Circular No. 69/2025/TT-BTC, issued by the Ministry of Finance, has officially clarified the regulations on Value Added Tax (VAT) applicable to foreign organizations and individuals conducting business activities in Vietnam. This document marks a significant step in completing the legal framework and enhancing the efficiency of foreign contractor tax management in the context of deep economic integration.
Here are the core contents you need to know.
1. Who is Subject to VAT in Vietnam?
According to Circular 69/2025/TT-BTC, foreign organizations and individuals (collectively referred to as Foreign Contractors, Foreign Sub-contractors) are subject to VAT when doing business in Vietnam, including:
More specifically, the following cases are subject to VAT:
Distributing goods or providing services in Vietnam: This applies when the foreign contractor remains the owner of the goods, is responsible for costs and quality, or sets the selling price in Vietnam, including cases of authorizing a Vietnamese party to perform these activities.
Negotiating and signing contracts in Vietnam: When the foreign contractor uses a Vietnamese organization or individual to sign contracts in their name.
Exercising import, export, and distribution rights: When the foreign contractor uses their right to import, export, and distribute in the Vietnamese market or purchases goods for export in accordance with commercial law.
2. Cases Exempt from (Not Subject to) VAT
The Circular also clearly specifies cases that are NOT subject to VAT, including:
Organizations established and operating under the laws of Vietnam.
Foreign organizations and individuals who only supply goods without any accompanying services performed in Vietnam.
Services that are performed and consumed entirely outside of Vietnam, such as:
International telecommunications ceding services, transmission line leasing, and international postal services between Vietnam and foreign countries.
3. How to Calculate VAT Payable under the Direct Method
For foreign contractors paying VAT under the direct method, the payable VAT amount is determined as follows:
Tax Calculation Formula
VAT Payable=VAT Taxable Revenue×VAT Rate (%)
VAT Taxable Revenue
Is the total revenue from providing services or services attached to goods that the foreign contractor receives.
This revenue is before deducting any payable taxes and includes any costs paid by the Vietnamese party on behalf of the foreign contractor (if any).
Important Note: In cases where a contract does not separate the value of goods from the value of services performed in Vietnam, VAT will be calculated on the entire contract value.
VAT Rate (%) on Revenue
This percentage rate is specifically defined for each business sector according to the prevailing laws on VAT.
Note: Foreign contractors paying VAT under the direct method are not entitled to deduct input VAT.
4. Special Provisions for the Oil and Gas Sector
The Circular includes a separate section to guide VAT in oil and gas activities:
If the contractor does not meet the conditions for the deduction method: The Vietnamese party is responsible for withholding and paying the tax on behalf of the foreign contractor before making payment.
If the contractor meets the conditions for the deduction method: The contractor can register to pay VAT under the deduction method if they satisfy the requirements (having a permanent establishment, being a tax resident, contract duration exceeding 183 days, maintaining accounting records as prescribed). However, input VAT incurred before the tax registration certificate is issued will not be deductible.
5. Key Terminology
Permanent Establishment (PE): Determined according to the provisions of the law on Corporate Income Tax.
Tax Resident: Determined according to the provisions of the law on Personal Income Tax.
Contractor Contract: A contract, agreement, or commitment between a foreign contractor and a Vietnamese party.
Sub-contractor Contract: A contract between a sub-contractor (who can be Vietnamese or foreign) and the main contractor.
The issuance of Circular No. 69/2025/TT-BTC has created a clear and transparent legal corridor, helping foreign organizations and individuals to better comply with their tax obligations in Vietnam while strengthening the management efficiency of state agencies.
