 2, Section I, Part A of this Circular); foreign individuals conducting business in Vietnam or generating income in Vietnam but lacking proof that they are independent practitioners permitted to engage in the corresponding income-generating activities.

Proof of being an independent practitioner includes: Independent practice license, tax registration certificate, or taxpayer identification number issued by the country where the foreign individual resides.

4. Foreign organizations or individuals deriving income from securities investment in Vietnam shall fulfill their tax obligations in accordance with the guidance on taxes applicable to securities trading activities.

Foreign organizations or individuals conducting business or generating income in Vietnam shall fulfill their tax obligations in accordance with current tax laws, including:

1. Value Added Tax (VAT): applicable to taxable goods and services;

2. Special Consumption Tax (SCT): applicable to goods and services subject to SCT;

3. Corporate Income Tax (CIT): applicable to income from business activities in Vietnam and income generated in Vietnam;

4. Export Duties, Import Duties: applicable to exported and imported goods;

5. Income tax for high-income individuals: applicable to taxable income of individuals working for foreign contractors, subcontractors, or foreign individuals conducting business or generating income in Vietnam but without documentation proving they are independent practitioners permitted under law.

The contents of this Circular below provide specific guidance on the implementation of VAT and corporate income tax for foreign organizations and independent foreign practitioners operating businesses or generating income in Vietnam. For other types of taxes, fees, and charges, foreign organizations and individuals shall comply with current laws and regulations.

In this Circular, the following terms are understood as follows:

1. "FOREIGN CONTRACTOR"Foreign organization without Vietnamese legal status, independent foreign practitioner, conducting business or generating income in Vietnam based on contracts or written agreements between them and Vietnamese organizations or individuals (Vietnamese Party)".

2. "Subcontractor"Subcontractor" refers to an organization or individual who enters into written agreements with a foreign contractor to perform part of the work under the contractor's contract.

Subcontractors include foreign subcontractors and Vietnamese subcontractors.

3. "Vietnamese Party" includes:

- State-owned enterprises established under the Law on State-Owned Enterprises;

- Enterprises established under the Enterprise Law;

- Enterprises with foreign investment and foreign parties participating in joint venture contracts under the Law on Foreign Investment in Vietnam;

- Oil and gas contractors operating under the Petroleum Law;

- Branches of foreign companies authorized to operate in Vietnam;

- Foreign organizations or their representatives authorized to operate in Vietnam;

- Other organizations and individuals in Vietnam.

4. "Contractor Contract" is a contract or agreement between a foreign contractor and the Vietnamese Party.

5. "Subcontractor Contract" is a contract or agreement between a subcontractor and a foreign contractor.

6. "Income Generated in Vietnam" refers to all forms of income received by foreign contractors and foreign subcontractors from the Vietnamese Party according to the agreements signed between the foreign contractor and the Vietnamese Party (excluding the supply of goods as specified in Point 2, Section II, Part A of this Circular), regardless of the location of the business premises through which the foreign contractor and foreign subcontractor conduct their business activities.

7. "Royalty Payment" refers to any form of income paid for the use, transfer of intellectual property rights, and technology transfer (including payments for the use and transfer of copyright and related rights, industrial property rights, and technology transfer); including the transfer of usage rights through leasing machinery, equipment, and transportation means.

7.1. "Copyrights, Related Rights" as defined in Chapter I, Part 6 of the Civil Code of the Socialist Republic of Vietnam and implementing guidelines.

7.2. "Industrial Property Rights" as defined in Chapter II, Part 6 of the Civil Code of the Socialist Republic of Vietnam and implementing guidelines.

7.3. "Technology Transfer" as defined in Chapter III, Part 6 of the Civil Code of the Socialist Republic of Vietnam and implementing guidelines.

7.4. "Leasing Machinery and Equipment" refers to the activity of leasing industrial machinery and equipment, scientific equipment, commercial equipment, transportation means, and other chattels in any form, including accompanying parts such as control software and auxiliary equipment.

8. "Interest on Loans" refers to the income of the lender from loans of any kind, whether secured by collateral or not, and whether the lender has the right to benefit from the borrower's profits; income from interest on deposits (excluding interest on deposits of foreign individuals and interest generated from deposit accounts maintained for the operation of diplomatic missions, international organizations, and non-governmental organizations in Vietnam), including any bonuses attached to deposit interest (if any); income from late payment interest as stipulated in economic contracts.

Interest on loans also includes any fees that the Vietnamese Party must pay according to the loan contract.

B. BASIS AND METHODS OF CALCULATING TAXES

Foreign contractors and subcontractors applying Vietnamese accounting regimes shall submit VAT according to the deduction method and corporate income tax based on declared revenue and expenses to determine taxable income.

The basis for calculating tax is the taxable value and VAT rate.

The taxable value of VAT is the selling price of goods and services subject to VAT by foreign contractors and subcontractors excluding VAT.

The VAT rate applied to goods and services sold is determined according to the Law on VAT and implementing guidelines.

Input VAT deductible is the amount of VAT recorded on VAT invoices and tax payment certificates for goods and services purchased for production and business operations of goods and services subject to VAT.

The basis for calculating tax is taxable income and the CIT rate.

Taxable income includes business income plus (plus) other income (if any). Taxable income equals gross revenue for taxable income minus (-) reasonable expenses related to production and business operations of goods and services during the tax period, as determined according to principles set forth in the Law on CIT and implementing guidelines.

The CIT rate is 28%, as prescribed in the Law on CIT.

Foreign contractors and subcontractors shall declare and pay CIT according to the Law on CIT, implementing guidelines, and instructions provided in Section I, Part C of this Circular.

3. For foreign contractors and subcontractors with a permanent establishment in Vietnam, if they can maintain a complete bookkeeping system reflecting revenues from goods and services sold, the value of goods and services purchased, output VAT, deductible input VAT, and VAT payable, then such foreign contractors and subcontractors shall register with the tax authority to pay VAT according to the deduction method as specified in Point 1, Section I, Part B of this Circular, and pay corporate income tax as specified in Point 2, Section II, Part B of this Circular.

Foreign contractors and subcontractors who have registered and paid taxes according to the guidance provided in Section I, Part B of this Circular, if they continue to sign contractor contracts or subcontractor contracts, shall continue to register and pay taxes as specified in Section I, Part B of this Circular.

The determination of foreign contractors and subcontractors with a permanent establishment in Vietnam shall be carried out in accordance with the provisions of the Law on Corporate Income Tax and current guiding documents.

Foreign contractors and subcontractors not implementing Vietnamese accounting regimes shall pay VAT directly based on the added value and pay corporate income tax at a percentage rate based on revenue, specifically as follows:

The basis for calculating VAT is the added value of taxable goods and services and the VAT rate.

The added value of taxable goods and services is determined by multiplying the taxable revenue by the VAT rate on revenue.

- Taxable revenue is the total revenue from providing taxable goods and services, not reduced by taxes payable that the foreign contractor or subcontractor receives, including all costs paid by the Vietnamese party on behalf of the foreign contractor or subcontractor (if applicable). In cases where the contract stipulates that the revenue received by the foreign contractor or subcontractor does not include the payable VAT (contract value excluding tax), the taxable revenue must be converted to taxable revenue including VAT according to the following formula:

Specifically, the taxable revenue of foreign contractors and subcontractors performing service, construction, installation contracts together with the provision of machinery, equipment, materials shall be reduced by the value of the following machinery, equipment, and materials when determining the taxable revenue:

+ Machinery, equipment, specialized transportation means included in production technology chains and construction materials that are not domestically produced to create fixed assets for the Vietnamese enterprise;

+ Machinery, equipment, transportation means that are not domestically produced and need to be imported for direct use in scientific research and technological development activities of the Vietnamese party;

+ Foreign-leased aircraft, ships, offshore drilling platforms that are not domestically produced used by the Vietnamese party for production and business operations;

+ Equipment, machinery, spare parts, specialized transportation means, and materials that are not domestically produced provided to organizations and individuals conducting oil and gas exploration, development activities.

The basis for determining imported goods not subject to VAT mentioned above for foreign contractors and subcontractors is the List of machinery, equipment, construction materials, materials, and spare parts that are domestically produced issued by the Ministry of Planning and Investment. The value of imported goods deducted when determining taxable revenue shall be determined according to the provisions of the Law on Export Duties and Import Duties.

If a foreign contractor signs a contract with a Vietnamese subcontractor to transfer part of the work value specified in the contractor contract signed with the Vietnamese party, the taxable revenue of the foreign contractor does not include the value of the work performed by the Vietnamese subcontractor. This provision does not apply in cases where the foreign contractor signs contracts with suppliers in Vietnam to purchase goods and services to serve the implementation of the contractor contract.

- The VAT rate on taxable revenue for certain industries is as follows:

- For contractor contracts and subcontractor contracts involving multiple business activities, the application of the VAT rate on taxable revenue when determining the amount of VAT payable shall be based on the taxable revenue of each business activity carried out by the foreign contractor or subcontractor according to the contract. In cases where it is not possible to separate the value of each business activity, the highest VAT rate for the industry with the highest tax rate shall be applied to the entire contract value.

The VAT rate applied to goods and services sold is determined according to the Law on VAT and implementing guidelines.

Foreign contractors and subcontractors subject to VAT under the direct calculation method on added value, as specified in this point, shall not be entitled to deduct VAT on goods and services purchased to fulfill contracts signed with the Vietnamese party.

The basis for calculating CIT is the taxable revenue and the CIT rate on taxable revenue.

- The taxable income for corporate income tax (TNDN) includes all revenues, without deducting any taxes payable (if applicable), excluding value-added tax (VAT), received by foreign contractors and subcontractors. The taxable income for corporate income tax also includes expenses paid by the Vietnamese party on behalf of the foreign contractor or subcontractor (if any).

In cases where, according to the contractor agreement or subcontractor agreement, the foreign contractor or subcontractor receives revenue that does not include the corporate income tax payable, the taxable income for corporate income tax shall be determined using the following formula:

Example: Contractor A provides construction quantity supervision services for cement plant Z to the Vietnamese party at a contract price excluding tax of 300,000 USD. Additionally, the Vietnamese party arranges accommodation and work facilities for the foreign contractor's management staff with a value of 23,000 USD. According to the contract, the Vietnamese party is responsible for paying the corporate income tax and VAT on behalf of the foreign contractor. The determination of the corporate income tax and VAT payable by the foreign contractor is as follows:

a) Determination of taxable revenue:

b) Determination of tax payable:

- Corporate income tax payable = 340,000.00 x 5% = 17,000.00 USD (1)

- VAT payable = 357,894.73 x 50% x 10% = 17,894.73 USD (2)

Total (1) + (2): 34,894.73 USD

* Determination of taxable revenue for corporate income tax in certain specific cases:

a) In cases where a foreign contractor enters into a subcontract with a Vietnamese subcontractor to transfer part of the work value specified in the main contract with the Vietnamese party, the taxable revenue of the foreign contractor does not include the value of the work performed by the Vietnamese subcontractor. This provision does not apply when the foreign contractor enters into contracts with suppliers in Vietnam to purchase goods and services for the performance of the main contract.

b) For the case of leasing machinery, equipment, and transportation vehicles, the taxable revenue for corporate income tax is determined without including direct costs paid by the lessor such as insurance, maintenance, inspection certification, and personnel operating the equipment, if there is actual evidence.

Specifically, for the case of leasing ships, the taxable revenue for corporate income tax is determined as follows:

+ In cases where the lessee pays costs such as personnel operating fees, insurance, maintenance, and inspection certification, the taxable revenue for corporate income tax for ship leasing is 50% of the lease payment.

+ In cases where the lessor pays costs such as personnel operating fees, insurance, maintenance, and inspection certification, the taxable revenue for corporate income tax for ship leasing is 20% of the lease payment.

c) The taxable revenue for corporate income tax of foreign airlines operating air transport in Vietnam is the amount of freight charges actually collected for the number of passengers and cargo loaded onto their aircraft at domestic airports departing to international airports - which are the final destinations of passengers and cargo according to the transport contract or transport documents issued by the foreign airline itself, not transit ports.

d) Interest on loans: as stipulated in Point 8, Section IV, Part A of this Circular.

Specifically, interest on loans from foreign loan contracts signed before January 1, 1999, is not subject to tax under the guidance of this Circular. In cases where these loan contracts are adjusted or extended:

+ In cases where the extension of debt or adjustment of the repayment period does not change the agreed interest rate and repayment conditions in the loan contract and the extension period for short-term debt does not exceed one production cycle but not more than 12 months, and the extension period for medium-term and long-term debt does not exceed half of the agreed loan term in the loan contract, then the interest on loans is not subject to corporate income tax.

+ In cases where a new loan contract is signed but the loan contract specifies that the loan is to replace the old loan, with no change in the lender, and the interest rate and repayment conditions are more favorable than those in the old loan contract, then the interest on loans is not subject to corporate income tax.

+ In cases where the extension of debt or adjustment of the repayment period does not change the agreed interest rate and repayment conditions in the loan contract but the extension period exceeds the maximum extension period mentioned above, the interest on loans arising from the time exceeding the maximum extension period mentioned above is subject to corporate income tax.

+ In cases where the loan contract is adjusted along with changes in key terms such as interest rates, lending methods, and repayment conditions, the interest on loans arising from the time the original loan contract ceases to be effective is subject to corporate income tax.

2.2. Percentage rate of corporate income tax applied to taxable revenue:

- For contractor agreements and subcontractor agreements that include multiple business activities, the application of the corporate income tax rate to determine the corporate income tax payable is based on the taxable revenue for each business activity carried out by the foreign contractor or subcontractor as stipulated in the contract. In cases where it is not possible to separate the value of each business activity, the highest tax rate applicable to the industry with the highest tax rate is applied to the entire contract value.

- Specifically, for contracts providing machinery and equipment accompanied by installation guidance, training, and trial operation services, if the contract does not separately state the value of the machinery and equipment and the services, a general corporate income tax rate of 2% (applicable to other business operations) is applied to the entire contract value.

Example: Foreign contractor A signs a contract with the Vietnamese party to build power plant F with a contract value of 70 million USD. The contract value includes:

+ Value of machinery and equipment provided for the project: 50 million USD

+ Value of technology chain design, other designs: 5 million USD

+ Value of factory buildings, other auxiliary systems, construction, installation: 10.5 million USD

+ Value of supervision and installation guidance services: 3 million USD

+ Value of technical training and trial operation services: 1.5 million USD.

In this case, the VAT tax rate and corporate income tax rate shall be applied as follows: for the value of machinery and equipment, the rate applicable to the trade sector (excluding VAT on machinery and equipment that are not domestically produced); for the value of design services, installation supervision, training, and trial operation services, the rate applicable to the service sector shall be applied; the value of construction and installation work (10.5 million USD) shall apply the tax rate applicable to the construction sector.

C. REGISTRATION, DECLARATION AND PAYMENT OF TAXES, SETTLEMENT OF TAXES

Foreign contractors or subcontractors must register for tax with the local tax authority where their management office is located within fifteen working days from the date of signing the Contractor Contract, Subcontractor Contract, or from the date of obtaining a business license or practice permit (if required).

The tax registration dossier includes:

+ Request for issuance of a taxpayer code according to the current guidelines of the Ministry of Finance regarding the registration of taxpayer codes for foreign contractors;

+ Tax declaration form No. 04-ĐK-TCT issued together with Circular No. 80/2004/TT-BTC dated August 13, 2004, of the Ministry of Finance guiding the issuance of taxpayer codes;

+ A copy of the Contractor Contract, Subcontractor Contract, and a summary of the contract in Vietnamese containing the main contents including scope of work, contract value (including detailed components constituting the contract value - if any), payment method, contract duration, obligations and responsibilities of the parties involved in the contract. Foreign contractors and subcontractors are responsible under the law for the accuracy of the contents submitted to the tax authority;

+ A copy of the business license or practice permit issued by the competent authority of Vietnam (if applicable);

+ A copy and Vietnamese translation of the independent business license or practice permit (for foreign contractors or subcontractors who are individuals), and the tax registration certificate issued by the country where the foreign contractor resides;

All copies mentioned above must be signed and stamped with confirmation of being true copies by the authorized representative of the foreign contractor or subcontractor.

The Vietnamese party is responsible for notifying the tax authority about the direct tax registration of the foreign contractor and subcontractor within ten working days from the date of signing the contract (Annex No. 01-NTNN issued together with this Circular).

After receiving the complete dossier mentioned above, the tax authority will issue a tax registration certificate to the taxpayer and send one copy of the tax registration certificate of the foreign contractor and subcontractor to the Vietnamese party or the foreign contractor. The tax registration certificate issued by the tax authority confirms that the foreign contractor and subcontractor directly fulfill their tax obligations to the tax authority and the Vietnamese party, or the foreign contractor does not have the responsibility to withhold and pay taxes on behalf of the foreign contractor or subcontractor, from the date of receipt of the copy of the tax registration certificate of the foreign contractor and subcontractor. If there is a payment made to the foreign contractor before the Vietnamese party receives the copy of the tax registration certificate of the foreign contractor, the Vietnamese party temporarily withholds and pays the VAT and corporate income tax that the foreign contractor is required to pay as specified in Section II, Part B of this Circular before making the payment to the foreign contractor.

Foreign contractors and subcontractors declare and pay VAT according to the tax deduction method as stipulated in the Law on VAT and implementing regulations, and declare and pay corporate income tax according to the Law on Corporate Income Tax and implementing regulations.

Foreign contractors and subcontractors falling under Point 3, Section I, Part B of this Circular shall declare and pay VAT according to the tax deduction method as stipulated in the Law on VAT and implementing regulations; declare and pay corporate income tax according to the fixed-rate method as specified in Point 2, Section II, Part C of this Circular.

If a foreign contractor or subcontractor has a management office in one locality but performs contracts for construction and installation in another locality, they shall declare and temporarily pay VAT according to the current regulations at the locality where the construction project is located, and pay corporate income tax and settle VAT and corporate income tax at the locality where the management office is located.

Foreign contractors and subcontractors apply Vietnamese accounting principles to settle VAT and corporate income tax according to the Law on VAT, the Law on Corporate Income Tax, and current implementing regulations.

Other foreign contractors and subcontractors who directly pay VAT through the tax deduction method and corporate income tax through the fixed-rate method shall settle taxes according to each contractor contract. Within ten working days from the end of the contract, foreign contractors and subcontractors shall submit the settlement declaration forms for each type of tax to the directly managing tax authority.

The registration, declaration, and payment of taxes, and settlement of taxes by foreign contractors and subcontractors who do not follow Vietnamese accounting principles shall be handled by the Vietnamese party.

The Vietnamese party registers and declares tax payments on behalf of foreign contractors and subcontractors with the local tax authority where its management office is located within fifteen working days from the date of signing the Contractor Contract.

The tax registration dossier includes:

+ The tax registration form used by the Vietnamese party to pay taxes on behalf of foreign contractors as per the current guidance of the Ministry of Finance regarding tax code registration for foreign contractors; accompanied by a list of foreign contractors and subcontractors according to Model 01-NTNN issued together with this Circular.

+ A copy of the Contractor Contract, Subcontractor Contract, and a summary of the contract in Vietnamese containing the main contents including criteria such as scope of work, contract value (including detailed components constituting the contract value - if applicable), payment method, contract duration, obligations and responsibilities of the parties involved in signing the contract. The Vietnamese party and foreign contractors must bear legal responsibility for the accuracy of the contents submitted to the tax authority.

+ A copy of the Business License or practice permit issued by the competent authority of Vietnam (if available).

+ A copy and Vietnamese translation of the Business License or Independent Practice Permit (for individual foreign contractors and subcontractors), and the Tax Registration Certificate issued by the country where the foreign contractor resides.

The above copies must be signed and stamped with confirmation of being true copies by the authorized representative of the Vietnamese party or the foreign contractor.

For construction contractor contracts: The Vietnamese party must additionally declare one set of the foreign contractor's tax registration files and send one set to the local tax authority where the Vietnamese party's management office is located for monitoring, and one set to the local tax authority where the construction project is located for registration, declaration, payment, and settlement of taxes on behalf of foreign contractors and subcontractors.

Specifically, the tax registration file for foreign airlines includes:

+ The tax registration form according to the current guidance of the Ministry of Finance regarding tax code registration for foreign contractors.

+ A copy and Vietnamese translation of the Business License, Tax Registration Certificate, or tax number issued by the country where the foreign airline resides (confirmed by the Representative Office of the Foreign Airline in Vietnam).

Within fifteen days from the date of payment to the foreign contractor, the Vietnamese party must prepare a tax declaration form, determine the amount of VAT and corporate income tax that the foreign contractor must pay (Annex 02-NTNN issued together with this Circular) and submit the declared tax amount to the State Budget.

In cases where the foreign contractor has foreign subcontractors, the Vietnamese party must determine the amount of VAT and corporate income tax that the foreign contractor and foreign subcontractors must pay, deduct, and pay on their behalf.

If there are multiple foreign contractors and subcontractors participating in the contractor contract and they wish to separately determine the tax amounts payable, the Vietnamese party must register to obtain separate tax codes, declare, and pay taxes individually for each foreign contractor and subcontractor. The Vietnamese party must detail the VAT and corporate income tax payable by each foreign contractor and subcontractor on the Payment Receipt to the State Budget.

The VAT paid by the Vietnamese party on behalf of foreign contractors is considered the input VAT of the Vietnamese party and can be deducted according to the provisions of the Law on Value Added Tax and current guiding documents. The evidence for determining the deductible input VAT of the Vietnamese party is the VAT payment receipt or the payment receipt to the state budget stamped with the confirmation seal of the Treasury Department regarding the VAT already paid.

If the Vietnamese party signs multiple contractor contracts simultaneously, the declaration and payment of taxes on behalf of foreign contractors will be carried out separately for each contract.

If the Vietnamese party does not declare, deduct, and pay VAT and corporate income tax on behalf of foreign contractors and subcontractors, they will be subject to back taxes, penalties according to current regulations, and must pay on behalf of the foreign contractors.

The back taxes and payments made on behalf of foreign contractors for VAT and corporate income tax cannot be deducted from the VAT payable by the Vietnamese party and cannot be included in costs when determining business results and corporate income tax payable by the Vietnamese party.

3.1. In cases where foreign contractors provide goods and services in Vietnam through Vietnamese agents (organizations or individuals), these agents must deduct, declare, and pay taxes on behalf of foreign contractors as guided in Section II, Part B of this Circular.

3.2. For foreign airlines operating air transportation in Vietnam, the declaration and payment of corporate income tax shall be carried out as follows:

Within ten days at the beginning of each quarter (January, April, July, October), the Representative Office authorized to sell transportation of the foreign airline, or the agency of the foreign airline in Vietnam, must declare corporate income tax (Annex 03-NTNN issued together with this Circular) to the local tax authority where the Representative Office is located and submit the declared tax amount to the State Budget.

If the foreign airline organizes agencies to sell transportation in Vietnam, the Representative Office of the foreign airline must submit a list of names and addresses of transportation sales agencies and copies of agency contracts to the local tax authority where the Representative Office is located.

3.3. Procedures for declaring and paying taxes in cases where multiple foreign contractors form a consortium with Vietnamese economic organizations to conduct business in Vietnam based on a contractor contract:

- In cases where the consortium establishes a Joint Management Board which conducts accounting, has a bank account, and issues invoices, or a Vietnamese economic organization participating in the consortium is responsible for joint accounting and profit distribution among the parties, the Joint Management Board or the Vietnamese economic organization must declare, pay, and settle VAT and corporate income tax according to the total revenue from implementing the contractor contract.

- In cases where parties participating in a joint venture share revenue or products, or jointly bid for work but each party separately performs a portion of the work, each party may directly register and pay taxes to the tax authority as directed in Parts B and C of this Circular, if they issue invoices for their own revenues.

The Vietnamese party is responsible for declaring, withholding, and paying VAT and corporate income tax on behalf of foreign contractors and subcontractors who have not registered to pay taxes directly with the tax authority.

3.4. In cases where foreign contractors and subcontractors have registered to pay taxes under the Vietnamese accounting system but fail to comply with accounting regulations, invoices, and supporting documents, leading to insufficient basis for accurately determining their VAT and corporate income tax liabilities, the tax authority will determine their tax liabilities according to the guidelines for foreign contractors and subcontractors that do not implement the Vietnamese accounting system.

3.5. Representative offices of foreign organizations operating in Vietnam that conduct business activities making them a Permanent Establishment as defined by the Corporate Income Tax Law and current guiding documents must declare and register with the tax authority as directed in Section I, Part C, and calculate and pay taxes as directed in Section II, Part B of this Circular.

Tax settlement is conducted on a per-contractor contract basis. The Vietnamese party is responsible for settling the taxes owed by foreign contractors and subcontractors within twenty working days from the end date of the contractor contract.

The tax settlement documents for foreign contractors and subcontractors submitted to the tax authority where they are registered and pay taxes include:

+ The Tax Settlement Declaration Form according to Appendix No. 04-NTNN issued along with this Circular;

+ A list of foreign contractors and subcontractors participating in the execution of the contractor contract (according to the attached model in Appendix No. 02-NTNN);

+ The Tax Settlement Declaration for foreign contractors sent to the tax authority in three copies. If the tax settlement documents are incomplete, the tax authority will notify the Vietnamese party in writing within three working days to supplement the missing information. Within fifteen working days from receiving complete documents, the tax authority will settle the taxes owed by foreign contractors and subcontractors and send two copies of the settled tax declaration to the Vietnamese party. The Vietnamese party retains one copy and sends one copy to the foreign contractor. If there are multiple foreign contractors and subcontractors involved in the contract, the Vietnamese party is responsible for copying and sending the tax settlement declarations to all foreign contractors and subcontractors.

The figures in the tax settlement declaration are the official confirmation of the fulfillment of tax obligations by foreign contractors and subcontractors. If additional payments between the Vietnamese party and foreign contractors are required after contract termination according to the contract terms, the tax settlement for foreign contractors and subcontractors will be based on the contract value at the end of the contractor contract period. When the Vietnamese party actually makes additional payments to the foreign contractor, the Vietnamese party is responsible for declaring and paying taxes on the additional payment amount.

If the tax payable upon settlement exceeds the temporarily paid VAT and corporate income tax, the Vietnamese party must make up the difference and pay it into the State budget within five working days from receiving the tax settlement declaration.

If the tax payable upon settlement is less than the amount already paid, the Ministry of Finance will refund the excess tax paid to foreign contractors and subcontractors through the Vietnamese party or their authorized representative. The refund application documents include:

+ A refund request form detailing the reasons for requesting a refund (Appendix No. 05-NTNN issued along with this Circular);

+ A legal power of attorney for the Vietnamese party or the authorized representative of the foreign contractor to handle the refund and receive the refunded tax (for cases where the foreign contractor authorizes the refund process);

+ A settlement and contract termination record (a certified and stamped copy by an authorized representative);

+ The tax settlement declaration, including the local tax authority's confirmation of the VAT and corporate income tax payable, paid, and overpaid for the entire contract;

+ A written confirmation from the National Treasury about the tax paid.

The refund application documents are submitted to the local tax bureau where the Vietnamese party is registered and pays taxes on behalf of the foreign contractor. The tax bureau is responsible for reviewing and determining the tax refund for foreign contractors and subcontractors and sending a written report to the Ministry of Finance (General Department of Taxation) along with the refund application documents of the foreign contractors and subcontractors.

Within thirty days from receiving complete documents, the Ministry of Finance will refund the excess tax paid to foreign contractors and subcontractors.

If the Vietnamese party has withheld the excess VAT paid by the foreign contractor, when the foreign contractor receives a decision to refund the VAT, the Vietnamese party must make up the VAT amount that was refunded.

D. VIOLATION HANDLING AND DISPUTE RESOLUTION

Foreign contractors, subcontractors, and the Vietnamese party are responsible for complying with current tax laws and the guidelines set forth in this Circular.

Violations such as failure to declare or register taxes, late tax payments, false declarations to evade taxes will be penalized according to current laws.

If the Vietnamese party fails to fully and timely declare and report to the tax authority information about the Contractor Contract and Foreign Subcontractor as required, it will be subject to penalties for non-compliance with declaration regulations. In cases where the Vietnamese party's declaration errors lead to loss of state tax revenue, the Vietnamese party will be penalized according to administrative violation regulations in the field of taxation.

Tax complaints under this Circular shall be handled directly by the local tax authority responsible for tax collection. If the complainant is not satisfied with the handling by the direct tax collection authority, they may submit a complaint to the General Department of Taxation and the Ministry of Finance. The decision of the Minister of Finance is final. While awaiting the decision of the competent authority, the complainant must still comply with the conclusions issued by the local tax authority directly responsible for tax collection.

Tax complaints related to provisions of an Agreement signed between the Government of Vietnam and the Government of another country shall be resolved according to the dispute resolution procedures stipulated in that Agreement.

E. IMPLEMENTATION

1. Foreign Contractors, Foreign Subcontractors (in cases of direct tax payment), or the Vietnamese Party (in cases of tax withholding) shall comply with registration and tax payment method regulations with the tax authority as guided in this Circular. In case of changes in business location or management office, they must complete tax registration procedures due to location changes with the provincial or city tax authority according to current regulations.

2. The Vietnamese Party, Foreign Contractors, and Foreign Subcontractors must comply with tax declaration and settlement regulations as guided in this Circular and other current guiding documents during their business operations.

3. Provide all accounting books, vouchers, and necessary documents related to tax calculation and settlement when requested by the tax authority.

4. Upon completion of the Contractor Contract, Subcontractor Contract, or cessation of business in Vietnam, the Vietnamese Party signing the contract and/or the Foreign Contractor and Foreign Subcontractor must notify the tax authority and submit the final tax settlement report as prescribed.

1. Guide taxpayers to properly register and declare taxes according to established regulations, and inform taxpayers of their bank accounts and budget sub-accounts for various types of taxes.

2. Inspect tax declarations, review accounting books, vouchers, and other necessary documents for tax calculation.

- Failure to submit or incomplete submission of tax declarations and settlement reports;

- Failure to pay taxes on time or underpayment of taxes.

4. Require taxpayers to provide accounting books, invoices, vouchers, and other relevant documents for tax calculation and payment; request financial institutions, banks, and other related organizations and individuals to provide documents related to the taxpayer's business tax calculation and payment.

5. Have the authority to determine the amount of tax payable in cases where taxpayers fail to declare on time, do not declare fully or accurately, or do not provide full and accurate information related to tax calculation, or in cases where income is affected by financial and commercial relationships not based on fair transactions.

6. Conduct inspections and audits of foreign contractors' and subcontractors' tax payments and settlements in accordance with current laws.

7. Prepare records and handle tax violations within the scope of their legal authority.

8. Ensure the implementation of tax laws, guaranteeing accuracy, truthfulness, and objectivity.

9. Confirm the amounts of taxes paid by foreign contractors and subcontractors and bear responsibility for the accuracy of the confirmed tax amounts.

Issuing certificates confirming the taxes paid by foreign contractors and subcontractors who pay taxes directly in Vietnam shall be done after these parties have completed their tax obligations according to the annual tax settlement. The tax authority shall issue a certificate confirming the taxes paid by foreign contractors and subcontractors within ten working days after the tax settlement.

Issuing certificates confirming the taxes paid by foreign contractors and subcontractors whose taxes are withheld by the Vietnamese Party shall be done after these parties have completed their tax obligations according to the tax settlement of each contractor contract. The tax authority shall issue a certificate confirming the taxes paid by foreign contractors and subcontractors within ten working days after the tax settlement. In cases where the contractor contract or subcontractor contract spans multiple years and foreign contractors and subcontractors require certificates confirming the taxes paid annually, they should request from the local tax authority. The tax authority shall issue a certificate confirming the taxes paid by foreign contractors and subcontractors within ten days from receiving the request from the Vietnamese Party or the foreign contractor and subcontractor.

Confirmation of taxes paid shall be carried out according to Appendix No. 06-NTNN attached to this Circular.

In cases where tax inspections result in additional tax payments by foreign contractors and subcontractors different from the tax settlement and confirmed tax amounts, the tax authority must adjust accordingly.

1. The Vietnamese Party entering into a Contractor Contract has the responsibility to deduct taxes from foreign contractors and subcontractors who do not implement the Vietnamese accounting system, and to deposit the tax money into the budget as guided in Section II, Part C of this Circular.

For foreign contractors and subcontractors signing contracts with Vietnamese parties to conduct oil and gas exploration and exploitation activities in accordance with the Oil Law, if the contract stipulates that the Vietnam Oil and Gas Corporation is responsible for paying on behalf of various taxes, then the Vietnam Oil and Gas Corporation shall deduct and pay the taxes of foreign contractors and subcontractors to the State Treasury. In cases where the Vietnam Oil and Gas Corporation does not directly deduct and pay taxes on behalf of foreign contractors and subcontractors, the corporation shall issue a power of attorney to its subordinate units to carry out these tasks.

2. For the corporate income tax amounts deducted and paid into the State Treasury by Vietnamese parties on behalf of foreign contractors and subcontractors, Vietnamese parties are entitled to a fee of 0.8% of the corporate income tax deducted and paid into the State Treasury, but this amount shall not exceed VND 50 million per deduction and tax payment.

This fee is deducted from the tax revenue before it is deposited into the State Treasury and is used to cover expenses related to tax declaration, deduction, and payment, as well as to reward individuals involved in managing tax declaration and payment.

This Circular takes effect fifteen days after its publication in the Official Gazette and replaces Circular No. 169/1998/TT-BTC dated December 22, 1998, and Circular No. 95/1999/TT-BTC dated August 6, 1999, issued by the Ministry of Finance, which provide guidance on tax regimes applicable to foreign organizations and individuals conducting business in Vietnam outside the forms of investment under the Law on Foreign Investment.

For contractor contracts and foreign subcontractor contracts signed prior to the effective date of this Circular, the determination of tax payment methods, the calculation of taxes due, and tax settlement shall continue to be implemented according to the guidance provided in Circular No. 169/1998/TT-BTC dated December 22, 1998, and Circular No. 95/1999/TT-BTC dated August 6, 1999 until the completion of the contracts. In cases where there is an extension of the term of such contracts after the effective date of this Circular, the calculation, declaration, and payment of taxes from the date of contract extension shall be carried out according to the guidance provided in this Circular.

If the Socialist Republic of Vietnam has entered into an Agreement or International Treaty containing provisions regarding the payment of taxes by foreign contractors and subcontractors that differ from the guidance provided in this Circular, such provisions shall be followed. Foreign contractors and subcontractors must submit a written request to the tax authority where they are registered to implement their tax obligations according to the terms of the Agreement or International Treaty. Based on the request of the foreign contractor or subcontractor and the International Treaty signed, the tax authority shall issue a confirmation letter regarding whether the foreign contractor or subcontractor may fulfill their tax obligations according to the International Treaty or in accordance with current tax laws./.