Update on Taxable Revenue for Foreign Contractors (Applied in accordance with Circular No. 20/2026/TT-BTC effective from 12 March 2026)

Pursuant to Article 7 of Circular No. 20/2026/TT-BTC on corporate income tax (CIT) applicable to foreign enterprises conducting business in Vietnam, and Article 2, Clause 4 of Article 3, and Clause 3 of Article 12 of Decree No. 320/2025/ND-CP, the CIT payable by foreign contractors and foreign subcontractors is determined based on taxable revenue and the CIT percentage rate applied to revenue.

Formula for determining CIT payable:

Corporate income tax payable

=

Taxable revenue for corporate income tax

x

Percentage rate applied to taxable corporate income tax revenue

Taxable revenue for CIT is the entire revenue received by a foreign contractor or foreign subcontractor, before deducting any taxes payable, including any expenses paid on behalf of the foreign contractor by the Vietnamese party (if any).

Previous regulation

Previously, under Circular No. 103/2014/TT-BTC, taxable revenue for CIT of foreign contractors was determined as revenue excluding value-added tax (VAT) received by the contractor.

Illustrative examples under Circular No. 20/2026/TT-BTC

Example 1: Gross contract

The value of the service contract performed in Vietnam by a foreign contractor is VND 100 million
(the foreign contractor bears the foreign contractor tax).

• VAT payable:
  100 million × 5% = VND 5 million
• CIT payable:
  100 million × 5% = VND 5 million

Example 2: Net contract

The value of the service contract is VND 90 million
(the Vietnamese party bears and pays the foreign contractor tax on behalf of the foreign contractor).

• Taxable revenue for CIT and VAT:
  90 million ÷ (100% − 10%) = VND 100 million
• VAT payable:
  100 million × 5% = VND 5 million
• CIT payable:
  100 million × 5% = VND 5 million

*** Important: This represents only our own opinions and assessments. You are advised to seek further guidance from the tax authority in charge. We assume no legal, tax liability for any content presented in this article.