Tax obligations for representative offices of foreign traders in Vietnam.

In cases where a business establishes a Representative Office, and the Representative Office's function is to communicate, conduct market research, and promote investment and business opportunities in Vietnam in the production and business sector of the foreign enterprise, without conducting production or business activities in Vietnam, then the Representative Office is not required to pay Value Added Tax (VAT), Corporate Income Tax (CIT), or business license fees in Vietnam. However, the Representative Office must register for tax to obtain a Tax Identification Number for tax payment on behalf of the foreign enterprise as prescribed.

The representative office uses the tax identification number to deduct and pay personal income tax on behalf of individuals working at the representative office, or to deduct and pay tax on behalf of foreign contractors and subcontractors (if any).

See the detailed guidance document 1200/BTC-TCT.

Dear: Representative Office of Livzon Pharmaceutical Group Inc (China)
(Address: No. 22, Alley 5, Hoang Quoc Viet Street, Cau Giay District, Hanoi)

In response to the inquiry from the Representative Office of Livzon Pharmaceutical Group Inc (China) regarding tax obligations for representative offices of foreign traders in Vietnam, as raised on the Government's electronic portal, based on the data provided by the unit, the Ministry of Finance has the following opinion:

Article 4 of the Value Added Tax Law No. 13/2008/QH12 dated June 3, 2008 stipulates:

Article 4. Taxpayers

Value-added tax payers are organizations and individuals producing and trading goods and services subject to value-added tax (hereinafter referred to as business establishments) and organizations and individuals importing goods subject to value-added tax (hereinafter referred to as importers).

Clause 1, Article 2 of the Corporate Income Tax Law No. 14/2008/QH12 dated June 3, 2008 stipulates:

Article 2. Taxpayers

1. Corporate income tax payers are organizations engaged in the production and business of goods and services that generate taxable income as stipulated in this Law.

Clause 6, Article 2 of Government Decree No. 139/2016/ND-CP dated October 4, 2016, on business license fees stipulates:

“The entities liable for business license fees are organizations and individuals engaged in the production and business of goods and services, except for cases stipulated in Article 3 of this Decree, including:

...

6. Branches, representative offices, and business locations of organizations specified in Clauses 1, 2, 3, 4, and 5 of this Article (if any).”

Clause 1a, Article 6 of Circular No. 111/2013/TT-BTC dated August 15, 2013, issued by the Ministry of Finance, guiding personal income tax (PIT), stipulates:

Article 24. Tax Registration

1. Subjects required to register for tax

According to Article 27 of Decree No. 65/2013/ND-CP, the subjects required to register for personal income tax include:

a) Organizations and individuals paying income include:

...

a.6) Project Management Boards, Representative Offices of foreign organizations.

Article 25 of Circular No. 111/2013/TT-BTC stipulates the responsibility of organizations paying taxable income to deduct personal income tax before paying the income.

Clause 2c, Article 5 of Circular No. 95/2016/TT-BTC dated June 28, 2016, issued by the Ministry of Finance, guiding tax registration, stipulates the issuance of tax identification numbers in certain specific cases:

“c) Issuing tax identification numbers to businesses, economic organizations, other organizations, and individuals responsible for withholding and paying taxes on behalf of foreign contractors and subcontractors; organizations and individuals authorized by the tax authority to collect taxes; and organizations paying taxes on behalf of individuals under business contracts or cooperation agreements (hereinafter referred to as the substitute tax identification number).”

Based on the above regulations, if Livzon Pharmaceutical Inc (China) establishes a representative office in Hanoi, and the representative office's function is to communicate, research the market, and promote investment and business opportunities in Vietnam in the field of pharmaceutical and food production and trading, without conducting production or business activities in Vietnam, then the representative office is not required to pay VAT, corporate income tax, or business license fees in Vietnam. However, the representative office must register for tax to obtain a tax identification number for tax payment on behalf of the company as prescribed. The representative office will use this tax identification number to deduct and pay personal income tax for individuals working at the representative office or to deduct and pay tax on behalf of foreign contractors and subcontractors (if any).

The Ministry of Finance is responding to inform the Representative Office of Livzon Pharmaceutical Group Inc (China)./.