other countries, which could offer tax benefits in many circumstances. Under current tax administration regulations,
the procedures to claim tax treaty benefits have been streamlined significantly
compared to previous rules.
Tax treaties only cover taxes on income and on capital,
therefore the following taxes may be exempt/reduced in Vietnam when applying
relevant tax treaties:
1.Corporate Income Tax (CIT) portion of the
Foreign Contractor Tax (FCT). For
instance, when a foreign company supplies machinery and equipment together with
services to a Vietnamese client, the Vietnamese client is generally responsible
for paying FCT at 1% CIT (on value of machine) and 5% CIT (on services). Under most tax treaties, such CIT will be
exempt in Vietnam if the foreign supplier does not have a Permanent
Establishment (PE) in Vietnam.
2.Personal Income Tax (PIT) of foreigners who stay
in Vietnam for less than 183 days in a year.
Generally other conditions must be met to qualify for exemption, such as
the employment cost is borne by an overseas company and not recharged to
Vietnam. Normally expatriates working
part-time for Representative Offices, or employees of foreign contractors, may qualify.