Guidance (an “official letter”) from Vietnam’s Ministry of Finance advises that when a foreign party allows another party to use a trademark for purposes of selling the trademarked goods, the activity is considered to be the transfer of a right to use a trademark, distinguishable from the transfer of intellectual property, and this trademark transfer is subject to value added tax (VAT).
Foreign invested enterprises in Vietnam typically enter into agreements with other foreign companies to use a trademark related to their goods and to pay remuneration for this arrangement. The income realized by the foreign company is subject to Vietnam’s foreign contractor tax. However, there has been a question as to whether the foreign contractor tax on the income consists of corporate income tax only or whether it also includes VAT and if it does include VAT, what is the applicable rate of VAT. The official letter provides clarification that VAT is to be included in the foreign contractor tax.
For these purposes, the foreign contractor tax consists of both the corporate income tax and VAT, and the rate of VAT to be applied is 10% under the credit method or a VAT rate of 5% under the deemed method.
Read a September 2016 report [PDF 152 KB] prepared by the KPMG member firm in Vietnam
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.