On May 31, 2024, the Hanoi City Tax Department issued Official Letter No. 32968/CTHN-TTHT to guide the Project Management Board of the Nuclear Science and Technology Research Center on the declaration and payment of contractor tax for foreign contractors and subcontractors with income arising in Vietnam based on the signed contract with the Vietnamese party.
Accordingly, in this case, if the foreign contractor or foreign subcontractor does not meet all of the following conditions:
- Having a permanent establishment in Vietnam, or being a resident in Vietnam;
- The business duration in Vietnam under the contractor or subcontractor agreement is 183 days or more from the effective date of the contract;
- Applying the Vietnamese accounting regime and registering for tax, and obtaining a tax identification number from the tax authority.
Then, the Vietnamese party is obligated to register for a tax identification number on behalf of the foreign contractor according to the guidance in Circular 105/2020/TT-BTC. The Vietnamese party is also responsible for declaring and paying value-added tax (VAT) and corporate income tax (CIT) on behalf of the foreign contractor using the direct method for each payment occurrence or monthly if multiple payments are made to the contractor within a month. Additionally, the Vietnamese party must declare and finalize VAT and CIT at the end of the contract.
This guidance enhances the tax responsibilities of the Vietnamese party when entering into contracts for projects with foreign contractors and subcontractors.
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