An e-commerce company in Ho Chi Minh City runs ads on Google and Meta, rents warehouse management software from a Singaporean provider, and pays platform royalties to a US partner. Each month, billions of VND flow abroad to pay for these services. The chief accountant’s question: must the company withhold tax before paying foreign suppliers — and what if the supplier has already paid tax in Vietnam itself?
This is the classic tax puzzle of the digital economy: services supplied from abroad, with no physical presence in Vietnam, but income arising from Vietnamese customers. This article systematizes tax obligations for cross-border services — focusing on digital services and online platforms — and distinguishes them from traditional contractor tax in EPC and technical consulting contracts (see foreign contractor tax in contracts with foreign partners).
Quick summary
| Topic | Tax obligations (VAT, CIT) for cross-border services, digital services, and online platforms |
|---|---|
| Main legal bases | Circular 89/2026/TT-BTC; Decree 252/2026/ND-CP; Circular 89/2026/TT-BTC; CIT Law 67/2025/QH15 |
| Core principle | Foreign supplier not meeting self-payment conditions → Vietnamese organization withholds and pays on behalf before payment |
| Direct payment channel | E-portal for foreign suppliers (etaxvn.gdt.gov.vn); from 19/5/2025 directly managed by the E-commerce Tax Department |
| New point | CIT Law 67/2025: foreign enterprises doing e-commerce/digital platform business without a permanent establishment in Vietnam still pay tax on Vietnam-sourced income |
What taxes apply to cross-border services?
Foreign organizations and individuals supplying services to organizations and individuals in Vietnam — even where services are performed entirely abroad and delivered via the internet — are subject to contractor tax under Circular 89/2026/TT-BTC of the Ministry of Finance. Common cross-border services include: online advertising (Google Ads, Meta), software as a service (SaaS), cloud hosting, e-commerce platforms, digital content streaming, software royalties, and other digital services.
In principle, Vietnam-sourced income of foreign suppliers is subject to two taxes: value-added tax (on service revenue) and corporate income tax (on service income). The practical question is not “whether tax applies” — but who declares and pays: the foreign supplier itself, or the Vietnamese business withholding and paying on behalf.
When do foreign suppliers pay tax themselves?
Circular 103/2014/TT-BTC — including the ‘three conditions’ in its Article 8 for self-payment — is no longer in force (repealed by Circular 89/2026/TT-BTC). Under the current framework, a foreign contractor declares and pays tax itself — VAT by the credit method (Article 19, Circular 89/2026/TT-BTC) and CIT on the basis of declared revenue and expenses (Article 21, Circular 89/2026/TT-BTC) — with tax declaration under Clause 1, Article 30 of Circular 89/2026/TT-BTC. In practice, this track requires the foreign contractor to be tax-registered in Vietnam and to fully apply the Vietnamese accounting, invoicing and documentation regime. There is no longer a single set of common conditions for both taxes: the applicable tax method is now determined separately for each tax (VAT: Article 9, Circular 69/2025/TT-BTC; CIT: Article 7, Circular 20/2026/TT-BTC).
In practice, cross-border digital service suppliers (Google, Meta, Microsoft, etc.) rarely maintain an accounting presence in Vietnam — they have no permanent establishment here and supply services continuously via online platforms. Therefore, for digital services, the common scenarios are not self-declaration under the above track, but one of the two mechanisms in the following sections: the supplier self-registers to pay tax via the e-portal, or the Vietnamese business withholds and pays on behalf.
When must Vietnamese businesses withhold and pay on behalf?
Where the foreign contractor does not declare and pay tax itself in Vietnam, the Vietnamese party withholds and pays tax on the contractor’s behalf. Under Clause 2, Article 30 of Circular 89/2026/TT-BTC — covering VAT calculated directly on revenue and CIT at percentage rates on revenue — the Vietnamese party declares per each payment to the foreign contractor and finalizes upon contract completion (where several payments occur within a month, monthly declaration may be registered instead). The withholding obligation itself is set out in Clause 3, Article 43 of Decree 252/2026/ND-CP: the Vietnamese organization withholds and pays on behalf the VAT payable by the foreign supplier (computed under Clause 4, Article 9 of Circular 69/2025/TT-BTC) and the CIT payable (computed under Article 7 of Circular 20/2026/TT-BTC) — withholding before each payment to the foreign contractor.
For Vietnamese businesses purchasing cross-border services, this means:
- Before each payment to a foreign supplier (advertising fees, SaaS fees, royalties, etc.), the business must determine the contractor tax to withhold, retain that tax, and pay it into the state budget;
- The foreign supplier actually receives the amount net of tax — this needs clear agreement in the contract (whether the price includes Vietnamese taxes or not);
- The Vietnamese business bears legal responsibility for correct and complete declaration and payment on behalf — errors lead to back-collection and penalties against the Vietnamese business itself.
An important exception: where the foreign supplier has self-registered, declared, and paid tax directly in Vietnam via the e-portal (section 4), the Vietnamese business need not withhold and pay on behalf for payments to that supplier — but should retain evidence of the supplier’s tax compliance for explanations during tax authority examinations.
Foreign suppliers’ direct tax payment channel
From 21/3/2022, the General Department of Taxation operates the E-portal for Foreign Suppliers (etaxvn.gdt.gov.vn), allowing foreign suppliers without a permanent establishment in Vietnam to self-register, declare, and pay tax directly into the state budget — instead of relying on the Vietnamese party’s withholding mechanism. Under Decree 252/2026/ND-CP and Circular 89/2026/TT-BTC, foreign suppliers pay tax quarterly for VAT and CIT (if any).
Implementation shows this mechanism is expanding rapidly: tech giants such as Meta, Google, Microsoft, TikTok, Apple, and Netflix have all registered, declared, and paid tax through this portal, with tax paid into the budget reaching thousands of billions of VND annually.
From 19/5/2025, under Notice 08/TB-TMĐT of the E-commerce Tax Department, the directly managing tax authority for overseas suppliers moved from the Large Enterprise Tax Department to the E-commerce Tax Department — Vietnamese businesses verifying a foreign supplier’s tax payment status work with this focal point.
New point: tax on digital business without presence in Vietnam
CIT Law No. 67/2025/QH15 (effective 01/10/2025) has a new point directly relevant to cross-border services: foreign enterprises without a permanent establishment in Vietnam must still pay tax on Vietnam-sourced income — including enterprises doing e-commerce business and business on digital platforms. At the same time, the concept of “e-commerce platforms and digital platforms” is added to the permanent establishment definition.
Practical meaning: the legal framework is shifting from collecting tax only through source withholding (the Vietnamese party paying on behalf) toward directly taxing foreign digital businesses with income from Vietnam. For Vietnamese businesses, this trend does not remove the current withholding obligation — but opens the possibility that in the future, when suppliers have fully self-paid, the Vietnamese party’s withholding burden will ease. Businesses should track subsequent guiding documents to adjust payment processes and contracts accordingly.
Permanent establishment risks for foreign investors are analyzed in detail in permanent establishment risks of foreign investors.
Distinguishing from traditional contractor tax
Many businesses confuse the following two groups — while their tax mechanisms and risk management differ:
| Traditional contractor tax (FCT article) | Cross-border and digital services tax (this article) | |
|---|---|---|
| Typical objects | EPC contracts, construction and installation, technical consulting, technology transfer with experts coming to Vietnam | Online advertising, SaaS, cloud, digital platforms, software royalties |
| Presence in VN | Usually has experts, equipment, and extended performance periods in VN | No physical presence; supplied via the internet |
| Common payment mechanism | Vietnamese party withholds and pays on behalf at rates on revenue (Clause 2, Article 30, Circular 89/2026/TT-BTC) | Supplier self-pays via the e-portal, or Vietnamese party withholds and pays on behalf |
| Specific risks | Misapplying tax rates for mixed contracts (goods + services) | Unable to verify whether the supplier has self-paid; price terms in the contract |
Common risks
Not withholding because “assuming the supplier has self-paid”. Vietnamese businesses pay foreign suppliers in full without withholding tax, on the reasoning that “they are big companies, surely they paid tax”. When tax authorities examine and the supplier has not registered tax for that income, the Vietnamese business faces back-collection of the tax it should have withheld, plus penalties and late-payment interest.
Vague price terms in contracts. Contracts with foreign suppliers do not clearly state whether the price includes Vietnamese taxes. When withholding obligations arise, the two parties dispute who bears the tax — while the budget payment obligation remains with the Vietnamese party.
Misidentifying taxable objects. Some outbound payments are not subject to contractor tax (e.g., certain purely commercial goods purchase transactions without attached services), but businesses still withhold — or conversely, miss services attached to goods. Correctly classifying the transaction’s nature is the first and most important step.
Not tracking legal changes. The tax framework for the digital economy is changing rapidly (CIT Law 67/2025, the E-commerce Tax Department, new guiding documents). Payment processes and contract templates built years ago may no longer be appropriate.
When to contact a lawyer
- The business regularly makes cross-border service payments and needs a standard withholding, declaration, and payment-on-behalf process;
- Needing to review and draft tax clauses in contracts with foreign suppliers (price with/without tax, obligation to provide tax payment documentation);
- Wanting to verify whether a foreign supplier has self-registered for tax in Vietnam;
- Facing back-collection and penalties related to contractor tax withholding obligations;
- A foreign supplier wanting to self-register, declare, and pay tax in Vietnam via the e-portal.
How FLAT LAW FIRM assists
- Classifying cross-border transactions: determining which payments are subject to contractor tax and which mechanism applies;
- Building internal processes for contractor tax withholding, declaration, and payment on behalf for businesses with many cross-border transactions;
- Drafting and reviewing tax clauses in contracts with foreign suppliers;
- Advising foreign suppliers on tax registration and declaration in Vietnam;
- Representing businesses before tax authorities and complaining against back-collection and penalty decisions — in coordination with FLAT’s tax consulting services for FDI enterprises.
Frequently asked questions
A Vietnamese company runs Google Ads and pays Google Singapore — must it withhold tax?
In principle, payments for online advertising services of foreign suppliers are subject to contractor tax; if the supplier does not declare and pay tax itself in Vietnam (neither under the self-declaration track nor via the e-portal), the Vietnamese party must withhold and pay on behalf before payment under Clause 2, Article 30 of Circular 89/2026/TT-BTC. However, Google has registered and pays tax directly in Vietnam through the e-portal for foreign suppliers — businesses need to verify and retain evidence of this to avoid double withholding.
How do I know whether a foreign supplier has self-paid tax in Vietnam?
Foreign suppliers register for tax through the E-portal etaxvn.gdt.gov.vn and are publicly listed by the tax authorities. Vietnamese businesses should request suppliers to provide tax registration confirmation and include the obligation to provide tax payment documentation in contracts. From 19/5/2025, the E-commerce Tax Department is the directly managing focal point.
Renting SaaS software from a US company with servers abroad — is contractor tax applicable?
Possibly. SaaS services supplied to organizations in Vietnam are subject to contractor tax regardless of where servers are located — the basis is the place of service consumption and where income arises. Businesses need to correctly classify the transaction’s nature (pure services or including software usage rights transfer) to apply correct tax obligations.
What if the contract does not state whether the price includes Vietnamese taxes?
The withholding and budget payment obligation remains with the Vietnamese party regardless of contract terms — this is a statutory obligation that cannot be contractually excluded against the tax authorities. Disputes over which party bears the tax are civil relations between the two parties under the contract. Therefore, tax clauses must be negotiated clearly from contract signing.
How do contractor tax for digital services and EPC contractor tax differ?
The main difference is the actual payment mechanism: for traditional EPC/consulting, contractors usually have presence in Vietnam and the Vietnamese party commonly withholds and pays on behalf at rates on revenue; for digital services, the trend is suppliers self-registering to pay tax directly through the e-portal, and new law (CIT Law 67/2025) is expanding direct taxation of digital businesses without presence in Vietnam.
Must foreign enterprises without a permanent establishment in Vietnam pay CIT?
Under CIT Law 67/2025/QH15, foreign enterprises without a permanent establishment in Vietnam still pay tax on Vietnam-sourced income, including enterprises doing e-commerce business and business on digital platforms. For details on the permanent establishment concept, see permanent establishment risks of foreign investors.
Useful links
This article is for general information on tax law at the time of posting, and does not replace legal advice for specific transactions. The tax framework for the digital economy is changing rapidly; please consult a lawyer before building cross-border payment processes.
