On October 29, 2019, Hanoi Tax Department issued Official Letter No. 81365/CT-TTHT. Whereby:
In case the foreign parent company generates income from software copyright in Vietnam when supplying the software to its subsidiary in Vietnam through the form of downloading via Internet and receiving monthly payments based on unit price and quantity downloaded of the software, the parent company is subject to foreign contractor tax in Vietnam.
– Regarding VAT: Income from software copyright is not subject to VAT as prescribed in Clause 21, Article 4 of Circular No. 219/2013/TT-BTC and Clause 1, Article 6, Section 1, Chapter 1 of Circular No. 103/2014/TT-BTC.
– Regarding CIT: Income from copyright is subject to CIT according to Clause 3 Article 7, Section 1, Chapter II of Circular No. 103/2014/TT-BTC. In case the parent company fails to meet one of the conditions specified in Article 8, Section 2, Chapter II of Circular No. 103/2014/TT-BTC, the subsidiary company in Vietnam is responsible for deducting CIT on behalf of the foreign contractor as per Article 11, Section 3, Chapter II of Circular No. 103/2014/TT-BTC. The CIT payable amount is equal to the taxable income multiplied by the percentage (%) of the CIT calculated on the taxable income; The rate (%) of the CIT calculated on the taxable income for revenue from copyright is 10% as prescribed in Clause 2, Article 13 of Circular No. 103/2014/TT-BTC.
