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Circular 60/2012 – Foreign Contractor Withholding Tax (FCWT)

The Ministry of Finance (MoF) issued Circular 60/2012/TT-BTC (Circular 60/2012) to replace Circular 134/2008/TT-BTC (and its amendments), and is generally effective from 27 May 2012 (see effective dates below). The significant points are noted below:
Scope

The following are now subject to FCWT in Vietnam, foreign contractors who:

-   supply goods in Vietnam through indirect import/export arrangements (i.e. domestically purchase from and sell Vietnamese entities);
-   sell goods under the commercial terms of DDP/DAT/DAP (i.e. goods delivered and/or the title is transferred in Vietnam);
-   provide online advertising and marketing services, and online training services, even though these services are performed outside of Vietnam. However, advertising and marketing services, and training, conducted offshore will not be subject to FCWT.

Deemed tax rates
The following FCWT rates have been changed/clarified:


Business activity

Circular 60 (New)

Circular 134 (Old)

VAT

CIT*

VAT

CIT

drilling

70%

5%

50%

5%

interest

5%**

5%

10%

reinsurance

0.1%

2%

casinos, restaurants, hotel management

50%

10%

50%

5%

derivatives

2%

2%

*

See Effective dates below

**

Circular 60/2012 did not mention the VAT treatment of interest payments to (non-financial institutions) offshore lenders. However, OL4927/CT-TTHT, which was subsequently issued on 27 June 2012, clarified that VAT of 5% was applicable. It is understood that an application has been made for the interest to be exempted for VAT but this is still pending.

Effective dates
Circular 60/2012 revokes Circular 134/2008 and is effective from 27 May 2012. However, contracts which were signed before 27 May 2012 remain governed by Circular 134/2008.
Notwithstanding the above, the deemed CIT rates under Circular 60/2012 will apply retrospectively from 1 March 2012.

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