At the same time, Ms. Linh's company hires a company in the UK as a third party to provide this service to the company, and the company will use this as input to export to Myanmar (the UK side can only issue an invoice and only has the value of the service).

Ms. Linh asked, what documents are needed to calculate reasonable input costs? Does her company have to pay any taxes to the UK?

Regarding this issue, the Ministry of Finance responds to this issue as follows:

Based on Circular No. 103/2014/TT-BTC dated August 6, 2014, of the Minister of Finance guiding the implementation of tax obligations applicable to foreign organizations, individuals doing business in Vietnam or earning income in Vietnam:

In Clause 1, Article 1, Chapter 1, regulations on the subject of application:

"The guidance in this Circular applies to the following subjects (except as provided in Article 2, Chapter I):

1. Foreign business organizations with or without permanent establishments in Vietnam; foreign individuals doing business as residents or non-residents in Vietnam (hereinafter referred to collectively as Foreign Contractors, Subcontractors) doing business in Vietnam or earning income in Vietnam based on contracts, agreements, or commitments between Foreign Contractors and Vietnamese organizations, individuals or between Foreign Contractors and foreign subcontractors to perform part of the work of the contractor contract…".

In Article 6, the subjects liable for VAT are regulated as follows:

"Article 6. Subjects liable for VAT

"1. Services or services attached to goods subject to VAT, provided by Foreign Contractors or Foreign Subcontractors under contractor contracts, subcontractor contracts used for production, business, and consumption in Vietnam (except as specified in Article 2, Chapter I), including:

- Services or services attached to goods subject to VAT provided by Foreign Contractors or Foreign Subcontractors in Vietnam and consumed in Vietnam;

- Services or services attached to goods subject to VAT provided by Foreign Contractors or Foreign Subcontractors outside Vietnam and consumed in Vietnam…".

Article 7 regulates income subject to CIT as follows:

"1. The CIT income of Foreign Contractors or Foreign Subcontractors is income derived from activities of providing, distributing goods; providing services, services attached to goods in Vietnam under contractor contracts, subcontractor contracts (except as specified in Article 2, Chapter I)".

Article 8 regulates the subjects and conditions for application.

Article 11 regulates the subjects and conditions for submitting VAT, CIT according to the direct ratio method:

"If Foreign Contractors or Foreign Subcontractors do not meet any of the conditions specified in Article 8, Item 2, Chapter II, the Vietnamese Party shall submit taxes on behalf of Foreign Contractors or Foreign Subcontractors as instructed in Article 12, Article 13, Item 3, Chapter II".

Article 12 regulates VAT as follows:

"1. Revenue subject to VAT

… 2. Percentage (%) for calculating VAT on revenue:

a) Percentage (%) for calculating VAT on revenue for business sectors:…".

Article 13 regulates CIT as follows:

"1. Revenue subject to CIT

… 2. Percentage (%) of CIT calculated on taxable revenue

a) Percentage (%) of CIT calculated on taxable revenue for business sectors:…".

Based on Circular No. 80/2021/TT-BTC dated September 29, 2021, of the Minister of Finance guiding the implementation of some provisions of the Tax Administration Law and Decree No. 126/2020/NĐ-CP dated October 19, 2020, of the Government detailing and guiding the implementation of some articles of the Tax Administration Law:

In Item 1 of Article 76, regulations on the direct tax registration of foreign suppliers.

In Item 1 of Article 77, guidelines on tax declaration, calculation of direct tax by foreign suppliers.

Article 78 regulates the direct tax payment by foreign suppliers.

Article 79 regulates the authorization to carry out tax registration, tax declaration and payment in Vietnam by foreign suppliers.

In Item 1 of Article 81, regulations on the responsibilities of organizations, individuals in Vietnam related to the purchase of goods, services from foreign suppliers:

"1. Organizations established and operating under Vietnamese law, organizations registered to operate under Vietnamese law purchasing goods, services from foreign suppliers or distributing goods, providing services on behalf of foreign suppliers that do not register tax, declare tax, pay tax in Vietnam as prescribed in Article 76, Article 77, Article 78, Article 79 of this Circular, then the purchasing organization or distributing goods, services on behalf of foreign suppliers has the obligation to declare, deduct, and pay taxes on behalf of foreign suppliers as stipulated in Circular No. 103/2014/TT-BTC dated August 6, 2014, of the Ministry of Finance…".

Based on Circular No. 96/2015/TT-BTC dated June 22, 2015, of the Ministry of Finance guiding CIT in Decree No. 12/2015/NĐ-CP dated February 12, 2015, of the Government.

In Article 4, amending and supplementing Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented at Item 2 of Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) as follows:

""Article 6. Deductible and nondeductible expenses when determining taxable income

1. Except for expenses not deductible as specified in Item 2 of this Article, enterprises are allowed to deduct all expenses if they meet the following conditions:

a) Actual expenses related to the business activities of the enterprise.

b) Expenses with sufficient legal invoices, documents as prescribed by law.

c) Expenses with invoices for purchasing goods, services each time valued at VND 20 million or more (including VAT) when payment must have non-cash payment vouchers.

Non-cash payment vouchers shall be made according to the provisions of legal documents on value-added tax.

In cases of purchasing goods, services each time valued at twenty million dong or more…".

Based on the above regulations, in principle, foreign organizations, Foreign Contractors, and income generated in Vietnam based on contracts, agreements, or commitments between foreign contractors and Vietnamese organizations, individuals fall within the scope of tax obligations under Circular No. 103/2014/TT-BTC.

In cases where foreign contractors do not register taxes, declare taxes, or pay taxes in Vietnam as prescribed in Articles 76, 77, 78, 79 of Circular No. 80/2021/TT-BTC, the purchasing organization or distributor substituting for the foreign contractor has the obligation to declare, deduct, and pay taxes on behalf of the foreign contractor as stipulated in Circular No. 103/2014/TT-BTC.

Regarding VAT: The subjects liable for VAT comply with the provisions of Clause 1, Article 6 of Circular No. 103/2014/TT-BTC. The percentage (%) used to calculate VAT on revenue follows the regulations in Clause 2, Article 12 of Circular No. 103/2014/TT-BTC.

Regarding CIT: Income subject to CIT complies with the provisions in Clause 1, Article 7 of Circular No. 103/2014/TT-BTC. The percentage (%) of CIT calculated on taxable revenue follows the regulations in Clause 2, Article 13 of Circular No. 103/2014/TT-BTC.

Expenses included in costs are deductible when determining the taxable income of Ms. Linh's company if they meet the conditions specified in Clause 1, Article 4 of Circular No. 96/2015/TT-BTC and do not fall under the cases of nondeductible expenses specified in Clause 2, Article 4 of Circular No. 96/2015/TT-BTC.

For specific cases, it is recommended that Ms. Linh provides relevant documents related to the issues and contacts the tax authority directly for specific guidance.