CIT Taxable Revenue for Foreign Contractors under Circular 20/2026/TT-BTC
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The Ministry of Finance provided guidance on determining the CIT taxable revenue for withholding tax on behalf of foreign contractors under Circular 20/2026/TT-BTC, effective 12 March 2026 and applicable from the 2025 tax year. Under Article 8(1) of Decree 320/2025/ND-CP, CIT revenue includes all amounts received regardless of collection timing. For VAT credit-method taxpayers, CIT revenue excludes VAT; for direct-method taxpayers, CIT revenue includes VAT. For foreign contractors subject to the direct-rate CIT method, where the contract price already includes CIT but excludes Vietnamese VAT, the CIT taxable revenue equals the contract price (VAT is not added on top). The CIT taxable revenue does not include the VAT payable.
CIT Taxable Revenue for Foreign Contractors under Circular 20/2026/TT-BTC
Issuing Authority: Ministry of Finance (General Department of Taxation)
Legal Basis
- Article 8(1), Decree 320/2025/ND-CP dated 15 December 2025
- Articles 7(3), 7(4), 10(1), 10(4), Circular 20/2026/TT-BTC dated 12 March 2026
CIT Taxable Revenue
General Principle:
- Equals total revenue received by the foreign contractor, before deducting taxes payable.
- Includes costs borne by the Vietnamese party on behalf of the contractor.
- Applies regardless of whether payment has been received.
VAT Inclusion in CIT Revenue:
- Circular 20/2026/TT-BTC does not explicitly state 'excluding VAT' as did the former Circular 103/2014/TT-BTC.
- Under Article 8(1), Decree 320/2025/ND-CP: For credit-method VAT payers, CIT revenue excludes VAT; for direct-method VAT payers, CIT revenue includes VAT.
- Foreign contractors generally use the credit method (withholding collected by the Vietnamese party), so CIT taxable revenue excludes VAT.
Where Contract Price Includes CIT but Excludes VAT: CIT taxable revenue = the stated contract price (VAT is not added).
Effective Date and Applicable Period:
- Circular 20/2026/TT-BTC is effective from 12 March 2026 but applies from the 2025 tax year.
- Contracts already using the hybrid method under Circular 103/2014/TT-BTC and signed before Circular 20 took effect continue under the rules applicable at contract signing date.
Practical Note
Enterprises should review their 2025 annual tax filings against the transitional provisions in Article 10 of Circular 20/2026/TT-BTC. Amended returns may be needed if previously declared under Circular 103/2014 using a different revenue-calculation method.