Foreign Contractor Withholding Tax (“FCWT”) applied for forwarding and logistics services
On 19 February 2021, Hanoi Tax Department issued Official Letter No. 5335/CTHN-TTHT guiding application of FCWT to forwarding and logistics services. A summary is as following:
If a foreign enterprise records income from international forwarding or logistics service delivering from foreign territory to Vietnam, the service is not subject to value-added tax (“VAT”) and corporate income tax (“CIT”).
If the income is recorded for the international forwarding and logistics services delivering from Vietnam to offshore destination, the service is subject to FCWT. Assessable revenue subject to VAT or CIT is the total revenue received by the foreign contractor excluding international freight payable to the carrier (air, sea). In case the foreign contractor does not satisfy the conditions for self-declaration of FCWT in Vietnam, Vietnam company needs to withhold, declare and make FCWT payment on behalf of the foreign contractor, Detail as following:
- For CIT: 2% on assessable revenue;
- For VAT: 0% VAT will be applied if the service is the international transport (i.e. transport of passengers, baggage and goods on international routes from Vietnam to overseas or vice versa, or both departure and arrival overseas destination, etc.). If the international transport service contract includes the domestic route, then international transportation should include the domestic component.