Ministry of Finance informs about policy of applying contractor tax to Formosa

(Baonghean.vn) - On September 21, the Ministry of Finance issued official information on whether or not to collect additional contractor tax from Formosa. Accordingly, the Ministry of Finance said that this policy needs to be fully considered in terms of legal basis as well as practical basis.

According to the Ministry of Finance, in the case of goods being machinery and equipment provided under a contract in the form of a delivery point located within the territory of Vietnam; or the provision of goods accompanied by services performed in Vietnam such as: Installation, testing, warranty, maintenance, replacement, other services accompanying the provision of goods, then the basis for the provisions on VAT-liable subjects in Clause 2, Article 6, Circular No. 60/2012/TT-BT of the Ministry of Finance (guidance on the implementation of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or having income in Vietnam). Accordingly, contractor tax must be paid for installation, testing, warranty, maintenance services... performed by foreign contractors in Vietnam.

A corner of Formosa Ha Tinh project (Illustration: Internet)

In the case of foreign organizations and individuals providing goods such as machinery and equipment to Vietnamese organizations and individuals without accompanying services delivered at Vietnamese border gates (the seller bears all responsibilities, costs, and risks related to the goods until the delivery point at the Vietnamese border gate; the buyer bears all responsibilities, costs, and risks related to receiving and transporting goods from the Vietnamese border gate), according to Article 4, Circular No. 60/2012/TT-BTC dated April 12, 2012 of the Ministry of Finance, the contractor tax is not applicable.

In fact, since the beginning of 2015, the Ministry of Finance has also directed the General Department of Taxation and the General Department of Customs to inspect the compliance with tax laws related to imported machinery and equipment for installation and construction of Formosa's projects, including this installation service. The Tax and Customs authorities have collected additional taxes including contractor tax and imposed penalties, in the total amount of settlement including the non-refundable VAT of nearly 250 billion VND, not accepting the increase in the value of the project by 4,000 billion VND.

For imported machinery and equipment that investors import under the condition of transferring ownership at the border gate (with only the warranty obligation being the seller's obligation, not with any other services in Vietnam), not collecting contractor tax (176 billion) for this subject is in accordance with the provisions of Article 4, General Provisions, Circular No. 60/2012/TT-BTC of the Ministry of Finance and is consistent with reality, because there is no installation service of foreign contractors in Vietnam.

Red River