posted on July 11, 2021

Foreign contractor tax is applied to foreign organisations and individuals undertaking business or earning income sourced from Vietnam on the basis of agreements with Vietnamese parties (including foreign owned companies). FCT is not a separate tax, and normally comprises a combination of Value Added Tax (“VAT”) and CIT, or Personal income tax (“PIT”) for income of foreign individuals.

Payments subject to FCT include interest, royalties, service fees, leases rentals, insurance premiums, transportation fees, income from transfers of securities, and from goods supplied within Vietnam or associated with services rendered in Vietnam.

Certain distribution arrangements where foreign entities are directly or indirectly involved in the distribution of goods or provision of services in Vietnam are subject to FCT – e.g., where the foreign entity retains ownership of the goods, bears distribution, advertising or marketing costs, is responsible for the quality of goods or services, making pricing decisions, or authorises/hires Vietnamese entities to carry out part of the distribution of goods/provision of services in Vietnam.

Cases where FCT is exempt include pure supply of goods (i.e. where the responsibility, cost, and risk relating to the goods passes at or before the border gate of Vietnam and there are no associated services performed in Vietnam), services performed and consumed outside Vietnam, and various other services performed wholly outside Vietnam (e.g. certain repairs, training, advertising, promotion, etc.).


No withholding or remittance tax is imposed on profits paid to foreign corporate shareholders.


A withholding tax of 5% CIT applies to interest paid on loans from foreign entities. Offshore loans provided by certain government or semi-government institutions may obtain an exemption from interest withholding tax where a relevant double taxation agreement or inter-governmental agreement applies. Interest paid on bonds (except for tax exempt bonds) and certificates of deposit issued to foreign entities is subject to 5% withholding tax.


FCT applies to payments to a foreign entity for the right to use or for the transfer of intellectual property (including copyrights and industrial properties), transfer of technology or software.


There is no dividend withholding tax in Vietnam on corporate shareholders.


Foreign contractors can choose among three methods for tax payment – the  deduction method, the direct method and the hybrid method.

While the Deemed method can be applied by foreign contractors without any specific conditions (and is the most common method, which can be applied), the Hybrid method and Declaration method require foreign contractors to satisfy the following conditions:

  • Maintaining a contract duration of 183 days or more;
  • Having a Permanent Establishment (PE) in Vietnam, (e.g a Project Office); and
  • Applying the Vietnamese Accounting System.


Contributed by ASTC

ASTC is a high growth trusted professional service provider in Vietnam. We provide our Clients with a wide range of Value-added Tax, Auditing, Consulting, and Accounting services.

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