Doing business with foreign service suppliers is always a tricky endeavor for Vietnamese businesses. While there are several specific banking requirements that must be adhered to, foreign tax regulations can also greatly affect the payment process. The following article will explore the various banking requirements that must be observed when paying foreign service suppliers, as well as the tax implications of such payments.
Before discussing banking requirements, it is important to note that Vietnam has implemented a foreign contractor tax (FCT) of between 0% and 20% for services rendered by a non-Vietnamese service supplier. Although the FCT rate applies to certain services, the rate can vary depending on the terms of the contract and other factors. Vietnamese businesses should consult a qualified tax specialist to ensure that they are adhering to all applicable FCT regulations.
Now that the FCT implications have been discussed, it is time to look at the banking requirements associated with paying foreign service suppliers. Vietnamese businesses must ensure that they have the necessary banking procedures in place in order to facilitate the transfer of funds from Vietnam to foreign countries. The following banking procedures should be observed:
- The local business must have a current bank account with sufficient funds to cover the service supplier’s invoice.
- The local business must provide a valid foreign invoice for the service provided by the foreign supplier.
- The local business must provide a valid foreign contract outlining the terms of the service provided by the foreign supplier.
- The local business must arrange for the payment to be made through an international money transfer system or through a recognized international bank.
- The local business must provide the necessary banking information needed by the international money transfer service or by the recognized international bank to facilitate the transfer.
- These banking requirements must be observed in order for any payment to be made to a foreign service supplier. Additionally, payment should only be made after all due diligence and verification have been completed and necessary documentation is collected.
Finally, it is important to note that all payments must be reported according to the applicable FCT regulations. Since these regulations can be complicated to navigate, it is best to seek professional advice if there is any confusion regarding the correct taxation.
In conclusion, paying foreign service suppliers can be a complicated process for Vietnamese businesses. Adhering to all banking requirements and applicable FCT regulations is essential for successful payment. This article has explored what such requirements and regulations are and provides some guidance on how to comply with them. by doing so, Vietnamese businesses can ensure that the payment to foreign service suppliers is made efficiently and in line with all applicable regulations.