Foreign contractor tax (FCT) does not apply to every payment a Vietnamese company makes abroad. Two exclusions matter most in practice: goods supplied to a Vietnamese buyer with delivery at the border and no associated service performed in Vietnam, and services that are both performed and consumed outside Vietnam. Beyond those, the guidance on foreign contractors has listed specific activities outside the regime. Everything else paid to a foreign contractor under a contract with a Vietnamese party should be assumed in scope until a documented review says otherwise.
The difficulty is that real contracts are rarely pure. A machine arrives with a commissioning engineer; an overseas consultancy works mostly from home but presents its findings in Hanoi; a foreign agent finds customers abroad but its fee is calculated on Vietnamese sales. This guide goes through the common boundary cases and sets out how to record a decision that a payment is outside FCT, so that the decision survives an audit.
The starting point in the rules
The scope of FCT follows the income, not the location of the supplier. The CIT component rests on Law 67/2025/QH15, which taxes foreign organisations on income arising in Vietnam, and the VAT component on Law 48/2024/QH15, which taxes goods and services used for production, business and consumption in Vietnam. Procedures follow the Law on Tax Administration (Law 38/2019/QH14) and its 2026 guidance (Decree 252/2026/NĐ-CP, Circular 89/2026/TT-BTC). The Ministry of Finance guidance on foreign contractors then lists who is inside and who is outside the regime.
Because the exclusions are written as specific cases, the burden in practice sits with the Vietnamese payer: if you do not withhold, you should be able to point to the exclusion you relied on and the facts that bring the payment within it.
Goods supplied without services
A foreign seller that supplies goods to a Vietnamese buyer, with delivery at the border gate or outside Vietnam and no services performed in Vietnam, is generally outside FCT. The goods are taxed at import instead: the buyer pays import duties where applicable and import VAT through customs. This is the ordinary position for raw materials, components and finished goods bought from overseas suppliers.
Two variations bring goods back towards FCT:
- Delivery terms that keep the seller's risk inside Vietnam. The guidance has historically treated supplies where the seller bears the risk of the goods up to a point inside Vietnam — under certain delivered-duty or delivered-at-place terms — or where the foreign party distributes goods in Vietnam itself, as within the regime. Check the current text before using such terms with a foreign seller, and look at the whole contract, not only the Incoterm on the invoice.
- On-the-spot import and export arrangements involving foreign parties have their own treatment. If goods move between parties within Vietnam on the instruction of a foreign seller, check how the arrangement is classified before paying.
Goods that come with installation, training or warranty
When a contract combines goods with services performed in Vietnam — installation, supervision of installation, commissioning, training, maintenance or warranty — the contract as a whole enters FCT territory. The question then is how much of the price is taxed as goods and how much as services, because the CIT percentages differ and the goods have usually already borne VAT at import.
| How the contract is written | Typical consequence |
|---|---|
| Separate values for goods and for each service | Goods value and service values are treated under their own categories |
| One lump sum for goods and services | The whole value may be treated under a single, often less favourable, category |
| Services free of charge "included" in the goods price | The tax office may attribute value to the services anyway |
The practical lesson is for the purchasing stage: if a foreign supplier will send engineers to install or commission, ask for a contract that states the value of the goods and of each service separately. If your team reads Vietnamese, ThueSuat.com has a worked article on goods imported with delivery, installation and warranty.
Warranty deserves a note of its own. A warranty obligation performed abroad — the faulty part shipped back to the supplier's factory — is different from warranty engineers flying in to repair on site. The first may not bring services into Vietnam at all; the second does.
Services performed and consumed outside Vietnam
A service is outside FCT only when it is both performed and consumed outside Vietnam. The guidance has listed examples of this kind, such as repair of means of transport or machinery abroad, advertising and marketing abroad, training conducted abroad, and brokerage for selling goods or services abroad. The exact list and wording must be checked in the current text.
The consumption test is where most errors happen. An overseas firm that does all its work abroad but delivers a report that the Vietnamese company uses in Vietnam has provided a service consumed in Vietnam. By contrast:
- A foreign workshop repairing the company's engine that was shipped abroad for repair performs and delivers the repair abroad.
- An advertising campaign in a foreign market, aimed at customers there, is consumed where the audience is.
- A sales agent abroad paid a commission for finding foreign buyers of Vietnamese exports provides a service used outside Vietnam, provided the agent does not also act in Vietnam.
Hypothetical example. Suppose a Vietnamese furniture exporter pays a European agent a commission on sales it arranges with European retailers, and pays a separate European design studio for a catalogue used in both European trade fairs and the exporter's Vietnamese showroom. The agent's commission may fall within the exclusion for brokerage abroad; the design fee is harder, because the catalogue is also used in Vietnam. The exporter should document each decision separately, with the facts, rather than treating "European supplier" as a single category.
When the work is split between abroad and Vietnam
Many service contracts are performed partly abroad and partly in Vietnam: an audit of a regional group with fieldwork in Ho Chi Minh City, a software implementation built offshore and deployed on site, a training programme with some sessions abroad and some in Hanoi. Where the service as a whole is consumed in Vietnam, doing part of it abroad does not take that part out of scope.
The reverse case — a contract covering several countries, of which Vietnam is one — is where a split can be justified. If a group-wide contract covers services for affiliates in several countries and only the Vietnamese portion is charged to the Vietnamese company, the FCT base is that Vietnamese portion. The allocation should be written into the contract or a schedule to it, with the key used, rather than reconstructed later from a single global invoice.
Other situations that are not what they seem
- Reimbursement at cost. A foreign party recharging third-party costs without margin, backed by the original invoices, is not the same as a fee. But a recharge that includes the foreign party's own staff time is a service.
- Services bought through a Vietnamese reseller. If the seller is a Vietnamese entity issuing a Vietnamese e-invoice, it is a domestic purchase and FCT does not arise for you. Check the entity named on the invoice.
- Payments to foreign individuals. A foreign individual paid for work in Vietnam may be subject to personal income tax rather than the CIT component; the rules for individuals differ and should be checked separately.
- Exempt items under the VAT law. An exemption from VAT removes the VAT component but not necessarily the CIT component. "No VAT" does not mean "no FCT".
Documenting an out-of-scope decision, and where to check
For every recurring overseas payment on which you do not withhold, keep a one-page note in the contract file covering the supplier and contract, the exclusion relied on, the facts that support it (where the work was performed, where it was used, the delivery terms), who made the decision and when, and when it will next be reviewed. Attach the evidence: shipping documents for goods, travel records showing no staff came to Vietnam, campaign reports for foreign advertising.
Accounting documents used directly for bookkeeping and preparing financial statements must be kept for at least 10 years under the Law on Accounting; a decision not to withhold should be kept with the same care. To check what the tax authority holds, review your company's e-tax account for FCT returns filed and paid, and use the taxpayer information lookup to confirm the managing tax office — since 1 July 2025 part of a three-tier administration across 34 provinces and centrally run cities. If an audit has already queried a category of payments, review the whole category, not just the invoices it named.
Frequently asked questions
Is importing goods from an overseas supplier subject to FCT?
Generally not, when the goods are delivered at the border or outside Vietnam and no services are performed in Vietnam. The goods bear import duties where applicable and import VAT at customs instead.
Does free installation included in a machine price avoid FCT?
Usually not. If the supplier performs installation or commissioning in Vietnam, the contract enters FCT territory, and the tax office may attribute value to the services even if they are described as free.
A foreign consultancy did all its work abroad. Is it out of scope?
Only if the service is also consumed outside Vietnam. A report or advice used by the Vietnamese company in Vietnam is a service consumed in Vietnam, wherever the work was done.
If a service is exempt from VAT, is it exempt from FCT?
No. A VAT exemption removes the VAT component, but the CIT component can still apply. Check both components separately.
Do delivery terms on the invoice decide the question for goods?
They matter, but read the whole contract. Terms under which the seller bears risk inside Vietnam, or an arrangement where the seller distributes in Vietnam, can bring goods into scope.
How should we record a decision not to withhold?
Keep a short note in the contract file with the exclusion relied on, the supporting facts and evidence, the decision-maker and the review date. It is the first document an auditor will ask for.
