Circular No. 95/1999/TT-BTC amends and supplements Circular No. 169/1998/TT-BTC dated December 22, 1998, of the Ministry of Finance guiding tax regimes for foreign organizations and individuals conducting business activities in Vietnam not under the form of foreign investment as regulated by the Law on Foreign Investment in Vietnam.

CIRCULAR

Amending and supplementing Circular No. 169/1998/TT-BTC dated December 22, 1998 of the Ministry of Finance guiding tax regimes for foreign organizations and individuals conducting business activities in Vietnam not under forms of foreign investment as regulated by the Law on Foreign Investment in Vietnam.

In recent times, the Ministry of Finance has received feedback from some units regarding difficulties arising during the implementation of tax management according to Circular No. 169/1998/TT-BTC dated December 22, 1998 of the Ministry of Finance guiding tax regimes for foreign organizations and individuals conducting business activities in Vietnam not under forms of foreign investment as regulated by the Law on Foreign Investment in Vietnam. To ensure consistent implementation, the Ministry of Finance supplements Circular No. 169/1998/TT-BTC as follows:

1. Regarding the declaration and payment location of taxes for foreign construction contractors and subcontractors:

In cases where foreign construction contractors and subcontractors have their headquarters in one locality but carry out construction projects in another locality, these contractors and subcontractors must declare and pay taxes to the tax authority of the locality where the construction project is located.

In cases where foreign construction contractors and subcontractors do not implement Vietnamese accounting regulations (paying taxes directly), the Vietnamese party signing the contract shall register and declare the activities of foreign contractors and subcontractors in Vietnam according to Model 02 NT-TCT issued together with Circular No. 169/1998/TT-BTC of the Ministry of Finance with the tax authority of the locality where its headquarters is located for monitoring purposes, while the Vietnamese party signing the contract shall declare, register, and pay taxes on behalf of foreign contractors and subcontractors to the tax authority of the locality where the construction project is located.

2. Supplementing Section II Part C of Circular No. 169/1998/TT-BTC on procedures for registration and declaration of tax payments for cases where foreign construction contractors and subcontractors who do not implement Vietnamese accounting regulations subcontract part of their work to Vietnamese subcontractors:

After signing a subcontracting contract with a Vietnamese subcontractor, foreign construction contractors and subcontractors must send a copy of the signed contract to the project owner so that the project owner can handle the declaration and registration procedures with the local tax authority as prescribed.

Periodically when settling accounts with the project owner, foreign contractors and subcontractors must clearly analyze the value of each portion of work carried out by contractors and subcontractors, separately identifying the value of work performed by Vietnamese subcontractors according to the signed contracts. Based on this, the project owner calculates and declares the tax payable by foreign contractors and subcontractors to the local tax authority where the construction project is located for the portion of work directly carried out by foreign contractors and subcontractors; simultaneously, the project owner deducts and pays on behalf of foreign contractors and subcontractors the tax payable to the state budget according to the guidance at Section C, Circular No. 169/1998/TT-BTC of the Ministry of Finance.

The VAT paid on behalf of foreign contractors and subcontractors is the input VAT of the Vietnamese party signing the contract and deductible according to Point 2, Section II, Part C, Circular No. 169/1998/TT-BTC. The document to determine the deductible input VAT of the Vietnamese party is the VAT payment receipt or the bank deposit slip with confirmation from the State Treasury about the amount of tax paid.

Vietnamese subcontractors directly declare and pay taxes to the tax authority according to regulations.

3. Procedures for declaration and payment of taxes for cases where multiple foreign organizations and individuals form joint ventures or joint operations with Vietnamese organizations and individuals to conduct business activities in Vietnam not under the Law on Foreign Investment in Vietnam:

- In cases where the Vietnamese party is responsible for consolidated accounting and all parties participate in the contract through profit sharing, the Vietnamese party shall declare, pay, and settle VAT and corporate income tax according to regulations on the total revenue obtained, while also keeping separate records for each contract.

- In cases where parties participate in the contract through product sharing or jointly bid for a project but each party carries out separate portions of the work, each party issues invoices for the revenue they obtain from selling goods or performing their portion of the work according to the contract, and each party is responsible for declaring, paying VAT and corporate income tax on the revenue they obtain. Each party registers the method of tax payment and handles the declaration, payment, and settlement of taxes with the direct managing tax authority according to regulations.

- In cases where parties participate in the contract through revenue sharing without dividing into separate portions of work, the Vietnamese party signing the contract (if there are multiple Vietnamese parties involved in the contract, they must appoint a representative responsible for consolidated accounting) is responsible for issuing invoices to customers, and simultaneously declaring, paying, and settling VAT with the tax authority on the total revenue.

When settling payments to related parties, related parties must issue VAT invoices as the basis for deducting input VAT for the Vietnamese party signing the contract. Each party registers tax payment with the tax authority based on their share of revenue.

- In cases where foreign organizations and individuals (contractors) apply the direct tax calculation method, the Vietnamese party signing the contract is responsible for withholding VAT and corporate income tax of foreign organizations and individuals before making payments or transferring funds to them. The VAT paid on behalf of contractors and subcontractors is the input VAT of the Vietnamese party signing the contract and deductible according to Point 2, Section II, Part C, Circular No. 169/1998/TT-BTC of the Ministry of Finance.

4. Value Added Tax on imported goods and materials supplied for construction projects:

The investor who imports materials and goods and then transfers them to contractors or subcontractors (including cases where the contractor receives a turnkey contract or foreign contractors provide materials for the project) must pay value-added tax on imported materials and raw materials according to the customs declaration of the Customs authority. The amount of value-added tax paid is determined as the input tax of the investor and is deductible from the input tax of fixed assets in accordance with Section III, Part B, Circular No. 89/1998/TT-BTC dated June 27, 1998, of the Ministry of Finance.

5. In cases where foreign organizations and individuals sell goods and services through a Vietnamese agent:

When foreign organizations and individuals without a permanent establishment in Vietnam conduct business in Vietnam through Vietnamese agents, they shall:

After signing the agency contract, Vietnamese organizations and individuals acting as agents must declare to the tax authority and register for tax payment in accordance with Circular No. 169/1998/TT-BTC of the Ministry of Finance.

When selling goods or providing services, agents must use value-added tax invoices. If the agents pay value-added tax under the direct method, they shall use sales invoices. In both cases, Vietnamese organizations and individuals acting as agents must separately track this revenue and only record in their income the commission they receive.

Before paying income to foreign organizations and individuals, the agents are responsible for withholding value-added tax, corporate income tax, and declaring and paying to the state budget on behalf of the foreign organizations and individuals. Withholding tax for foreign organizations and individuals is carried out as follows:

a. For agents paying taxes under the withholding method:

Value-added tax: implemented in accordance with Point 2, Section II, Part C, Circular No. 89/1998/TT-BTC of the Ministry of Finance. The value-added tax at the import stage that the agent has paid on behalf of foreign organizations and individuals when importing goods into Vietnam can be deducted when calculating the value-added tax payable. Specifically:

Value-added tax payable = Output VAT - Input VAT

Where:

- Output VAT: is the value-added tax recorded on the invoice when selling goods.

- Input VAT: is the value-added tax of goods already paid at the import stage.

Corporate income tax: implemented in accordance with Point 2, Section I, Part C, Circular No. 169/TT-BTC of the Ministry of Finance.

b. For agents paying taxes under the direct method:

Agents withhold and declare, pay value-added tax and corporate income tax on behalf of foreign organizations and individuals in accordance with Section I, Part C, Circular No. 169/1998/TT-BTC of the Ministry of Finance. The value-added tax that the agent has paid when importing goods into Vietnam cannot be deducted when determining the tax payable by foreign organizations and individuals.

This circular takes effect from the date of signature. During implementation, if there are any difficulties, agencies and units are requested to report to the Ministry of Finance for timely consideration and resolution.