05 Feb What is FCT how does it work in Vietnam?

The Foreign Contractor Tax (FCT) is a tax levied on foreign contractors who provide services in Vietnam. It is similar to a value-added tax (VAT) and is imposed on the revenue earned by foreign contractors from services provided in Vietnam.

The FCT is calculated as a percentage of the revenue earned by the foreign contractor, and the exact percentage depends on the nature of the services provided. The current rate is 5% for technical services, 7% for consulting services, and 10% for construction services.

To calculate the FCT, the foreign contractor must first determine their taxable revenue. This is calculated as the revenue earned from services provided in Vietnam, minus any allowable expenses. Allowable expenses are those that are directly related to the provision of the services and are supported by appropriate documentation.

Once the taxable revenue has been determined, the FCT can be calculated as follows:

FCT = Taxable revenue x FCT rate

For example, let’s assume that a foreign contractor provides technical services in Vietnam and earns a revenue of $100,000. The FCT rate for technical services is 5%. To calculate the FCT, we would use the following formula:

FCT = $100,000 x 5% = $5,000

In this example, the foreign contractor would be liable to pay $5,000 in FCT to the Vietnamese tax authorities.

It is important to note that the FCT must be paid within 30 days of the end of each quarter. Late payment of the FCT may result in fines and penalties.

Foreign business owners in Vietnam must be aware of the FCT and ensure that they are in compliance with the Vietnamese tax regulations. Failure to comply with the FCT regulations can result in substantial fines and penalties, so it is important to seek the assistance of a qualified accounting or legal firm.

In conclusion, the Foreign Contractor Tax is a tax imposed on foreign contractors who provide services in Vietnam. It is calculated as a percentage of the taxable revenue earned by the foreign contractor, and the exact percentage depends on the nature of the services provided. Foreign business owners in Vietnam must be aware of the FCT and ensure that they are in compliance with the Vietnamese tax regulations. Seeking the assistance of a qualified accounting or legal firm can help to ensure compliance and minimize the risk of fines and penalties.

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