Công văn 3175/TCT-HT

To: DMS Macsimize Sdn Bhd Company

On May 30, 2007, the General Department of Taxation received the fax and email of DMS Macsimize Sdn Bhd Company (below abbreviated as DMS Company) inquiring about the tax rate for tax withholding at source applicable to the company. Regarding this issue, the General Department of Taxation gives the following opinions:

1. On taxes on incomes earned from the provision of consultancy services for Vietnamese companies:

Under Point 1, Section I, Part A of the Finance Ministry's Circular No. 05/2005/TT-BTC of January 11, 2005, guiding the tax regime applicable to foreign organizations without Vietnamese legal status and foreigners doing business or earning incomes in Vietnam, as DMS Company does not have Vietnamese legal status and has earned incomes from a contract to provide consultancy services for a Vietnamese company, DMS Company is governed by Circular No. 05/2005/TT-BTC above.

In case DMS Company does not apply the Vietnamese accounting system, the company shall pay value-added tax by the method of direct calculation on added value and pay business income tax in percentage (%) on turnover, specifically as follows:

- Value-added tax (VAT) equals 5% of the VAT-liable turnover

VAT-liable turnover is the entire turnover earned by foreign contractors and subcontractors for the supply of VAT-liable goods and services before subtracting payable tax amounts.

When the VAT-liable turnover does not include the payable VAT, this turnover must be converted into VAT-included turnover according to the formula prescribed in the Circular.

- Business income tax (BIT) equals 5% of the BIT-liable turnover

BIT-liable turnover is the entire turnover exclusive of VAT earned by foreign contractors and subcontractors before subtracting payable tax amounts.

When the turnover does not include the payable BIT, the BIT-liable turnover must be converted into BIT-included turnover according to the formula prescribed in the above Circular.

2. On work expenses

When DMS Company sent its consultants to Vietnam and paid work expenses for these consultants itself:

If these work expenses were included in the contract value which the Vietnamese party must pay, the tax-liable turnover shall be determined based on the contract value.

If these work expenses were not included in the contract value and the Vietnamese party must pay these expenses for the company, these expenses shall be accounted into the tax-liable turnover.

The General Department of Taxation informs DMS Company thereof for compliance.