On September 18th, 2024, the Bình Dương Provincial Tax Department issued Official Letter No. 25581/CTBDU-TTHT, accordingly:
In the case where the company signs a contract with a foreign company (foreign contractor) to purchase a software license with software-containing equipment as prescribed by law and implemented in Vietnam, the income from the software license and the transfer of the software-containing equipment of the foreign contractor is subject to contractor tax in Vietnam. In the case where the foreign contractor does not meet one of the conditions for directly declaring taxes in Vietnam, as stipulated in Article 8, Section 2, Chapter II of Circular 103/2014/TT-BTC, the company is responsible for deducting, declaring, and paying taxes on behalf of the foreign contractor before making any payments. Specifically:
– VAT: The software license, as regulated by law is not subject to VAT; VAT for the transfer of the software-containing equipment is subject to a 2% tax rate as regulated.
– CIT: In case the contract separates the value of the software license and the value of the transfer of the software-containing equipment, the CIT rate (%) on taxable revenue is 1% for the supply of goods ( the software-containing equipment) and 10% for the value of the software license.
