The Ministry of Finance issued Circular 103/2014/TT-BTC (Circular 103) on foreign contractor tax (FCT) on 6 August 2014. FCT is the method by which enterprise income tax (EIT) and value added tax are imposed on foreign companies and individuals that carry out business in Vietnam (irrespective of whether or not a permanent establishment is deemed). Circular 103 replaces Circular 60/2012/TT-BTC and is effective from 1 October 2014.
The main changes of Circular 103 are summarized below:
-The scope of application has been extended to cover foreign entities and individuals.
-Supply contracts, with a warranty clause, will generally not fall within the scope of FCT so long as the warranty services are not carried out in Vietnam.
Additionally, FCT would not apply to the use of a customs bonded warehouse or inland container depot (ICT) port to store goods for international transport, transit, transshipment or for further processing (by a Vietnamese company). Circular 103 is currently only available in the Vietnamese language.