Scenario: your company hires a German training organization for a two-week production-line course in Vietnam, fee USD 60,000 (net — excluding Vietnamese taxes). How much contractor tax must accounting withhold on payment? Worked step by step below.
Step 1 — Check the tax treaty before computing
Germany has a tax treaty with Vietnam (signed 1995, in force). If the German trainer has no permanent establishment in Vietnam, service income is CIT-exempt under Article 7 (file Form 01/HTQT). But contractor VAT is assessed separately — treaties don’t exempt VAT. If no treaty applies (or a PE exists), continue to step 2.
Step 2 — Rates: training is VAT-exempt
Training’s special feature: teaching and vocational training are not subject to VAT (check current VAT non-taxable persons rules). Consequence for contractor tax (2026 framework: CIT Law 67/2025, Decree 320/2025, Circular 20/2026):
- Contractor VAT: 0% — none arises.
- Contractor CIT: 5% on taxable revenue (ordinary services).
Step 3 — The numbers on USD 60,000 (net)
- VAT withheld: 60,000 × 0% = USD 0.
- CIT withheld: 60,000 × 5% = USD 3,000.
- Total withholding: USD 3,000 — the German organization nets USD 57,000.
Compare: ordinary consulting (5% VAT) would withhold USD 6,150 (VAT 3,000 + CIT 3,150 on VAT-inclusive revenue) — training costs less than half thanks to VAT exemption.
Step 4 — Filing, paying on behalf, and the 12/3/2026 contract note
The Vietnamese payer’s duty: on each payment, the Vietnamese party deducts the contractor tax from the amount payable to the training organization, files Form 01/NTNN (Circular 80/2021), and remits the tax on its behalf. One 2026-framework point: the hybrid method has been abolished for contracts signed from 12/3/2026 — training contracts signed from that date follow the deemed withholding method above, while earlier contracts keep their registered method until expiry.
Frequently asked questions
1. How much contractor tax on foreign training?
Only 5% CIT — training (teaching, vocational) is VAT-exempt, so no contractor VAT arises.
2. Withholding on USD 60,000?
USD 3,000 (60,000 × 5% CIT, VAT 0%) — the foreign organization nets USD 57,000.
3. Can a treaty exempt it?
CIT may be exempt under Article 7 without a Vietnamese PE (file Form 01/HTQT) — but VAT is assessed separately.
4. Who declares and pays?
The payer in Vietnam — it deducts the tax at the moment of payment, files Form 01/NTNN on the foreign organization’s behalf, and pays the tax for it.
5. Contracts signed before 12/3/2026?
They continue under the registered method to end of term; contracts from 12/3/2026 use the withholding method.
