Scenario: your company hires a London law firm for cross-border M&A advice — English lawyers work from London, meet online, never come to Vietnam. Fee USD 72,000 (net). If the lawyers never enter Vietnam, is contractor tax still withheld?
Step 1 — Remote advice is still subject to contractor tax
A common misconception: contractor tax follows where the service is consumed, not where the lawyers sit. Legal services serving Vietnamese operations — even performed entirely from London — are Vietnam-sourced income subject to contractor tax. Legal services are ordinary services (2026 framework: CIT Law 67/2025, Decree 320/2025, Circular 20/2026): 5% VAT + 5% CIT.
Step 2 — The numbers on USD 72,000 (net)
- VAT withheld: 72,000 × 5% = USD 3,600.
- CIT taxable revenue: 72,000 + 3,600 = USD 75,600.
- CIT withheld: 75,600 × 5% = USD 3,780.
- Total withholding: USD 7,380 — the firm nets USD 64,620.
Step 3 — Treaty, practice licensing, and filing
Tax treaty: the UK has a treaty with Vietnam (signed 1994). A firm with no Vietnamese permanent establishment (working remotely from London) may have service fees CIT-exempt under Article 7 (Form 01/HTQT) — a “clean” exemption with zero physical presence. 5% VAT still applies.
Practice licensing: foreign law organizations wanting presence and practice in Vietnam (offices, dispatched lawyers advising in person) need licensing under the Law on Lawyers (check the operative text) — cross-border remote advice falls outside that scope but remains subject to contractor tax.
On-behalf procedure: the Vietnamese enterprise retains the contractor tax before wiring the service fee abroad, declares it on Form 01/NTNN under Circular 80/2021, and pays on the law firm’s behalf — the obligation arises on each payment, not once at period-end.
Frequently asked questions
1. Do lawyers who never visit Vietnam trigger contractor tax?
Yes — contractor tax follows service consumption. London advice serving Vietnamese operations is taxable.
2. Withholding on USD 72,000?
USD 7,380 (VAT 3,600 + CIT 3,780 on 75,600) — the firm nets USD 64,620.
3. Can a treaty exempt it?
CIT may be exempt under Article 7 without a Vietnamese PE (remote work = “clean” case) — 5% VAT still applies.
4. Foreign firms opening in Vietnam?
Licensing under the Law on Lawyers is required for presence and practice in Vietnam.
5. Who declares and pays?
The Vietnamese company performs the deduction, the declaration (Form 01/NTNN), and the on-behalf payment every time it pays the foreign law firm — remote advice is no exception.
This article has been quality-reviewed by the FLAW AI Legal Council
