Official Letter No. 38359/CT-TTHT (OL 38359): VAT, CIT (FCT) rates for advertisement on Facebook, Google, CloudFlare

OL 38359 dated 27th May 2019 by Hanoi Department of Taxation handles the following case:

A company uses advertisement service on Facebook, Google, CloudFlare from oversea network to promote its business. Service fee is paid each time the company uses this service (many times per month) when the service suppliers send them the payment requests. In this case, the company has the responsibility to withhold, declare and pay foreign contractor tax (FCT) on behalf of the service suppliers (foreign contractors) before making payments with the rate for VAT and CIT of 5%, according to regulations stated at Article 12 and 13 of Circular No. 103/2014/TT-BTC.

The company shall declare FCT each time when they make payments to the foreign contractors. The finalization declaration is also requested when the contract is finished.

In case the company makes many payments to a foreign contractor in a month, the company may register to declare FCT monthly.


Official Letter No. 8136/CT-TT&HT (OL 8136): CIT incentives for income from compensation

On 22nd May 2019, Binh Duong Department of Taxation issued OL 8136 about CIT incentives for income from compensation. The company has a new investment project established inside the industrial zone which is located in the geographical areas eligible for CIT incentives. In 2018, the company received compensation from a client since the client did not comply with the contract signed between them. In this case, the income from compensation is other income. According to Clause 13, Article 7 of Circular No. 78/2014/TT-BTC dated 18th June 2014 by the Ministry of Finance, this other income shall not be eligible for CIT incentives.


Official Letter No. 29723/CT-TTHT (OL 29723) about customs declaration for on-spot exporting products

On 29th May 2019, Hanoi Department of Taxation issued OL 29723 about customs declaration for on-spot exporting products with the following contents:

A company signs contracts with foreign individuals or foreign organizations which are not present in Vietnam and is requested by these foreign parties to deliver products to another business entities in Vietnam. In this case, the activity is conformable with the regulations about on-spot export act at Clause 1, Article 87, Circular No. 38/2015/TT-BTC dated 25th March 2015 by the Ministry of Finance.

In order to apply VAT rate of 0% for on-spot exporting products, the company must meet the requirements regulated at Point a, Clause 2, Article 9 of Circular No. 219/2013/TT-BTC dated 31st December 2013 by the Ministry of Finance, which includes the regulations about customs declaration. In case the company fails to meet any regulated requirements, the company must calculate and pay VAT as if the products are consumed domestically.


Official Letter No. 8408/CT-TT&HT (OL 8408): FCT on air ticket fee purchased directly with foreign airline

On 28th May 2019, Binh Duong Department of Taxation issued OL 8408, which handles the case that a company buys round-trip air tickets for its employees for business trip to Japan from EVA Air (foreign airline). The company purchases tickets through EVA Air’s website as well as make payment directly to EVA Air, not through its agents in Vietnam. In this case, income of EVA Air is subject to FCT. The company has a responsibility to declare and pay FCT on behalf of EVA Air with the CIT rate of 2%.

Since the air ticket purchase is conducted online without any contracts or agreements:

–  If EVA Air receives net payment after deducting FCT that the company pays on behalf of EVA Air, the company can record this tax to its deductible expense.

– If EVA Air receives payment before deducting FCT, the company is not allowed to record this tax to deductible expense.