Instructions on how to settle and declare contractor tax online

With this article, fdiinvietnam.com will guide (with examples and images) how to make a contractor tax declaration, tax settlement declaration – pay foreign contractor tax online.

I. How to declare foreign contractor tax

1. Form and deadline for submitting contractor tax declaration

There are 2 forms of contractor tax declaration, which are declaration upon each occurrence and declaration monthly:

• Declaration for each occurrence: The declaration deadline is the 10th day from the date of payment to the foreign contractor (hereinafter referred to as NTNN);
• Monthly declaration: The deadline for declaration is the 20th day of the month following the month in which the declaration obligation arises;
• The deadline for paying contractor tax is the last day of the declaration submission deadline.

2. Instructions on how to prepare foreign contractor tax declarations

>> Step 1: Download the HTKK software on the website of the General Department of Taxation, then log in with the contractor’s tax code that has been issued, select “Agree”, the screen will appear as shown below:

>> Step 2: Select the contractor tax subsystem, then select the type of declaration to declare:

• Form 01/NTNN: Vietnamese company declares and pays tax on behalf of foreign company;
• Form 03/NTNN: NTNN directly declares and pays taxes.

In this article, fdiinvietnam.com will guide you through the declaration in the case where the Vietnamese side declares and pays taxes on behalf of the foreign contractor (form 01/NTNN), which is also the most common case.

>> Step 3: Select the appropriate declaration period (monthly or by each occurrence, first declaration or additional declaration), then click “Agree”;

 

>> Step 4 : Fill in the information on the form you have chosen;

 

• Column 1: Content;
  • In this index, you fill in the content of the work that NTNN performs for your company. Please note to declare in detail the work that NTNN provides according to the corresponding industry groups. Different business activities will apply different rates;
  • In case your company signs contracts with many foreign contractors or signs many contracts with one foreign contractor. Please note to declare separately for each contract.

For example: fdiinvietnam.com signed contract No. 56789 on October 26, 2021, the contract content is to buy a line of machinery and office equipment with enterprise B abroad. Enterprise B sells the line of machinery and equipment to fdiinvietnam.com for 500 million VND, and at the same time provides guidance and installation services to fdiinvietnam.com for 80 million VND. The above price does not include value added tax (VAT) and corporate income tax (CIT) arising in Vietnam. fdiinvietnam.com will be responsible for declaring and paying taxes arising from this contract.
In the declaration, you need to summarize the work that NTNN performs as follows:
     + Sell line of machinery and office equipment;
     + Provide guidance and installation services.

If the contractor contract includes business activities and service provision subject to VAT and CIT at different rates, when declaring, you must separate the corresponding business activities and service provision. If you cannot separate them, you must declare at the highest tax rate for the entire contract value.

In the above example, “Selling of machinery and office equipment” is subject to 1% corporate income tax and not subject to VAT, “Providing guidance and installation services” is subject to 5% corporate income tax and 5% VAT, and the contract also clearly states the value of each item. Therefore, when declaring, you need to separate them as illustrated.

• Column 2: Tax code;

Is the NTNN tax code, if the foreign enterprise does not have a tax code, leave it blank.

• Column 3: Contract No.… date/month/year;

You fill in the contract number and contract signing date. 

• Column 4: Revenue excluding VAT;

Is the actual amount paid during the declaration period to foreign contractors.

• Column 5: Payment date;
  • If declaring for each occurrence: HTKK defaults to the date of declaration, you are not allowed to edit the date of this column;
  • If declared monthly: Actual payment date to foreign contractor.

Note: The payment date you fill in the declaration must be within the tax period, that is, if you declare contractor tax in October 2021, the payment date you must enter must be in October 2021.

• Column 6: Revenue subject to VAT;
  • Case 1: The revenue of the foreign contractor as agreed in the contract is the revenue including VAT (Gross price);

➞ Is the value of the contract signed with the contractor.

  º Case 2: Revenue of foreign contractors as agreed in the contract is revenue excluding VAT (Net price), specifically:

            ➞ Revenue subject to VAT = (Revenue subject to corporate income tax)/(1 – Rate (%) for calculating VAT on revenue)

• Column 7: VAT rate on revenue;

Taxpayers shall determine the VAT rate (%) calculated on taxable revenue for business activities performed by foreign contractors under contracts and record it in this indicator. The VAT rate (%) is stipulated in Circular No. 103/2014/TT-BTC dated August 6, 2014 of the Ministry of Finance and is determined for each specific industry as follows:

 

• Column 8: VAT payable;

VAT payable (Column 8) = VAT taxable revenue (Column 6) x VAT rate % on revenue (Column 7).

• Column 9: Revenue subject to corporate income tax;

This indicator reflects the revenue subject to CIT of foreign contractors according to regulations. The revenue subject to CIT of foreign contractors is the total revenue excluding VAT, excluding taxes payable (if any) received by the foreign contractor. The revenue subject to CIT is calculated including expenses paid by the Vietnamese Party on behalf of the foreign contractor and foreign subcontractors (if any).

>> Case 1: Revenue of foreign contractors as agreed in the contract is revenue including corporate income tax (Gross price);

➞ Contractual revenue minus VAT but not minus corporate income tax payable.

>>  Case 2: Revenue of foreign contractors as agreed in the contract is revenue excluding corporate income tax (Net price) which is the actual amount paid in the declaration period to foreign contractors;

            ➞ Revenue subject to corporate income tax = (Revenue subject to corporate income tax)/(1 – Rate (%) for calculating VAT on revenue)

• Column 10: Corporate income tax rate;

Taxpayers shall determine the corporate income tax rate (%) calculated on taxable revenue for business activities performed by foreign contractors under contracts and record it in this indicator. The corporate income tax rate (%) calculated on revenue is stipulated in Circular No. 103/2014/TT-BTC dated August 6, 2014 of the Ministry of Finance and is determined for each industry:

 

• Column 11: Tax amount exempted under the agreement;
  • This indicator reflects the amount of corporate income tax exempted under the Double Taxation Avoidance Agreement with countries that Vietnam has signed;
  • If you determine that your contract with the foreign contractor is eligible for tax exemption, you send a notification to the tax authority within 15 days before the tax declaration deadline. The next time a contract arises with a foreign contractor for which you have previously sent a notification, you only need to send a copy of the newly signed economic contract to the tax authority.
    If the company is not eligible for tax exemption, you do not need to declare this indicator.
• Column 12: Corporate income tax payable;

 

• Column 13: Total tax payable to the state budget.

 

>> Step 5: Record the data you just entered into the declaration;

 

>> Step 6: Generate contractor tax declaration;

To submit the declaration online, you need to export the file in XML format.

 

>> Step 7: Submit tax return online;

• You log in to the electronic tax system using your business’s electronic tax account;
• The way to submit a contractor tax declaration is similar to submitting other declarations such as VAT declaration, personal income tax declaration, etc.

3. How to pay contractor tax online

>> Step 1: Log in to your electronic tax account on the website thuedientu.gdt.gov.vn using your business account;

>> Step 2: Select “Pay tax”, then select “Create a payment slip”;

• Select the tax payment bank, the screen will appear as shown below;

 

• The payer information section is the information of the Vietnamese enterprise paying tax on behalf of the foreign contractor (the system will automatically display, you do not need to enter); 
  • Currency: You choose the tax payment currency as “Vietnamese Dong” (check the VND box);
  • Deduct account number: You select the account number you want to deduct. 
• “Beneficiary” information: You fill in the NTNN tax code, the system will automatically display name and address information;

 

• Information of the tax authority, “Information about the place where the revenue arises”: The system will automatically display;
• Treasury information:  
  • Transfer to State Treasury: The system will automatically display;
  • Open at authorized collection bank: Select authorized collection bank.

 

• Tax type information: Select “Domestic Tax”;
• Other information: Do not select;
• Section “Content of budget payments”: 
  • Tax period/Decision date/Notification date: Select “Pay tax for each occurrence” if the declaration is made for each occurrence. Select “Pay tax monthly” if the declaration is made monthly;

 

 

º Contractor tax includes VAT and CIT, so when making a payment slip, you need to select both of these taxes. You select sub-item 1701 to pay VAT and 1052 to pay CIT.

After filling in all the information on the “Deposit Form”, you sign and submit it, then look up “Deposit Form” to see the status of the deposit form.

4. Can contractor VAT be deducted and corporate income tax be included in costs?

• Regarding value added tax: Value added tax paid on behalf of foreign contractors will be deducted from input value added tax. Specifically, Clause 10, Article 1 of Circular 26/2015/TT-BTC stipulates: “There must be a legal value added invoice for purchased goods and services or a document proving the payment of value added tax at the import stage or a document proving the payment of value added tax on behalf of foreign parties according to the guidance of the Ministry of Finance applicable to foreign organizations without Vietnamese legal status and foreign individuals doing business or having income arising in Vietnam”. 
• Regarding corporate income tax: Corporate income tax paid on behalf of foreign contractors by enterprises will be included in reasonable expenses when calculating corporate income tax. Specifically, Clause 2.37 of Circular 96/2015/TT-BTC stipulates non-deductible expenses, stating: “Input value added tax that has been deducted or refunded; input value added tax of fixed assets being cars with 9 seats or less exceeding the prescribed level shall be deducted according to the provisions of legal documents on value added tax; corporate income tax except for cases where enterprises pay corporate income tax on behalf of foreign contractors where, according to the agreement in the contract of foreign contractors or subcontractors, the revenue received by foreign contractors or subcontractors does not include corporate income tax; personal income tax except for cases where enterprises sign labor contracts stipulating that salaries and wages paid to employees do not include personal income tax”.

➨ Conclusion: Tax paid by contractors on behalf of foreign contractors is deductible from VAT and included in expenses for corporate income tax.

II. How to settle foreign contractor tax

1. Deadline for submitting contractor tax finalization declaration

Depending on the method of calculating contractor tax, the deadline for submitting the contractor tax finalization declaration will be different. Specifically:

• Contractor tax calculated by direct method: VAT and CIT will be settled upon the end of the contractor contract. The deadline for submitting contractor tax settlement declaration is no later than the 45th day from the end of the contractor contract;
• Contractor tax calculated by mixed method: Corporate income tax by mixed method of foreign contractors is settled upon the end of the contractor contract. Similar to above, the deadline for submitting contractor tax settlement declaration is no later than the 45th day from the end of the contractor contract;
• Corporate income tax according to the declaration method of foreign contractors is settled annually. The deadline for submitting the final declaration is the last day of March of the following year. 

2. Contractor tax settlement dossier includes:

• Tax settlement declaration form No. 02/NTNN or 04/NTNN;
• List of foreign contractors and Vietnamese subcontractors participating in the implementation of the contractor contract according to form No. 02-1/NTNN, form 02-2/NTNN;
• List of tax payment documents;
• Minutes of liquidation of contractor contract.

3. How to prepare contractor tax settlement declaration

>> Step 1: Log in with the contractor tax code that has been issued, select “Agree”;

>> Step 2: Select the Contractor Tax subsystem, then select the type of declaration to declare;

• Form 02/NTNN: Vietnamese company declares and pays tax on behalf of foreign company;
• Form 04/NTNN: NTNN directly declares and pays taxes.

In this article, fdiinvietnam.com will guide you in declaring the case where the Vietnamese party declares and pays taxes on behalf of the foreign contractor (form 02/NTNN), which is also the most common case.

>> Step 3: Select the appropriate declaration period then click “Agree”;

Note : 

• Select additional Appendix 02-1/NTNN if making settlement for many foreign contractors;
• Select additional Appendix 02-2/NTNN if there are subcontractors participating in the contractor contract.

The screen will appear as shown below:

• Row 1: Contract value;
  • Column 3: You fill in the total contract value at the time of signing; 
  • Column 4: You fill in the total actual contract value at the time of settlement. 

Note : If you settle for many foreign contractor contracts, you choose to add appendix 02-1/NTNN. After you fill in the appendix, the system will automatically calculate rows 1 and 2 of column 4.

• Item 2: Revenue excluding VAT;
  • Column 3: You fill in revenue information excluding VAT at the time of signing;
  • Column 4: You fill in the revenue information excluding actual VAT at the time of settlement.
• Row 3: Taxable revenue of deductible work of subcontractors;
  • If there are subcontractors participating in the contractor contract, you fill in the information in Appendix 02-2/NTNN, the system will automatically calculate this index.
• Row 4: Taxable revenue of foreign contractors;
  • The system will automatically calculate.
• Line 5: Tax payable by foreign contractors;

This index is equal to VAT amount + CIT amount payable, the system will automatically synthesize the data when you fill in all information in rows 5a and 5b:

  º Item 5a: Value added tax:

+ Column 3: You fill in the VAT amount declared on the 01/NTNN declarations related to the contract;

+ Column 4: Fill in the actual VAT amount incurred at the time of settlement.

º Line 5b: Corporate income tax, Similar to VAT, you fill in:

+ Column 3: You fill in the corporate income tax amount declared on the 01/NTNN declarations related to the contract;

+ Column 4: You fill in the actual corporate income tax amount incurred at the time of settlement.

• Line 6: Tax payable by foreign contractors;

This index is equal to VAT amount + CIT amount paid, the system will automatically synthesize the data when you fill in all information in lines 6a and 6b;

    º Line 6a: Value added tax, you fill in the actual VAT amount paid on the payment slip.

    º Line 6b: Corporate income tax, similar to VAT, you fill in the actual corporate income tax amount paid on the payment slip.

• Line 7: Tax payable.

The system will automatically calculate the remaining tax payable. The additional tax you must pay (if any) is the reference number of row 7 and column 5.

>> Step 4: Click “Save”, export the XML declaration and submit the declaration similar to the foreign contractor tax declaration.