Công văn 2389/TCT-CS

To: Tax Department of Ho Chi Minh City.

The General Department of Taxation received the document No. 12534/CT-TTHT dated December 14, 2015 of the Tax Department of HCMC concerning foreign contractor tax (FCT) related to sale of goods at bonded warehouses of foreign contractors. Below are opinions of General Department of Taxation:

Clause 1 and Clause 5 Article 1 of Circular No.103/2014/TT-BTC dated August 6, 2014 of the Ministry of Finance provide for regulated entities as follows:

“1. Foreign businesses with or without Vietnam-based permanent establishments; and resident or non-resident foreign businesspeople (below collectively referred to as foreign contractors and foreign subcontractors) doing business in Vietnam or earning incomes in Vietnam under contracts, agreements or commitments with Vietnamese organizations or individuals or between foreign contractors and foreign subcontractors to perform part of the main contract.

…

5. Foreign organizations or individuals that exercise the right to export, import or distribute goods in Vietnam, purchase goods for export, or sell imported goods to Vietnamese traders in accordance with trading laws.

Clause 1 Article 7 of Circular No.103/2014/TT-BTC provides for incomes subject to Corporate Income Tax (CIT) as follows:

“1. Income subject to CIT of foreign contractors or foreign subcontractors is income generated from provision or distribution of goods; provision of services and services attached to goods in Vietnam under main contracts and subcontracts (except for the case in Article 2 of Chapter I).

Pursuant to Article 20 of the Circular No. 156/2013/TT-BTC dated November 6, 2013 of the Ministry of Finance guiding declaration of VAT and CIT payable by foreign contractors.

Pursuant to above regulations and Canon Group’s function-based business division model:

- Regarding goods sale between Canon Singapore Pte, Ltd (below referred to as Canon Sing) and Canon Marketing Vietnam Co., Ltd where goods are delivered at a bonded warehouse in Vietnam leased by Canon Sing, then Canon Sing must pay CIT in Vietnam as per the regulations of Circular No.103/2014/TT-BTC; and Canon Marketing Vietnam Co., Ltd has the responsibility to declare, deduct and pay this tax on behalf of Canon Sing as prescribed in Circular No. 156/2013/TT-BTC.

- Regarding goods sale between Canon Sing and its clients in foreign countries where goods are delivered at a bonded warehouse in Vietnam leased by Canon Sing, then Canon Sing must pay CIT in Vietnam as per the law.

- Regarding goods sale between Canon Japan Inc. (manufacturer, outsourcing party) and Canon Sing (distributor), Canon Japan Inc. does not have to pay FCT in Vietnam as this is not a business activity of Canon Japan Inc. in Vietnam.

For your information and compliance./.