Scenario: the overseas parent appoints an international audit firm for consolidated financial-statement audit, with the Vietnam portion performed by dispatched foreign experts — the fee allocated to the Vietnam work is USD 80,000 (net). How is contractor tax computed?
Step 1 — Characterize: audit fees are ordinary services
Unlike training (VAT-exempt), audit is an ordinary VAT-taxable service. The 2026 contractor-tax framework (CIT Law 67/2025, Decree 320/2025, Circular 20/2026): 5% VAT + 5% CIT on taxable revenue. Key legal note: statutory audit of financial statements in Vietnam must be performed by a licensed Vietnamese auditing firm (Independent Audit Law 2011) — international firms typically work through their Vietnam member firm; fees paid directly to the foreign organization (technical support, regional coordination) still suffer contractor tax as computed below.
Step 2 — The numbers on USD 80,000 (net): gross up VAT first
On a net price (excluding Vietnamese taxes), contractor VAT is computed on the net price, then contractor CIT on the VAT-inclusive amount:
- VAT withheld: 80,000 × 5% = USD 4,000.
- CIT taxable revenue: 80,000 + 4,000 = USD 84,000.
- CIT withheld: 84,000 × 5% = USD 4,200.
- Total withholding: USD 8,200 — the foreign organization nets USD 71,800.
Step 3 — Treaty check and filing on behalf
Tax treaty: without a Vietnamese permanent establishment, the foreign auditor’s service fees may be CIT-exempt under Article 7 (Form 01/HTQT dossier) — but the 5% VAT still applies. In practice, foreign audit experts working extended stints in Vietnam easily breach 183 days → PE → no CIT exemption.
Declaring and paying on behalf: the Vietnamese enterprise retains the computed tax out of the audit fee at the time of payment, then declares it on Form 01/NTNN issued with Circular 80/2021 and pays it on the foreign audit firm’s behalf. For contracts signed from 12/3/2026, the hybrid method no longer exists — only the withholding method computed in step 2 applies.
Frequently asked questions
1. How much contractor tax on foreign audit services?
5% VAT + 5% CIT (on VAT-inclusive revenue) — on USD 80,000 net, total withholding USD 8,200.
2. Why is CIT computed on 84,000, not 80,000?
On a net price, contractor VAT is computed on the net first, then CIT on VAT-inclusive revenue (80,000 + 4,000).
3. What about the Vietnam member firm?
Fees to the Vietnam-incorporated member firm aren’t contractor tax — only amounts paid directly to the foreign organization count.
4. Can a treaty exempt it?
CIT may be exempt under Article 7 without a PE (Form 01/HTQT), but 5% VAT still applies. Extended expert stints easily breach 183 days → PE.
5. Who declares and pays?
The Vietnamese company paying the fee. It keeps the tax back when transferring the money, then declares and pays it via Form 01/NTNN.
This article has been quality-reviewed by the FLAW AI Legal Council
