Are royalties subject to contractor tax

Must determine what is royalties

Pursuant to the Law on Consolidation of Intellectual Property Law No. 07 / VBHN-CPQH dated June 25, 06 of the National Assembly of the Socialist Republic of Vietnam.

+ In Clause 1, Article 3 on subjects of copyright:

"first. Objects of copyright include literary, artistic and scientific works; Object rights related to copyright includes performances, sound recordings, video recordings, broadcasts, Satellite signals carry encoded programs."

+ In Article 4 provides for explanation of a number of words:

"2. Copyrights are the rights of organizations and individuals to works created or owned by them.

3. Rights related to copyrights (hereinafter referred to as related rights) is the right of organizations and individuals to performances, phonograms, video recordings, broadcasts, Satellite signals carry encoded programs.

...

7. Works are creative products in the literary, artistic and scientific fields expressed by any medium or form.

8. Derivative work means a work translated from one language to another, adapted, modified, transformed, compiled, annotated or selected work.

9. Published work, phonogram or video recording means a work, phonogram or video recording that has been released with the consent of the copyright owner or related right holder for dissemination to public with a reasonable number of copies. "

+ Article 17 provides for protected subjects of related rights:

“3. A broadcast program or satellite signal carrying an encrypted program is protected if it falls into one of the following cases:

a) The broadcast program or satellite signal carrying the encrypted program of a broadcasting organization with Vietnamese nationality;

b) Broadcast programs and satellite signals carrying encrypted programs of broadcasting organizations are protected under international treaties to which the Socialist Republic of Vietnam is a contracting party.

4. Performances, phonograms, video recordings, broadcasts, satellite signals carrying encrypted programs are only protected according to the provisions of Clauses 1, 2 and 3 of this Article, provided that they are not prejudice to copyright. ”

Regulations on contractor tax

Pursuant to Circular No. 103/2014 / TT-BTC dated August 06, 8 of the Ministry of Finance guiding the implementation of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or having income in Vietnam. Vietnam:

+ In Article 1 stipulates the subjects of application:

“Guidance in this Circular applies to the following subjects (except for the case specified in Article 2, Chapter I):

1. Foreign business organizations have a permanent establishment in Vietnam or do not have a permanent establishment in Vietnam; Foreign business individuals who are residents of Vietnam or are not residents of Vietnam (hereinafter referred collectively to as foreign contractors or foreign subcontractors) doing business in Vietnam or earning income. arising in Vietnam on the basis of a contract, agreement or commitment between a foreign contractor and a Vietnamese organization or individual or between a foreign contractor and a foreign sub-contractor to perform a part of the work of Contractor contract ... ”

Where the revenue is determined to be the income from royalties, VAT is not subject to VAT and the 10% CIT rate (%) calculated on the taxable turnover is applied.

In case the revenue is not the income from royalties (Service revenue), the contractor tax is calculated at the rate of 5% of the taxable turnover and 5% of the turnover for EIT calculation.

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