Mednovum Medical Services and Trading Company Limited (HCMC) intends to sign service contracts with some Singaporean individuals, residing in Singapore to carry out investment and trade promotion in the Singapore market.

These individuals will learn and report on the Singapore market situation to the Company, find customers, advertise and market the Company's products, all activities and jobs are performed by these individuals in Singapore.

The Company understands that the services these individuals provide to the Company are not subject to tax as prescribed in Clause 4, Article 2 of Circular 103/2014/TT-BTC because they are foreigners who do not reside in Vietnam and perform services for Vietnamese enterprises in foreign markets. Therefore, when paying service fees to these individuals, the Company is not obliged to withhold the personal income tax of these individuals.

Through the Receipt and Reply System to Business Recommendations, Mednovum Trading and Medical Services Co., Ltd. asked if the Company's understanding and application as above are in accordance with Vietnamese law?

In case the above application is correct, what procedures and regulations does the Company need to follow to be in the non-applicability of Circular 103/2014/TT-BTC? Does the company need to submit to the tax authority documents proving that it is a business individual according to Clause 4, Article 2 of Circular 103/2014/TT-BTC?

Regarding this issue, the General Department of Taxation - Ministry of Finance has the following comments:

Article 1, Chapter I of Circular 103/2014/TT-BTC dated August 6, 2014, of the Ministry of Finance guiding the implementation of tax liability of foreign entities doing business in Vietnam or earning income in Vietnam stipulates on subjects applicable:

“The guidance in this Circular applies to the entities below (except for the cases in Article 2, Chapter I):

1. Foreign business organizations having permanent establishments in Vietnam or not; foreign business individuals that are residents of Vietnam or not (hereinafter referred to as foreign contractors and foreign sub-contractors) who do business in Vietnam or earn income in Vietnam under contracts, agreements, or commitments between the foreign contractor and a Vietnamese entity or between a foreign contractor and a foreign sub-contractor to perform part of the main contract”.

Clause 4, Article 2, Chapter I of Circular 103/2014/TT-BTC mentioned above provides on subjects not applicable:

4. Any foreign entity that provides any of the services below for Vietnamese entities, provided the services are performed overseas:

… - Advertising and marketing (except for online advertising and online marketing);

… - Trade promotion and investment encouragement;

- Brokering goods sale and services provision overseas;

According to the above provisions, in case the Company signs a service contract with some individuals residing in Singapore to promote investment and trade in Singapore, these individuals will research, report on the market, search for customers, advertise and market the Company's products in the Singapore market (except for advertising and marketing on the internet), it is not subject to apply the Circular 103/2014/TT-BTC.

The company needs to have documents proving the activities of hiring advertising, marketing, investment promotion and trade in the Singapore market to serve the Company's production and business activities such as service contract signed with the individuals residing in Singapore; report on the results of research, market research, customer search, advertising and marketing of the Company's products in the Singapore market by individuals according to the signed contract; money transfer documents for individuals and other related documents.