In the context of globalization and the sharp increase in cross-border transactions, many foreign-invested enterprises (FIEs) in Vietnam frequently enter into service contracts, technology transfer agreements, or goods purchase and sale contracts with foreign partners. Under Vietnamese law, such transactions may fall within the scope of the Foreign Contractor Tax (FCT) – a tax regime applicable to foreign organizations and individuals that do not have a commercial presence in Vietnam but derive income from sources within the country.
However, not all contracts or transactions with foreign contractors are necessarily subject to Foreign Contractor Tax (FCT) declaration and payment. Pursuant to Circular No. 103/2014/TT-BTC issued by the Ministry of Finance – the key legal instrument providing detailed guidance on the tax policy applicable to foreign contractors – there are specific cases in which FCT is not imposed in Vietnam.
Understanding these exemptions is not only essential for ensuring compliance with applicable regulations, but also plays a crucial role in optimizing costs and minimizing legal risks in investment and business activities. In this article, we will provide an in-depth analysis of cases where no Foreign Contractor Tax (FCT) liability arises, accompanied by practical examples to help enterprises gain a comprehensive understanding and apply the rules flexibly to specific situations.
1. Foreign organizations and individuals conducting business in Vietnam in accordance with the Law on Investment, the Law on Petroleum, or the Law on Credit Institutions
In such cases, these are understood to be foreign investors conducting investment activities by establishing a company in Vietnam; foreign investors investing for the purpose of conducting basic petroleum investigations (including research, surveys, studies on geological formations and material components, conditions and laws governing petroleum generation, with the aim of assessing petroleum potential and prospects to serve as a basis for exploration and production orientation); and petroleum operations in Vietnam (including oil and gas exploration, field development, production, and decommissioning of petroleum installations); as well as foreign banks establishing branches in Vietnam.
2. Foreign organizations and individuals supplying goods to Vietnamese organizations or individuals without any accompanying services performed in Vietnam, under the following form
Delivery at a foreign border gate – in which the seller bears all responsibilities, costs, and risks related to the export and delivery of goods at the foreign border gate; and the buyer bears all responsibilities, costs, and risks related to the receipt and transportation of goods from the foreign border gate to Vietnam (including cases where the delivery is subject to a warranty obligation, which remains the responsibility of the seller).
Delivery at a Vietnamese border gate – in which the seller bears all responsibilities, costs, and risks related to the goods up to the point of delivery at the Vietnamese border gate; and the buyer bears all responsibilities, costs, and risks related to the receipt and transportation of goods from the Vietnamese border gate onward (including cases where the delivery is subject to a warranty obligation, which remains the responsibility of the seller).
Example:
Company C in Vietnam enters into an import contract for a shipment of excavators and bulldozers with Company D, a foreign entity. The delivery of goods is carried out at a Vietnamese border gate. Company D bears all responsibilities and costs related to the shipment up to the point of delivery at the Vietnamese border gate. Company C assumes all responsibilities and costs related to receiving and transporting the goods from the border gate in Vietnam. The contract includes a provision that Company D shall provide a one-year warranty for the goods; however, Company D does not perform any other services in Vietnam in relation to the shipment. In this case, the supply of goods by Company D falls outside the scope of application of Circular No. 103/2014/TT-BTC and is therefore not subject to Foreign Contractor Tax (FCT).
3. Foreign organizations and individuals earning income from services that are provided and consumed entirely outside of Vietnam
Example:
Company H, based in Hong Kong, provides cargo handling services at a Hong Kong port for the international shipping fleet of Company A in Vietnam. Company A pays Company H a service fee for the cargo handling services at the Hong Kong port. In this case, the cargo handling service is both provided and consumed in Hong Kong, and therefore it is not subject to tax in Vietnam.
A foreign organization provides professional services such as management and bond issuance, legal consultancy, depository agent services, and roadshow organization (a form of brand activation activity) for Company A in Vietnam. These services are performed in the countries where Company A issues Global Depositary Receipts (GDR) and international bonds. As these services are carried out entirely outside of Vietnam, they fall outside the scope of application of Circular No. 103/2014/TT-BTC and are not subject to Foreign Contractor Tax.
4. Foreign organizations and individuals providing the following services to Vietnamese organizations or individuals, where such services are performed entirely outside of Vietnam
Repair of means of transport (such as aircraft, aircraft engines, aircraft components, and seagoing vessels), machinery and equipment (including submarine cables and transmission devices), with or without the inclusion of spare parts or replacement materials; Advertising and marketing services, excluding advertising and marketing conducted via the Internet;
Example:
When a Vietnamese enterprise enters into a contract with an organization in Singapore to provide advertising services targeting the Singapore market, the service falls outside the scope of application of the Circular. However, if the Singaporean organization provides advertising services aimed at promoting product consumption in the Vietnamese market via the Internet, the income generated from such services is subject to the provisions of the Circular and thus falls within the scope of Foreign Contractor Tax.
5. Investment and Trade Promotion
In the context of international economic integration, investment and trade promotion activities serve as a vital bridge between domestic and foreign enterprises. However, when foreign organizations engage in promotional activities in Vietnam—such as providing market information, facilitating partner connections, or participating in exhibitions and trade fairs—questions arise as to whether such activities fall within the scope of liability for Foreign Contractor Tax. According to the guidance provided in Circular No. 103/2014/TT-BTC, certain forms of investment and trade promotion do not give rise to FCT obligations, provided that they are not accompanied by the provision of fee-based services in Vietnam.
6. Brokerage: Sale of Goods and Provision of Services to Overseas Markets
A common scenario for foreign-invested enterprises involves entering into brokerage agreements with foreign partners to facilitate the sale of goods or the provision of services outside the territory of Vietnam. In such cases, commissions paid to foreign brokers often raise questions regarding the applicability of Foreign Contractor Tax. In practice, where the brokerage activity is performed entirely outside the territory of Vietnam and does not involve the provision of services within Vietnam, such transactions do not fall within the scope of FCT liability under the prevailing regulations. The following discussion aims to assist enterprises in correctly identifying the nature of the transaction, thereby ensuring the accurate application of the relevant tax policies.
Example:
Where a Vietnamese enterprise enters into a contract with a Thai enterprise to engage brokerage services for the sale of its products in the Thai market or the global market, such brokerage services provided by the Thai enterprise shall fall outside the scope of application of the Circular. Conversely, where the Vietnamese enterprise contracts with a Thai enterprise to perform brokerage services in relation to the transfer of its real estate located in Vietnam, such brokerage services shall be subject to the provisions of the Circular.
7. Training Services (Excluding Online Training)
Training is a common area of collaboration between Vietnamese enterprises and foreign organizations or experts—particularly in programs aimed at enhancing managerial skills, technology, or international compliance. However, not all training activities conducted by foreign partners are subject to Foreign Contractor Tax in Vietnam. According to the provisions of Circular No. 103/2014/TT-BTC, where training is conducted online and the learners participate from within Vietnam, the FCT regulations may apply. Conversely, where the training is conducted entirely abroad, no FCT obligation arises.
Example:
Where Company A, a Vietnamese enterprise, enters into a contract with University B, based in Singapore, for its employees to attend in-person training courses at University B’s campus in Singapore, the training services provided by University B shall fall outside the scope of application of the Circular. However, in the event that Company A contracts with University B to deliver training to its employees located in Vietnam through online learning platforms, such online training services shall be subject to the provisions of the Circular.
Revenue sharing (payment of charges) for international telecommunications services between Vietnam and foreign countries, where such services are performed outside the territory of Vietnam, as well as payments for the lease of foreign transmission lines and satellite bandwidth in accordance with the Law on Telecommunications, shall fall outside the scope of application. Similarly, revenue sharing (payment of charges) for international postal services between Vietnam and foreign countries, where such services are performed outside the territory of Vietnam, shall be governed by the Law on Post and the international postal treaties to which the Socialist Republic of Vietnam is a signatory.
8. Foreign organizations and individuals using bonded warehouses or inland container depots (ICD) as storage facilities in support of international transportation, transit, transshipment, warehousing, or for subcontracted processing by other enterprises
Example:
Company ABC, a Singaporean entity operating in the international logistics sector, specializes in transporting goods from China to Europe. To optimize its supply chain, ABC leases a bonded warehouse in Hai Phong, Vietnam, for the temporary storage of imported goods from China prior to their onward shipment to Europe (as part of transshipment or transit operations). Within the bonded warehouse, Company DEF in Vietnam is contracted to perform minor processing activities (such as labeling and repackaging). Upon completion, the goods are exported from Vietnam through international routes. As this activity does not generate income from the provision of services in Vietnam or involve the consumption of goods within the Vietnamese market, it does not fall within the scope of foreign contractor tax liability.
The determination of whether a transaction is subject to foreign contractor tax is not merely a matter of legal technicality, but also has a direct impact on a company’s costs, cash flow, and its reputation for legal compliance. Therefore, in addition to having a clear understanding of the cases that fall outside the scope of foreign contractor tax as stipulated in Circular No. 103/2014/TT-BTC, enterprises—particularly foreign investors—are advised to proactively review their contracts, methods of transaction execution, and the underlying nature of cash flows in order to make an accurate assessment.
In cases involving uncertainties or complex circumstances, seeking advice from legal consultants with expertise in foreign contractor tax can help enterprises mitigate risks, avoid potential tax reassessments, administrative penalties, and disruptions to their business operations in Vietnam.
Understanding correctly – applying correctly – and declaring correctly are the keys for enterprises to operate efficiently, transparently, and sustainably within Vietnam’s increasingly refined legal framework.
Time of writing: 01/08/2025
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You can refer for more information:
- Foreign-Invested Enterprises: How to properly identify the Beneficial Owner?
- Who is the Beneficial Owner? – Legal Perspective from the Latest Regulations of Vietnamese Enterprise Law
- Latest social insurance obligations for foreign enterprises in Vietnam in 2025
- Deduction of input VAT under Decree 181/2025/NĐ-CP: What are the considerations for enterprises?
