[Taxation]Guidance from the Directorate General of Taxation regarding applicable exchange rates when journalizing foreign contractor tax
In the Directorate General of Taxation Official Letter No. 4666/TCT-CS dated October 23, 2023, the Directorate General of Taxation provided the following guidance regarding the exchange rate that should be applied when recording foreign contractor tax for accounting purposes.
Based on the provisions of Article 69, Paragraph 1.3 of the Ministry of Finance Circular 200/2014/TT-BTC regarding enterprise bookkeeping and preparation of financial statements (amended by Article 1, Paragraph 3 of Circular 53/2016/TT-BTC), Vietnam When companies pay foreign contractor tax in advance, they need to check whether the foreign contractor tax is included in the contract amount and apply an appropriate exchange rate.
If the foreign contractor tax is a receivable of a Vietnamese company, the transaction rate applied when recording the foreign contractor tax is the TTB of the bank where the bank account used by the company to receive the foreign contractor tax remittance from the customer is rate. (This case applies to large overseas IT companies that have acquired the FCT tax code in Vietnam, or to project offices that have concluded service contracts in foreign currency with Vietnamese EPE companies.)
If the amount of services or assets purchased from a foreign vendor includes foreign contractor tax and is not paid immediately, the applicable transaction rate will be the TTS rate of the bank used to transfer the amount.
If foreign contractor tax is included in the purchase price of services or assets purchased from a foreign vendor and is paid immediately, the applicable transaction rate will be the TTB rate of the bank used to transfer the amount.
It is also necessary to apply the exchange rate used for bookkeeping when filing FCT returns.
Directorate General of Taxation Official Letter No.4666/TCT-CS dated October 23, 2023
*This article was translated by Yarakuzen.