On March 25th, 2019, Hanoi Department of Tax issued the Official Letter No.11232/CT-TTHT. Accordingly, in case Enterprise signs a contract with an overseas company (without a permanent establishment in Vietnam) to purchase software copyright with an intermediary containing the software (USB) in accordance with the law implemented in Vietnam, the income from the software copyright and USB transfer mentioned above are subject to withholding tax in Vietnam. The company is responsible for declaring, deducting and paying foreign contractor tax for foreign companies as follows:
– Value Added Tax (VAT): software copyright is not subject to VAT under law. VAT of USB transfer activities containing software is subject to tax of 2%.
– Corporate Income Tax (CIT): In case of a separate contract on software copyright value and USB transfer value containing software, the CIT rate calculated on taxable revenue for supplying goods ( USB) is 1% and for software copyright value is 10%.
