Foreign Contractor Tax – a special tax of Vietnam
- What is FCT?
- Tax
- The reason why FCT is important
- Examples when consulting on FTC
- I-GLOCAL also
supports FTC
related services
What is Foreign Contractor Tax?
Foreign Contractor Tax or Foreign Contractor Withholding Tax –
abbreviated as FCT, FCWT, is a tax applied when foreign legal entities provide services to a Vietnamese legal entities.
In other words , it’s the tax that applies to the expenses payable by Vietnamese legal entity
(not the revenue/profit of the Vietnamese legal entity). The taxable party can be a foreign legal entity or a Vietnamese legal entity,
it’s depending on the provisions of the contract. However, taxpayer must be a Vietnamese legal entity.
- ※ Either party can bear the tax.
Tax
FCT includes 2 types of taxes – Value Added Tax (VAT) and Corporate Income Tax (CIT), each tax have difference
| Content | VAT (％) |
CIT (％) |
|---|---|---|
| Product trading with services, exporting on the spot | Tax Exemption | 1 |
| Construction, installation which does not include bidding for materials or machinery and equipment | 5 | 2 |
| Construction, installation which is including materials or machinery and equipment; transportation services, production | 3 | 2 |
| General services, equipment rental | 5 | 5 |
| Interest rate | Tax Exemption | 5 |
| Copyright fee | Tax Exemption | 10 |
| Copyright fee management services for the trademark use ; restaurant , hotel, casino management services | 5 | 10 |
| Securities transfer, reinsurance | Tax Exemption | 0.1 |
| Derivative financial products | Tax Exemption | 2 |
The reason why FCT
is important
FCT is only in Vietnam, so the regulations are difficult to explain.
However, FCT has a big effect on Vietnamese businesses that have transactions with foreign partners, so this tax is quite important.
- Wide range of taxable objects
- Contract signed with foreign organization, individual.
- Many points need to attention on the way specified in the contract
- The taxable party is definite in the contract
- Declare and pay tax within 10 days from the date of payment
- Easily pointed out as a violation when tax inspection in Vietnam
Examples when consulting
on Foreign Contractor Tax
We provide a wide range of consultations from basic questions to specific cases.
- What is FCT?
- Do all transactions need to be reviewed to check which transactions are subject to contractor tax?
- Until now we have not filed the FCT, is there any retrospective tax payment during tax inspection?
- Will tax amount change based on the ways on writing the contract?
- How is the FCT different from the Japanese withholding tax?
- If already taxed in Japan, is it possible to avoid being taxed according to the regulation of the agreement to avoid double taxation? Is it possible to deduct taxes paid abroad?
- Is it true that when sending people to work under a technical support contract, we need to pay both FCT and PIT?
- FCT is a tax applied on services, so is it taxable when importing equipment items?
- Is FCT applicable in international trade terms?
I-GLOCAL also supports
Foreign Contractor Tax
related services
I-GLOCAL also has a lot of knowledge and practical experience in Foreign Contractor Tax.
- I-GLOCAL is providing Tax – Accounting services for over 1,000 Japanese enterprises currently, we solved problems with a high expertise.
Based on practical experiences, I-GLOCAL is confident to support enterprises invest in Vietnam
by the most suitable way to help businesses avoid potential risks or unnecessary taxes.
With a variety of support forms, we will try to support companies to expand investment to Vietnam - Consulting on Foreign Contractor Tax is
conducted any time through Annual Consulting Contract!
FCT related reports
- I-GLOCAL ・Vietnam Report
～Accounting and Tax - Vietnam Foreign Contractor Tax (FCT) Overview and Practical Considerations
- I-GLOCAL ・Vietnam Report
～Accounting and Tax - Foreign Contractor Tax and Incoterms in Vietnam
- I-GLOCAL ・Vietnam Report
～Accounting and Tax - Main transactions subject to foreign contractor tax in Japanese companies in Vietnam
