Viet Nam - A Guide for Business and Investment - asean-korea centre

PART III. BUSINESS AND FOREIGN INVESTMENT ENVIRONMENTLoading packages at the Hai Phong PortSpecial Sales Tax (Excise Tax) (“SST”)SST applies to the production or import of certain luxury goods (i.e. cigarettes, liquor, beer, petrol, automobilescarrying less than 24 people, air-conditioners up to 90,000 BTU, playing cards, votive paper) and the provision ofcertain services (i.e. discotheques, massage parlours, karaoke bars, casinos, golf clubs, entertainment with bettingand lotteries). SST rates range from 10% to 80%. Goods and services subject to SST are also subject to VAT.Withholding TaxForeign companies performing business in Vietnam/having contracts with Vietnamese customers without establishinga legal entity in Viet Nam are subject to “Foreign Contractor Withholding Tax” (FCWT), which includes a VATand a CIT element. Withholding tax also applies to payments of interest, royalties, licence fees, and cross borderlease charges. Withholding tax applies on the income derived from Viet Nam, regardless of where the services areperformed, inside or outside Viet Nam.FCWT can be calculated in three ways.Method 1: Deduction Method (“VAT registration”)The FC maintains full Vietnamese Accounting System (“VAS”). The FC registers for VAT, issues Vietnamese VATinvoices to its Vietnamese customers and files conventional VAT returns (i.e. VAT payable equals output VAT lessinput VAT) with the Vietnamese tax authorities. The FC also pays CIT on the actual net profits derived from thecontract, based on their accounting records.38 Viet Nam - A Guide for Business and Investment