Vietnam

Foreign Contractor Tax (FCT) is withheld on payments to foreign contractors.

Payments to foreign contractors

FCT applies when a Vietnamese entity contracts with a foreign contractor. The FCT typically targets payments originating from Vietnam, with exceptions for the pure supply of goods/services consumed outside Vietnam and specific services performed entirely abroad.

Additionally, FCT is applicable in certain distribution arrangements in Vietnam. Foreign contractors can opt to be deduction-method VAT payers if they meet certain conditions. Foreign contractors having a PE could be subject to tax on a net profit basis, although the regulations are not clear (except for certain cases).

For foreign contractors applying the direct method, VAT and CIT are withheld by the Vietnamese contracting party at stipulated rates, with CIT ranging from 0.1% to 10% and VAT from 2% to 5%. The VAT withheld can be claimed as an input credit, subject to certain conditions

A summary of VAT and CIT FCT rates for certain activities follows:

Notes

1. VAT will not be payable where goods are exempt from VAT or where import VAT is paid upon importation.
2. International transportation is subject to 0% VAT.
3. Software products/software services, transfer of technology, and transfer of intellectual property (IP) rights (including copyrights and industrial properties) are VAT exempt. Other royalties may attract VAT.

VAT Circular, effective from 1 July 2025, makes certain changes to the VAT withholding tax provisions in the FCT regulations. The appendix to VAT Circular sets out new FCT-VAT rates applicable to various categories of business. Thus, VAT Circular should be referred to in order to determine the specific FCT rates (where applicable). Further, CIT Circular guiding the implementation of the new CIT Law and CIT Decree should also be referred to assess the FCT scope of application and the determination of taxable revenue.

Foreign companies engaged in or selling goods/services via e-commerce, digital platform, and other business in Vietnam without a PE have to directly register and file tax returns in Vietnam for their income from selling goods/services to Vietnamese corporations and individuals. Foreign companies will be awarded with a tax code, declare tax online at the portal of the Tax Department on a quarterly basis, and pay tax online. From 1 July 2026 onwards, the quarterly filing changes to monthly filing.

Operators of domestic and foreign e-commerce platforms must withhold and pay taxes, including personal income tax (PIT) and VAT, for:

• Individual and household residents on their worldwide sales income.
• Individual and household non-residents on Vietnam-sourced income from sales.
• Non-residents corporate on their Vietnam sourced income.

Withholding tax (WHT) rates range from 0.5% to 5% for PIT and 1% to 5% for VAT depending on transaction type.

According to the new Law on CIT, which took effect from 1 October 2025, foreign companies using e-commerce & digital platforms to supply goods/services in Vietnam are formally included within the scope of the new CIT Law. In addition, these platforms are now officially included in the definition of permanent establishments, potentially impacting double taxation agreement exemption claims.

Tax treaties

The above FCT-CIT rates may be reduced or eliminated by a relevant DTA, subject to the relevant conditions being satisfied.

Tax admin regulations outline new procedures for claiming tax treaty benefits, including required documentation and a formal review process. The tax authorities will review the DTA claims upon receiving sufficient documentation within a specific timeline. They must notify taxpayers of rejections but there is no requirement to issue an approval.

Notes

1. The treaty is not yet in force.
2. Interest earned by certain government bodies is exempt from FCT. In most cases, the limits set by the DTA are higher than the present withholding rates under domestic law; consequently, the domestic rates will apply.

Vietnam has ratified the Multilateral Instrument (MLI) to combat BEPS, which took effect on 1 September 2023. Taxpayers should anticipate changes to DTAs and their implications for investment structuring in Vietnam.

Additionally, the Tax Department (TD) announced that the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC) took effect in Vietnam on 1 December 2023, with information exchange starting 1 January 2024. The GDT provided a list of participating countries and the applicable taxes, including VAT, and instructed local tax departments to comply with the MAAC regulations.

The current tax dispute resolution mechanisms in Vietnam include appeal procedures, court proceedings and MAP under applicable DTAs. DTAs provide taxpayers with the right to request Vietnam and the other contracting country to resolve a dispute through MAP.