On July 5, 2023, Hanoi Tax Department issued Official Letter No. 47359/CTHN-TTHT, according to which:
n case Company A (foreign) – Foreign contractor generates income in Vietnam on the basis of a contract signed with Company B (Vietnam) to supply health care products with copyright services to use products in Vietnam, then Company A (foreign) is subject to tax on foreign contractors as prescribed in Clause 1, Article 1 of Circular No. 103/2014/TT-BTC. In case the foreign contractor fails to meet one of the conditions to declare tax directly in Vietnam mentioned in Article 8, Section 2, Chapter II of Circular No. 103/2014/TT-BTC, then Company B (Vietnamese party) is responsible for declaring and paying tax on behalf of the foreign partner according to the instructions in Article 12, Article 13, Section 3, Chapter II of Circular No. 103/2014/TT-BTC.
- In case if it is possible to separate the value of royalties and the value of goods:
- VAT: For the case where goods are provided under the contract in the form of: the place of delivery and receipt of goods is within the territory of Vietnam, or the supply of goods with services carried out in Vietnam, the value of goods is only subject to VAT at the stage of importation according to regulations; the value of services is subject to VAT as guided in Article 6 of Circular 103/2014/TT-BTC. If the copyright service falls into the cases specified in Clause 21, Article 4 of Circular No. 219/2013/TT-BTC, it is not subject to VAT. If not falling into the cases specified in Clause 21, Article 4 of Circular No. 219/2013/TT-BTC, the rate of 5% of taxable revenue for services shall be applied as prescribed in Clause 2, Article 12 of Circular No. 103/2014/TT-BTC.
- CIT: apply the rate of 10% to calculate CIT on income from royalties as prescribed in Clause 2, Article 13 of Circular No. 103/2014/TT-BTC.
- In case the copyright value and the goods value cannot be separated:
- VAT: apply the rate of 3% to calculate on the VAT calculation revenue of the contract;
CIT: apply the rate of 2% on the taxable turnover of the contract
