Question:
Our enterprise signs a brokerage contract with a foreign organization for export purposes. Are we required to declare contractor tax? What are the deadlines for submitting contractor tax declarations, and what penalties apply for late submission?
Answer:
Contractor tax is a type of tax applied to foreign organizations or individuals when doing business or earning income arising in Vietnam under a contract, agreement, or commitment with a Vietnamese organization or individual. Pursuant to Clause 1, Article 1 of Circular 103/2014/TT-BTC, the subjects include foreign organizations doing business with or without a permanent establishment in Vietnam, as well as foreign individuals, resident or non-resident in Vietnam, when conducting business in Vietnam or earning income arising in Vietnam.
According to Clause 4, Article 2 of Circular 103/2014/TT-BTC, this guidance does not apply to services provided to Vietnamese organizations or individuals but performed abroad, including brokerage services for selling goods or providing services abroad. Therefore, if the enterprise signs a brokerage contract with a foreign organization for exporting goods abroad, the commission paid to the foreign company is not subject to contractor tax.
Regarding the deadline for submitting contractor tax declarations, pursuant to Point n, Clause 4, Article 8 of Decree 126/2020/ND-CP, value-added tax and corporate income tax of foreign contractors are applied using the direct method; corporate income tax may apply the hybrid method when the Vietnamese party makes multiple payments in a month. In the case of declaration per each taxable transaction, the declaration must be submitted no later than the 10th day from the date the tax obligation arises. If the Vietnamese party makes multiple payments in a month, the declaration may be submitted monthly, no later than the 20th day of the following month.
Regarding penalties for late submission of contractor tax declarations, pursuant to Article 13 of Decree 125/2020/ND-CP, depending on the level and duration of the delay, the taxpayer may be subject to a warning or a fine ranging from VND 2,000,000 to VND 25,000,000. For organizations, the fine is twice the amount for individuals. In addition, the taxpayer must pay the full amount of late tax payment and submit the tax declaration, including all attached appendices if any.
Consultation: Tax Consulting Lawyer Service
