“Hello Lawyer X. My company is currently the investor of 1 project. We decided to choose a contractor online, but since this is our first time, we are not very clear on the issues related to this. So, hope the lawyer can help me answer the tax on contractors buying foreign software in Vietnam. Ask a lawyer for help”. In foreign investment activities, the phrase contractor tax is very common. So, what is the law on this tax for the purchase of software from abroad. Here, let’s find out with Lawyer X about “Tax on contractors buying foreign software in Vietnam” through the following article!
Legal grounds
Decree 71/2007/ND-CP
Circular 103/2014/TT-BTC
Circular 219/2013/TT-BTC
Tax on contractors buying foreign software
According to Clause 21, Article 4 of Circular 219/2013/TT-BTC dated December 31, 2013 stipulating that the subjects are not subject to VAT:
“Computer software includes software products and software services as prescribed by law.”
According to Clause 1, Article 3 of Decree 71/2007/ND-CP dated May 3, 2007 stipulating:
“first. Software product is software and accompanying documents produced and displayed or stored in any physical form, which can be purchased, sold or transferred to another object for exploitation and use.
According to Clause 2, Article 9 of Decree 71/2007/ND-CP dated May 3, 2007 stipulating:
“2. Types of software products include:
a) System software;
b) Application software;
c) Utility software;
d) Tool software,
d) Other software.”
Taxes payable to foreign contractors and foreign subcontractors
In this case, you are determined to be the party your company has to pay the contractor tax on behalf of the foreign contractor. According to the provisions of law, foreign contractors that generate income in Vietnam must pay contractor tax. The fact that your company pays this contractor tax is how you legalize the software.
Accordingly, Article 5 of Circular 103/2014/TT-BTC stipulates taxes payable to foreign contractors and foreign sub-contractors as follows:
“first. Foreign contractors and foreign sub-contractors are business organizations that fulfill their value-added tax (VAT) and corporate income tax (CIT) obligations under the guidance in this Circular.
- Foreign contractors and foreign sub-contractors being foreign individuals doing business shall fulfill their VAT obligations under the guidance in this Circular and personal income tax (PIT) in accordance with the law on PIT.”
Taxable income of foreign contractors and foreign sub-contractors
According to Article 7 of Circular 103/TT-BTC:
- Income subject to CIT of foreign contractors and foreign sub-contractors is income arising from goods supply and distribution activities; providing services and goods-linked services in Vietnam on the basis of contractor contracts or sub-contractors (except for the case specified in Article 2, Chapter I).
- In case the goods are provided in the form: the delivery point is located in the territory of Vietnam (except for the case specified in Clause 5, Article 2, Chapter I); or the supply of goods accompanied by a number of services conducted in Vietnam such as advertising and marketing services (marketing), trade promotion activities, after-sales services, installation services, test runs, warranty, maintenance, replacement and other services accompanying the supply of the goods (including in the case of free accompanying services), whether or not the provision of the foregoing services is included in the value of the goods supply contract, the taxable income of the foreign contractor or foreign sub-contractor is the entire value of goods and services.
- Incomes arising in Vietnam of foreign contractors and foreign sub-contractors are incomes received in any form on the basis of contractor contracts, sub-contractors’ contracts (except for cases specified in Clause 1 of this Article). specified in Article 2, Chapter I), regardless of the location where the foreign contractor or foreign sub-contractor conducts business activities. Taxable income of foreign contractors and foreign sub-contractors in some specific cases as follows:
- Income from transfer of ownership and right to use property; transfer of the right to participate in economic contracts/projects in Vietnam, transfer of property rights in Vietnam.
– Income from royalties is income of any kind paid for the right to use, transfer intellectual property rights and transfer technology, software copyright (including: payments for rights) use and transfer of copyright and work owner rights; transfer of industrial property rights; transfer of technology, software copyright).
“Copyright, work owner’s rights”, “Industrial property rights”, “technology transfer” are prescribed in the Civil Code, Intellectual Property Law, Law on Technology Transfer and other documents instruction.
Income from transfer and liquidation of assets.
Interest Income: is the Lender’s income from loans of any kind, whether or not secured by a mortgage, whether or not the lender is entitled to interest. of the borrower; income from deposit interest (except interest on deposits of foreign individuals and interest on deposits arising from deposit accounts to maintain operations in Vietnam of diplomatic missions, representative offices of foreign countries). international organizations, non-governmental organizations in Vietnam), including bonuses associated with deposit interest (if any); income from interest on deferred payment according to the provisions of the contracts; income from bond interest, bond price discount (except for tax-exempt bonds), treasury bills; income from certificate of deposit interest.
Loan interest includes fees that the Vietnamese Party must pay in accordance with the provisions of the contract.
– Income from securities transfer.
– Fines and compensations collected from the counterparty who breached the contract.
– Other incomes as prescribed by law.
Is buying foreign software subject to contractor tax?
According to Clause 1, Article 3 of Decree 71/2007/ND-CP dated May 3, 2007 stipulating:
“Software product is software and accompanying documents produced and displayed or stored in any physical form, which can be bought, sold or transferred to another object for exploitation and use. “
According to Clause 21, Article 4 of Circular 219/2013/TT-BTC dated December 31, 2013 stipulating that the subjects are not subject to VAT:
“Computer software includes software products and software services as prescribed by law.”
According to Article 11 of Circular 219/2013/TT-BTC, subjects subject to 10% VAT:
“The 10% tax rate applies to goods and services not specified in Articles 4, 9 and 10 of this Circular.”
According to Clause 3, Article 7 of Circular 103/2014/TT-BTC dated August 6, 2014 on contractor tax:
“3. Incomes generated in Vietnam of foreign contractors and foreign sub-contractors are incomes received in any form on the basis of contractor contracts or sub-contractors (except for cases specified in Clause 1 of this Article). in Article 2 Chapter I), regardless of the location where the foreign contractor or foreign sub-contractor conducts business activities. Taxable income of foreign contractors and foreign sub-contractors in some specific cases as follows:
– Income from royalties is income of any kind paid for the right to use, transfer intellectual property rights and transfer technology, software copyright (including: payments for rights) use and transfer of copyright and work owner rights; transfer of industrial property rights; transfer of technology, software copyright).
“Copyright, work owner’s rights”, “Industrial property rights”, “technology transfer” are prescribed in the Civil Code, Intellectual Property Law, Law on Technology Transfer and other documents instruction.”
According to Clause 2, Article 11 of Circular 103/2014/TT-BTC stipulating the % rate for calculating VAT on contractors, specifically as follows:
“Services, machinery and equipment rental, insurance; construction and installation excluding bidding for materials, machinery and equipment -> Taxable at 5%”
Revenue subject to VAT is the total revenue from the provision of services and services associated with goods subject to VAT received by the foreign contractor or foreign sub-contractor, excluding payable taxes including expenses paid by the Vietnamese party on behalf of the foreign contractor, foreign sub-contractor (if any).
According to Clause 2, Article 13 of Circular 103/2014/TT-BTC stipulating the percentage for calculating CIT for contractor tax, specifically as follows:
“Copyright income -> Taxable at 10%”
“Services, machinery and equipment rental, insurance, rig rental -> Taxable at 5%”
Revenue subject to CIT is the total revenue excluding VAT received by foreign contractors and foreign sub-contractors, excluding payable taxes.
The taxable revenue includes expenses paid by the Vietnamese party on behalf of the foreign contractor, foreign sub-contractor (if any).
So that:
– When paying for the purchase of imported software (Software Copyright), you must deduct, declare and pay contractor tax at the specific rate as follows:
CIT: Revenue subject to CIT (X) at the rate of 10% on revenue subject to CIT.
VAT: Do not have to pay VAT because it is a non-taxable object.
– When paying service fees in the process of importing software, your business must deduct, declare and pay contractor tax at the following rate:
VAT = Revenue subject to VAT ( X ) The rate is 5% of the revenue subject to VAT
CIT = Revenue subject to CIT ( X ) The rate is 5% on revenue subject to CIT.
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Frequently asked questions
Pursuant to Article 1 of Circular 103/2014/TT-BTC, subjects to which contractor tax shall be applied include:
Foreign business organizations that have a permanent establishment in Vietnam or do not have a permanent establishment in Vietnam; foreign individuals doing business in Vietnam or not being resident in Vietnam (collectively referred to as foreign contractors and foreign sub-contractors) doing business in Vietnam or earning income in Vietnam on the basis of a contract, agreement, or commitment between a foreign contractor and a Vietnamese organization or individual or between a foreign contractor and a foreign sub-contractor to perform a part of the contract’s work. contractors.
Foreign organizations and individuals that supply goods in Vietnam in the form of on-spot import and export and generate income in Vietnam on the basis of contracts signed between foreign organizations and individuals and enterprises. businesses in Vietnam (except for processing and exporting goods to foreign organizations and individuals) or distributing goods in Vietnam or providing goods according to the delivery conditions of commercial terms. International – Incoterms that the seller bears the risks related to the goods entering the territory of Vietnam.
Foreign contractors and sub-contractors being Individuals:
V.a.t tax.
PIT
Foreign contractors and sub-contractors being organizations:
V.a.t tax.
CIT
Foreign contractors and sub-contractors will pay taxes, fees and other fees based on the provisions of current effective legal documents on Taxes, fees and other fees.
Conclusion: So the above is Tax on contractors buying foreign software in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
