Vietnam has actively signed the Double Taxation Avoidance Agreement to create an equal and favorable business environment for taxpayers. Domestic and foreign subjects that generate income between countries that have signed double taxation avoidance agreements are very interested in this issue. Please follow the article to get the most detailed view as well as update tax documents to answer questions of businesses facing this problem.

On August 6, 2014, the Ministry of Finance issued Circular No. 103/2014/TT-BTC guiding the implementation of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or having income in Vietnam. Nam as follows:

+ In Article 1, it guides the subjects subject to contractor tax:

“ Article 1. Subjects of application

1. Foreign business organizations have a permanent establishment in Vietnam or do not have a permanent establishment in Vietnam; Foreign individuals doing business who are residents of Vietnam or not residents of Vietnam (hereinafter collectively referred to as Foreign Contractors, Foreign Subcontractors) doing business in Vietnam or having income arising in Vietnam on the basis of contracts, agreements, or commitments between foreign contractors and Vietnamese organizations and individuals or between foreign contractors and foreign subcontractors to perform part of the work of Contractor contract. …”

+ In Article 2, instructions on subjects not applicable are as follows:

“Article 2. Subjects not applicable

Instructions in this Circular do not apply to:

…3. Foreign organizations and individuals with income from services provided and consumed outside Vietnam.”

On October 18, 2023, Official Dispatch No. 74365/CTHN-TTHT of the Hanoi Tax Department responded to Document No. 010923/AFRYVN dated September 7, 2023 of AFRY Vietnam Co., Ltd. on determining taxable subjects. The contractor and the Hanoi Tax Department have the following opinions:

Pursuant to Circular No. 103/2014/TT-BTC dated August 6, 2014 of the Ministry of Finance guiding the implementation of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or having income Imported in Vietnam…

Pursuant to the Agreement between the government of the Socialist Republic of Vietnam and the government of the Kingdom of Thailand on avoiding double taxation and preventing tax evasion with respect to taxes on income as follows:

+ In Article 7, regulations on corporate profits are as follows:

“first. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in that other State but only so much of them as is attributable to that permanent establishment.”

• Article 23 stipulates measures to eliminate double taxation as follows:

“ARTICLE 23. MEASURES TO EXCLUDE DOUBLE TAXATION

…3. a. When a resident of Thailand has income which under the provisions of this Agreement may be taxed in Vietnam, Thailand shall allow a deduction from the income tax of such resident an amount equal to tax amount paid in Vietnam. However, the tax deducted shall not exceed the tax in Thailand calculated on that income before allowing the deduction.”

– Pursuant to Article 62 of Circular 80/2021/TT-BTC issued on September 29, 2021 of the Ministry of Finance guiding on tax exemption and tax reduction application procedures under the Double Taxation Avoidance Agreement as follows:

“Article 62. Procedures for tax exemption and tax reduction documents under the Double Taxation Avoidance Agreement (Tax Agreement)

1. For foreign contractors:

….b) For direct method:

b.1) For business activities and other types of income:

b.1.1) Within 15 days before the tax declaration deadline, the foreign contractor or the Vietnamese party signs a contract or pays income to the foreign contractor and sends a document to the directly managing tax agency of the Vietnamese party. Dossier to request tax exemption or reduction under the Tax Agreement, the dossier includes:

b.1.1.1) Written request according to form No. 01/HTQT issued with Appendix I of this Circular;

b.1.1.2) Original (or certified copy) Certificate of residence issued by the tax authority of the country of residence immediately before the year of notification of tax exemption or reduction under a legal Tax Agreement consularization

b.1.1.3) Copies of contracts signed with organizations and individuals in Vietnam with confirmation from the taxpayer;

b.1.1.4) Power of attorney in case the taxpayer authorizes a legal representative to carry out procedures for applying the Tax Agreement.

…b.1.5) In case the previous year had a dossier requesting tax exemption or reduction under the Tax Agreement, the following years only need to send copies of newly signed economic contracts with organizations and individuals in Vietnam. Male and foreign (if any) with confirmation from the taxpayer.

b.1.6) Within 15 days before the end of the working contract in Vietnam or before the end of the tax year (whichever occurs first), the foreign contractor sends the original (or a certified copy). authenticated) Certificate of residence that has been consularly legalized for the tax year for which the Vietnamese party signed the contract or paid income. Within 03 working days from the date of receiving the Certificate of Residence, the Vietnamese party signing the contract or paying income is responsible for submitting to the tax authority the original (or certified copy) of the Certificate of Residence. this residence certificate.

b.1.7) In case at the above time the Certificate of Residence has not yet been obtained, the foreign contractor is obliged to commit to sending the original (or a certified copy) of the Certificate of Residence that has been legally approved. consular receipt in the quarter immediately following the end of the tax year.

Pursuant to the above regulations, if ARFY Vietnam Co., Ltd. purchases a service version from a company residing in Thailand (without a permanent establishment in Vietnam), then:

– Case 1: A company in a foreign country (a company residing in Thailand) has business activities in Vietnam and income arising in Vietnam on the basis of contracts and agreements between companies in Vietnam. foreign company and a company in Vietnam (ARFY Vietnam Co., Ltd.), the foreign company is subject to tax obligations for foreign contractors according to the provisions of Article 1 of Circular 103/2014/TT- BTC.

If a company in Thailand has business activities in Vietnam (providing services to the Company in Vietnam) without having a permanent establishment in Vietnam, the Company’s income in Thailand will only be taxable in Thailand. Thailand follows the instructions in Article 7 of the Double Taxation Avoidance Agreement between Vietnam and Thailand.

To enjoy tax exemption and reduction under the Double Taxation Avoidance Agreement for the income arising in Vietnam of the company in Thailand, ARFY Vietnam Co., Ltd. shall submit an application for tax exemption and reduction under the Agreement. Tax is prescribed in Article 62 of Circular 80/2021/TT-BTC.

– Case 2: ARFY Vietnam Co., Ltd. provides services to a company in Thailand. The company in Thailand retains the tax to pay on behalf of ARFY Vietnam Co., Ltd. in Thailand. ARFY Vietnam Co., Ltd. refers to the guidance in Official Dispatch No. 5269/TCT-HTQT issued on November 15, 2019. 2017 of the General Department of Taxation.

Clause 1, Article 7 (Corporate profits) of the Tax Agreement between Vietnam – Malaysia and Vietnam – Laos stipulates:

“first. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in that other State but only so much of them as is attributable to that permanent establishment.”

– In the case of Indochina Research Company Limited (Vietnam) – hereinafter referred to as Indochina Company:

Based on information and documents provided by the City Tax Department. Hanoi provided with official dispatch No. 60582/CT-TTHT,

Indochina Company implemented 02 service contracts with Green Zebras SDN BHD Company (headquartered in Malaysia) with the content of market research in Vietnam. Because these services are performed in Vietnam and not through a permanent establishment in Malaysia, the income earned by Indochina Company is not subject to corporate income tax in Malaysia.

Therefore, for this case:

+ The tax portion of Green Xebras SND BHD Company retains 10% to pay income tax to the Malaysian Tax Authority, Indochina Company is not deducted from the corporate income tax amount payable in Vietnam and is not included in deductible expenses. when determining income subject to corporate income tax.

+ Because it does not have a permanent establishment in Malaysia and does not have to pay corporate income tax in Malaysia, Indochina Company can request the Malaysian Tax Authority to refund the corporate income tax amount that Green Xebras SND BHD Company paid on its behalf.

– In the case of Chemical Industry Design Joint Stock Company – hereinafter referred to as CECO:

Because the Contract provided is incomplete, with only a few pages, the General Department of Taxation has no basis to determine whether CECO has a permanent establishment (CSTT) in Laos or not. Therefore, the General Department of Taxation guides on the following principles:

In case CECO conducts business in Laos with monetary policy in Laos, it must pay corporate income tax in Laos. The paid CIT amount is deducted from the tax amount payable in Vietnam. However, the deductible tax amount does not exceed the tax amount payable in Vietnam calculated on income from Laos according to current tax laws in Vietnam.

In case CECO conducts business in Laos without a monetary policy in Laos, CECO must contact the Lao Tax Authority to request a refund of the tax paid. For the refunded CIT amount, CECO is not allowed to deduct the CIT amount payable in Vietnam and is not included in deductible expenses when determining income subject to CIT.

+ In Article 11, instructions for determining tax obligations for income from business activities are as follows:

“Article 11. Determination of tax obligations for income from business activities

1. In case a foreign enterprise conducts production and business activities in Vietnam but does not establish a legal entity in Vietnam.

1.1. Tax obligations

According to the provisions of the Agreement, income from business activities of a foreign enterprise is only taxed in Vietnam if that enterprise has a permanent establishment in Vietnam and that income is directly or indirectly related to that permanent establishment. In this case, the enterprise is only taxed in Vietnam on the income allocated to that permanent establishment.

1.2. Definition of permanent establishment

1.2.2. An enterprise of a Contracting State shall be deemed to carry on business through a permanent establishment in Vietnam in the following principal cases:

1. c) That enterprise provides services including consulting services in Vietnam through its employees or another subject under the condition that the above service activities are in a project or related projects lasting in Vietnam for a period or periods of time combined exceeding 183 days in each 12-month period.

Regarding the provision of services, although the Agreement stipulates that permanent establishments include the provision of consulting services in Vietnam through employees of the enterprise or another subject, provided that the activities are The above service activities in a project or related projects, lasting in Vietnam for a period or periods of time combined exceeding 183 days in each 12-month period, but due to the nature of the service services, the service provision period does not last more than 6 months in a 12-month period, while the three conditions for permanent establishments in Point 1.2.1 above are still satisfied, the service provision is still satisfied. is considered to have a permanent establishment in Vietnam.”

Pursuant to Article 62 of Circular No. 80/2021/TT-BTC dated September 29, 2021 of the Ministry of Finance guiding on tax exemption and tax reduction application procedures under the Double Taxation Avoidance Agreement (Tax Agreement):

“I. For foreign contractors:

In addition to tax declaration documents, foreign contractors must also submit additional documents to request tax exemption or reduction under the Tax Agreement.

1. a) For deduction and declaration method:

a.1) When temporarily calculating corporate income tax, the taxpayer sends a request for tax exemption or reduction under the Tax Agreement to the tax authority at the same time as temporarily paying quarterly corporate income tax. Profile include:

a.1.1) Written request according to form No. 01/HTQT issued with Appendix I of this Circular;

a.1.2) Original (or certified copy) Certificate of residence issued by the tax authority of the country of residence immediately before the year of notification of tax exemption or reduction under a Tax Agreement that has been legalized in the territory the;

a.1.3) Copies of contracts signed with organizations and individuals in Vietnam and abroad with confirmation from the taxpayer;

a.1.4) Power of attorney in case the taxpayer authorizes a legal representative to carry out procedures for applying the Tax Agreement.

a.2) In case the taxpayer had a dossier requesting tax exemption or reduction under the Tax Agreement in the previous year, the following years only need to send copies of contracts signed with organizations and individuals in Vietnam. New male and foreign country (if any) with confirmation from the taxpayer.

a.3) When declaring and finalizing corporate income tax, the taxpayer sends a consularly legalized Certificate of Residence for that tax year and confirmation of contract performance by the contracting parties. Contract and corporate income tax finalization declaration.

1. b) For direct method:

b.1) For business activities and other types of income:

b.1.1) Within 15 days before the tax declaration deadline, the foreign contractor or the Vietnamese party signs a contract or pays income to the foreign contractor and sends a document to the directly managing tax agency of the Vietnamese party. Dossier to request tax exemption or reduction under the Tax Agreement, the dossier includes:

b.1.1.1) Written request according to form No. 01/HTQT issued with Appendix I of this Circular;

b.1.1.2) Original (or certified copy) Certificate of residence issued by the tax authority of the country of residence immediately before the year of notification of tax exemption or reduction under a legal Tax Agreement consularization;

b.1.1.3) Copies of contracts signed with organizations and individuals in Vietnam with confirmation from the taxpayer;

b.1.1.4) Power of attorney in case the taxpayer authorizes a legal representative to carry out procedures for applying the Tax Agreement.

b.1.5) In case the previous year had a dossier requesting tax exemption or reduction under the Tax Agreement, the following years only need to send copies of newly signed economic contracts with organizations and individuals in Vietnam. Male and foreign (if any) with confirmation from the taxpayer.

b.1.6) Within 15 days before the end of the working contract in Vietnam or before the end of the tax year (whichever occurs first), the foreign contractor sends the original (or a certified copy). authenticated) Certificate of residence that has been consularly legalized for that tax year for the Vietnamese party to sign the contract or pay income. Within 03 working days from the date of receiving the Certificate of Residence, the Vietnamese party signing the contract or only paying income is responsible for submitting to the tax authority the original (or certified copy) of the Certificate of Residence. this residence certificate.

b.1.7) In case at the above time the Certificate of Residence has not yet been obtained, the foreign contractor is obliged to commit to sending the original (or a certified copy) of the Certificate of Residence that has been legally approved. consularization in the devil immediately after the end of the tax year.

1. c) For mixed method:

c.1) Within 15 days before the tax declaration deadline, the foreign contractor sends to the tax authority where tax is registered a dossier requesting tax exemption or reduction under the Tax Agreement. The dossier includes:

 c.1.1) Written request according to form No. 01/HTQT issued with Appendix I of this Circular;

c.1.2) Original (or certified copy) Certificate of residence issued by the tax authority of the country of residence immediately before the year in which tax exemption or reduction is requested under the Tax Agreement that has been consularly legalized;

c.1.3) Copies of contracts signed with organizations and individuals in Vietnam with confirmation from the taxpayer;

c.1.4) Power of attorney in case the taxpayer authorizes a legal representative to carry out procedures for applying the Tax Agreement.

c.2) In case the previous year had a dossier requesting tax exemption or reduction under the Tax Agreement, the following years only need to send copies of newly signed economic contracts with organizations and individuals in Vietnam. Male and foreign with taxpayer confirmation (if any).

c.3) Within 15 days before the end of the working contract in Vietnam or before the end of the tax year (whichever occurs first), the foreign contractor sends the approved Certificate of Residence Consular legalization of that tax year to the tax authority where tax is registered.

c.4) In case at the above time the Certificate of Residence has not yet been obtained, the foreign contractor is obliged to commit to sending the Certificate of Residence that has been consularly legalized in the quarter immediately following the end of the year. tax.

Based on the above regulations and the content of the written question, the Tax Department of Binh Duong province guides the principles as follows:

In case Velcro China Company headquartered in China (hereinafter referred to as Foreign Contractor) has income from providing support and training services in Vietnam (referred to as corporate income) on Based on the unnumbered agreement dated January 1, 2020 between the foreign contractor and Velcro Vietnam Co., Ltd., this service is subject to contractor tax including VAT and corporate income tax according to the provisions of Circular No. 103 /2014/TT-BTC dated August 6, 2014 of the Ministry of Finance. Velcro Vietnam Company Limited is responsible for deducting, declaring and paying contractor tax on behalf of Velcro China Company.

In case the foreign contractor meets the conditions of not having a permanent establishment in Vietnam according to the detailed provisions in Article 5 of the Agreement on Avoidance of Double Taxation between Vietnam and China and the instructions in Article 11 of Circular 205 /2013/TT-BTC is exempt from corporate income tax (not exempt from VAT) according to the Double Taxation Avoidance Agreement between Vietnam and China. Regarding tax exemption and tax reduction application procedures under the Double Taxation Avoidance Agreement (Tax Agreement), the foreign contractor or an organization or individual legally authorized by the foreign contractor shall prepare a dossier notifying the exemption. , reduced according to the Agreement as prescribed in Clause 1, Article 62 of Circular 80/2021/TT-BTC mentioned above.

The detailed dispatch is attached at the following link: https://drive.google.com/drive/u/0/folders/1D__9yYV6j3f7dW1RqNwlLq5GU97VrPwC