Foreign Contractors Tax (FCT)

Latest Update: June 8, 2021


This is relevant for:  Foreign companies selling services in Vietnam

In technical terms, it is easy to sell services to Vietnam. For most cases, they can be provided and invoiced without any barriers. This is a contrast to some other countries where foreign entities have to obtain a tax registration. 

Nevertheless, the Vietnamese authorities justifiably are looking to tax companies making profits within their jurisdiction. Their approach is quite pragmatic: They are taxing foreigners with the Foreign Contractors Tax (FCT) which is withheld by their Vietnamese customers. This means, that

  • the foreign service provider is being taxed, but

  • the Vietnamese customer will pay the FCT on their behalf


The tax applies for all services "consumed in Vietnam". Some examples for applicable cases are:

  • A software company selling a program or license to a Vietnamese customer

  • A machinery manufacturer selling maintenance services to a Vietnamese customer

  • A company headquarter selling intra-company services to its Vietnamese subsidiary


The FCT is a combination of the Value Added Tax (VAT) and Corporate Income Tax (CIT). Applicable rates are various and should be checked for each individual case. However, the most common rates are VAT 5% + CIT 5% = FCT 10%.

For Vietnamese customers it shouldn't be a big deal to withhold the FCT and pay it to the authorities. However, we have encountered the following "worst cases" following the unawareness of Vietnamese customers of their FCT obligations.

  • Worst Case A - Customer can't pay
    Outgoing payments will be observed by the Vietnamese State Bank. It, respectively the commercial bank of the Vietnamese customer, will check if all requirements for an international transfer are met. In one case we encountered, a local customer couldn't pay for a completed service because he didn't know about the FCT. When he tried to pay, his request has not been cleared by his commercial bank. This may result in Worst Case B.

  • Worst Case B - Customer wants to re-negotiate
    In this instance the Vietnamese customer was also unaware of his FCT obligations. The customer was uncooperative. He argued that the service of their foreign supplier would be taxed and hence wanted to completely withhold the FCT from the contract amount. The supplier was at risk to loose 10% of their turnover from this project and was forced to go into a complicated re-negotiation process after the project was completed.

With respect to above-mentioned worst cases, the topic of FCT should always be addressed within the price negotiations of services rendered to Vietnamese customers.

A comprehensive overview on FCT by law firm "Roedl & Partner" can be found here.

Please consider this information without liability for any data with respect to content, completeness or up-to-datedness. For legally valid information you should turn to a lawyer. A list of German law firms can be found here.