10/10/2024

REVISION FCT

12 PAST EXAM QUESTIONS FOR FCT

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Question 1 (Q4/ Jun 2024)

DKN Co (DKN), a Chinese construction company, using the hybrid method for foreign contractor tax (FCT), entered into a
contract with a Vietnamese company for a construction project valued at USD30 million (gross of FCT).

DKN subcontracted works to two companies in Thailand, Company B and Company Y, worth the values of USD 12 million
and USD8 million respectively. Company Y adopts the deemed method, whilst Company B adopts the actual method
(direct filing as a company in Vietnam) for FCT.

DKN also purchased goods equivalent to USD3 million from Vietnamese suppliers for the project.

What is the taxable revenue for FCT purposes (corporate income tax portion) that should be declared by DKN Co in
relation to the project described (assuming all subcontracted works were properly registered)?

A. 7 million

B. 19 million

C. 30 million

D. 18 million

Guidance
This question required candidates to determine taxable revenue for FCT purposes in case of subcontract and purchase from Vietnam suppliers

China Vietnam

DKN Co Main contract

(Hybrid method) Gross FCT = USD30 mill

Subcontractor B Subcontractor Y
VN suppliers
(actual method) (deemed method)

USD 12 mil USD 8 mil USD3 mil

Not subject to FCWT Subject to FCWT Subject to FCWT

Answer

The correct answer is D

According to Article 13, only subcontracted works to B which adopts the actual method can be deducted from revenue.
Domestic purchases cannot be deducted.
• Taxable price = 30 million
• Amount not subject to FCT = 12 million
• Taxable revenue = 30 – 12 = 18 million

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Question 2 (Q8/ Jun 2024)

X Co is a Vietnamese subsidiary of FWD Co, a foreign forwarder.

In the year 2023, X Co allocated a fee of USD 600,000 (net of all foreign contractor tax) collected from Vietnamese clients to
FWD Co for international forwarding activities (treated as transportation) in relation to those Vietnamese clients.

55% of these activities were for deliveries from Vietnam to overseas, and the remaining are related to deliveries from
overseas to Vietnam.

What is the amount of the corporate income tax portion of the foreign contractor tax liabilities (rounded to the nearest
USD) that X Co would be required to pay on behalf of FWD Co from the described transactions?

A. USD 6,600

B. USD 5,400

C. USD 6,375

D. USD 5,510

Guidance

This question required candidates to differentiate the gross and net revenue which are subjected to CIT.

Outbound postal services

Net FCT = USD 600,000

From overseas to VN From VN to overseas

45% 55%

Not subject to FCT Subject to FCT

Net FCT Gross-up CIT taxable revenue

USD 330,000 CIT rate (2%) USD 330,000 / (1 - 2%) = USD 318,75

CIT
USD 318,75 x 2% = USD 6,375

Answer

The correct answer is Option 3

According to Article 13, deliveries from overseas to Vietnam are exempt from foreign contractor tax (FCT). Accordingly, only 55% would be
subject to FCT (at the rate of 2% applicable to transportation). As the amount is net, gross-up is required.
• Net FCT = USD 600,000 & 55% = USD 300,000
• Revenue subjected to CIT = [(USD 600,000 x 55%) / (1-2%)] = USD 318,75
• CIT portion = USD 318,75 x 2% = USD 6,375

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Question 3 (Q12/ Jun 2024)

HBO Co is the owner of a luxury hotel in Vietnam. HBO Co engaged MGT Co, a company headquartered in Europe, for its hotel
management services. According to the management contract, value added tax (VAT) would be borne by HBO Co and the
corporate income tax portion of foreign contractor tax would be borne by MGT Co.

In the year 2023, MGT Co received payment of USD5 million from HBO Co for hotel management services fee.

What are the VAT and corporate income tax (CIT) liabilities (in USD) which should be declared in the foreign contractor tax
return to be filed by HBO Co in respect of the hotel management services fee paid to MGT Co in the year 2023?

Option VAT CIT

1 263,158 250,000
2 263,158 500,000
3 250,000 555,556
4 250,000 263,158

Guidance

This question required candidates to differentiate the gross and net revenue which are subjected to CIT and VAT.

Born CIT portion MGT Co Europe

Provide hotel management services

HBO Co Viet Nam
Born VAT portion

Services fee
USD 5 million

CIT taxable revenue Gross-up VAT taxable revenue

USD 5 mil VAT rate (5%) USD5 mil / (1 - 5%) = USD 5,263,158

CIT VAT
USD 5 mil x 10% = USD 500,000 USD 5,263,168 x 5% = USD 263,158

Answer

The correct answer is Option 2

The hotel management services are subject to 10% CIT and 5% VAT. As the amount is net of VAT and gross of CIT, there should be a gross up for VAT

• CIT taxable revenue = USD 5,000,000

• CIT portion= USD 5,000,000 x 10% = USD 500,000
• VAT taxable revenue (inclusive of CIT & VAT) = USD 5,000,000 / (1 – 5%) = USD 5,263,158
• VAT portion = USD 5,263,158 x 5% = USD 263,158

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Question 4 (Q4/ Dec 2023)

SGT Co is a trading company in Singapore. In the year 2022, SGT Co entered into a contract with AHD Co, a Vietnamese
company, in which SGT Co purchased goods from AHD Co with a value of USD4.5 million. At the same time, SGT Co sold the
goods to NKT Co, a company established in Vietnam for USD5 million (net of Foreign Contractor Tax (FCT)).

SGT Co instructed AHD Co to hand over the goods directly to NKT Co in Vietnam. The activity is viewed as an 'on the spot
export' by SGT Co and is treated as a 'trading in Vietnam' transaction for FCT purposes.

What is the amount of FCT that would occur from the transactions between SGT Co, AHD Co and NKT Co in the year 2022,
and which party would be responsible for the FCT declaration, if any?

FCT
Option Party to declare
USD
1 0 No declaration needed
2 45,455 AHD Co
3 50,505 NKT Co
4 100,000 SGT Co

Guidance

This question required candidates to calculate CIT portion of FCT portion in case of 'on the spot export'

SGT Co

Singapore (1) Sell 4.5 mil goods Net FCT Gross-up CIT taxable revenue
(2) Sell 5 mil goods
USD 5,000,000 CIT rate (1%) 5 mil / (1 - 1%) = USD5,050,505

Viet Nam
(3) Deliver goods CIT portion
AHD Co NKT Co
Declare on behalf 5,050,505 x 1% = USD 50,505

Answer

The correct answer is Option 3

According to Circular 103/2014,, for on-the-spot export transactions, the buyer in Vietnam (NKT Co) would be required to declare FCT.

• CIT taxable revenue = USD 5,000,000 / (1 - 1%) = USD 5,050,505

• CIT portion= USD 5,050,505 x 1% = USD 50,505

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Question 5 (Q8/ Dec 2023)

SVO Co is a Korean company which has entered into a contract for the supply and installation of equipment to VSC Co, a
Vietnamese company.

The contract price is USD10 million, inclusive of all foreign contractor tax (FCT). SVO Co subcontracted all the equipment to a
Vietnamese subcontractor at a supply value amounting to 70% of the contract price; but performed the installation services
itself.

What is the total amount of FCT (including corporate income tax and value added tax (VAT)) liabilities that would arise on
SVO Co from the transactions?

A. USD 682,500
B. USD 570,000
C. USD 292,500
D. USD 1,330,000

Guidance

This question required candidates to calculate the CIT and VAT portion of FCT in case the contractor performs only services.

30% Perform only VAT taxable revenue (Gross FCT) Gross-down CIT taxable revenue
Subject to FCT
services USD10 mil x 30% = USD 3 mil VAT rate (5%) USD 3 mil x (1 - 5%) = USD 2.85 mil
Inclusive CIT & VAT

Main contract VAT CIT

Gross FCT = USD 10 million USD 3 mil x 5% = USD 150,000 USD 2.85 mil x 5% = USD 142,500

Subcontract FCT
Not subject to FCT USD150,000 + USD 142,500 = USD 292,500
70% equipment to VN Co

Answer

The correct answer is C

As the equipment is fully sub-contracted to the Vietnamese party, SVO Co will be subject to tax on the services value only, with a tax rate of 5%.

As the contract is gross of FCT, VAT should be calculated first, followed by CIT.

• VAT taxable revenue = Gross FCT = USD 10,000,000 x 30% = USD 3,000,000
• VAT = USD 3,000,000 x 5% = USD 150,000
• CIT taxable revenue = USD 3,000,000 - USD 150,000 = USD 2,850,000
• CIT = USD 2,850,000 x 5% = USD 142,500
• Total FCT = USD 150,000 + USD 142,500 = USD 292,500

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Question 6 (Q12/ Dec 2023)

KZ Co is a company headquartered in the United States in the year 2022, KZ Co entered into a contract with LTC Co, a
company in Vietnam, to provide supervision services for a construction project in Vietnam

The contract value specified that LTC Co would pay KZ Co USD1,200,000, net of foreign contractor tax (FCT) in Vietnam, for
the services provided. The full contract value was settled in the year 2022

LTC Co also arranged accommodation for the personnel of KZ Co valued at USD45,000.

In respect of the transactions between LTC Co and KZ Co, what is the amount (rounded to the nearest USD) of the value
added tax (VAT) portion of the FCT liability that LTC Co should declare on its FCT return in the year 2022?

A. USD 65,526

B. USD 63,158

C. USD 66,482

D. USD 68,975

Guidance
This question required candidates to calculate the VAT portion of FCT in case Vietnam party arrange accommodation for the personnel of contractor.

KZ Co (Headquarter) USA

Provide supervision services

LTC Co Viet Nam

Contract value Accomodation

Net FCT = USD 1,200,000 USD 45,000

Net FCT Gross-up CIT taxable revenue Gross-up VAT taxable revenue
USD 1,245,000 CIT rate (5%) USD1,245,000/ (1-5%)= USD1,310,526 VAT rate (5%) USD 1,310,526 / (1-5%)= USD 1,379,501

VAT
USD 1,379,501 x 5% = USD 68,795

Answer
The correct answer is D

Accommodation borne by the Vietnamese company would be subject to FCT.

• CIT taxable revenue (inclusive of CIT, exclusive of VAT) = USD 1,245,000 / (1-5%) = USD 1,310,526
• VAT taxable revenue (inclusive of CIT & VAT) = USD 1,310,526 / (1 - 5%) = USD 1,379,501
• VAT = 1,379,501 x 5% = USD 68,975

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Question 7 (Q8/ June 2023)

TKT Co is a Japanese company that has entered into a contract to supply and install specialized machinery and equipment to
VKF Co, a Vietnamese company.

The contract price is a lump sum amount of USD 20 million, inclusive of foreign contractor tax (FCT).

What are the corporate income tax (CIT) and value added tax (VAT) portions under FCT that VKF Co should withhold from
TKT Co for the above transactions?

CIT VAT
Option
USD USD
1 408,163 631,180
2 420,787 618,557
3 388,000 600,000
4 400,000 588,000

Guidance
This question required candidates to calculate the CIT and VAT portion of FCT in case of lumpsum contract to supply and install machinery and equipment

TKT Co Japan
supply and install M&E
Viet Nam
LTC Co

2% CIT, 3% VAT
Lump sum contract
USD 20 mil

VAT taxable revenue (Gross FCT) Gross down CIT taxable revenue
USD 20 mil VAT\rate (3%) USD 20mil x (1 - 3%) = USD19.4 mil

VAT CIT
USD 20 mil x 3% = USD 600,000 USD 19.4 mil x 2% = USD 388,000

Answer

The correct answer is Option 3

According to Circular 103/2014, for gross contracts, first calculate VAT, then corporate income tax (CIT). The lump sum contract would
be subject to 2% CIT and 3% VAT.

• VAT taxable revenue = USD 20 million

• VAT portion = USD 20 million x 3% = USD 600,000
• CIT taxable revenue (exclusive of VAT & inclusive of CIT) = USD 20 million - USD 600,000 = USD 19.4 million
• CIT portion = USD 19.4 million x 2% = USD 388,000

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Question 8 (Q12/ June 2023)

MZ Co is a Singaporean company with no presence in Vietnam. In late 2021, MZ Co entered into an agreement to sell luxury
watches in the Vietnamese market via its exclusive distributor, AG Co. MZ Co would determine the price of the watches
depending on international trends and market conditions.

In the year 2022, the revenue from the sales of MZ Co’s watches by AG Co in the Vietnamese market amounted to
VND50,000 million.

During the year 2022, AG Co also advanced an amount equivalent to VND2,000 million for advertising in Vietnam, which was
duly reimbursed by MZ Co in the same year.

What is the corporate income tax portion of the foreign contractor tax (FCT) liability that AG Co should declare on its FCT
return in the year 2022 for the above transactions, assuming the contract is silent on which party would bear the
withholding tax?

A. VND 520 million

B. VND 0
C. VND 480 million
D. VND 500 million

Guidance
This question required candidates to calculate the CIT portion in case the contractor can determine the selling price.

Overseas Vietnam
AG Co
MZ Co
Determine the price of wacthes (Distributor)

Subject to FCT Advance for advertising

Sales revenue
repaid in same year
VND 50,000 mil
VND 2,000 mil

Not subjected to FCT Subjected to FCT

CIT taxable revenue CIT

Contract is silent on which VND 50,000 mil VND 50,000 mil x 1% = VND 500 mil
party would bear FCT

Answer

The correct answer is D

According to Circular 103/2014, as MZ Co can determine the selling price, it would be subject to foreign contractor tax (FCT) for the
revenue from sales of watches in Vietnam.

The CIT rate is 1%. As the contract is silent on withholding tax, it would be gross of CIT.

Advertising costs were advanced and repaid in the same year, and hence would not be subject to FCT.

• CIT portion = VND 50,000 million x 1% = VND 500 million

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Question 9 (Q4/ Dec 2022)

In 2021, FFC Co (a foreign company) provided VNT Co (a Vietnamese company) with consultancy services for a digital
transformation strategy for VNT Co in Vietnam. The contract price was USD1.8 million of which foreign contractor tax would
be borne by VNT Co. In addition, VNT Co would also bear airfares and accommodation costs for experts from FFC Co during
the contract’s execution, amounting to USD 120,000.

What are the amounts of corporate income tax (CIT) and value-added tax (VAT) in USD (rounded to 0 decimals) that VNT
Co is required to pay in respect of the above contract?

CIT VAT
Option
VND million VND million
1 94,737 99,723
2 106,371 101,053
3 101,053 106,371
4 99,723 94,737

Guidance
This question required candidates to calculate the VAT portion of FCT in case Vietnam party bear airfares and accommodation costs for experts of contractor.

FFC Co Overseas

Provide consultancy services

Borne FCT Viet Nam
VNT Co

Contract value Airfare + Accomodation

Net FCT = USD1.8 million USD 120,000

Net FCT Gross-up CIT taxable revenue Gross-up VAT taxable revenue
USD 1,920,000 CIT rate (5%) USD 1,920,000/ (1-5%)= USD 2,021,053 VAT rate (5%) USD2,021,053 / (1-5%)= USD 2,127,424

CIT VAT
USD 2,021,053 x 5% = USD 101,053 USD 2,127,424 x 5% = USD 106,371

Answer

The correct answer is Option 3

The airfare and accommodation costs for experts borne by VNT Co is also subject to FCT.

• CIT taxable revenue (inclusive of CIT, exclusive of VAT) = (USD1,800,000 + USD120,000)/(1 – 5%) = USD 2,021,053
• CIT portion = USD 2,021,053 x 5% = USD 101,053
• VAT taxable revenue (inclusive of CIT & VAT) = USD 2,021,053 / (1 - 5%) = USD 2,127,424
• VAT portion = USD 2,127,424 x 5% = USD 106,371

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Question 10 (Q4/ Jun 2022)

In June 2021, TLP Co, a Vietnamese company operating in the field of industrial parks development, signed a contract with
ADV Co, a Singaporean company. Under the terms of the contract, ADV Co advertises TLP Co’s industrial parks premises in
Vietnam as being available to lease to Asian INVestors outside Vietnam. The advertising services are carried out fully
online. According to the contract, TLP Co must pay an annual fee to ADV Co of USD600,000, net of tax, in four equal
installments in June, September, December and March.

What is the amount of the corporate income tax portion of foreign contractor tax (rounded to 0 decimals) which TLP Co
is required to pay in the year 2021 for the above transactions?

A. USD0

B. USD22,500

C. USD31,579

D. USD23,684

Guidance
This question required candidates to calculate the CIT portion of FCT in case of online advertising service

Jun 2021 Sep 2021 Dec 2021 Mar 2022

Singapore ADV Co 3 installments

Viet Nam Provide online advertising service

TLP Co

Annual fee in 4 installments

Only 3 installments Net FCT = USD600,000
in 2021
Net FCT Gross-up CIT taxable revenue
USD600,000 x 3/4 = USD450,000 CIT rate (5%) USD450,000 / (1 - 5%)= USD 473,684

CIT
USD 473,684 x 5% = USD 23,684

Answer

The correct answer is D

Online advertisement is subject to foreign contractor tax at 5%, and only three out of four payments (I.e. June, September and
December) were taxed in 2021. Gross up of 5% is required.

• CIT taxable revenue = (USD600,000 * 3/4 months) / (1 - 5%)= USD 473,684

• CIT portion on interest payment = USD 473,684 x 5% = USD 23,684

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Question 11 (Q4/ Dec 2021)

On 31 March 2020, INT Co borrowed USD20 million from a foreign bank at an interest rate of 2.4% per annum for three
years. Interest will be accumulated to the principal at the end of every 12-month period, and will be paid at the end of the
lending period. It was agreed that INT Co will bear foreign contractor tax (FCT) on the interest.

What is the amount of the corporate income tax portion of FCT (rounded to 0 decimals) to be declared and paid by INT
Co in the year 2020 for the above borrowing?

A. USD18,947

B. USD25,263

C. USD18,000

D. USD0

Guidance
This question required candidates to determine the time of declare and pay FCT.

31 Mar 2020 31 Dec 2020 31 Mar 2021

Borrow USD20 mil

Interest rate of 2.4% per annum for Repay principal + interest
No repayment
three years every 12-month period

No FCT Declare and pay FCT

Answer

The correct answer is D

As interest would be paid at the end of the contract, FCT should only be declared and paid at that time.

FCT to be declared and paid in 2020 would be 0

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Question 12 (Q8/ Dec 2021)

Paramont Co, a company registered in Turkey, entered into a turnkey contract with a Vietnamese company, Company Q, for
construction of a factory in Vietnam at a contract value of USD20 million (gross of tax in Vietnam). Paramont Co adopted the
deemed method for foreign contractor tax filing in Vietnam. Paramont Co purchased goods with a value of USD6 million
from Vietnamese suppliers for the contract. Paramont Co also subcontracted 20% and 25% of the total contract value
respectively to AYE, a company in Vietnam and BEE, a Chinese sub-contractor which also adopted the deemed method for
tax filing in Vietnam.

What is the amount of taxable revenue which Company Q will declare for foreign contractor tax purposes on behalf of
Paramont Co assuming all sub-contractors were clearly stated in the contract?

A. USD11 million

B. USD5 million

C. USD15 million

D. USD16 million

Guidance
This question required candidates to know the implications of taxable revenue for FCT purposes in case of subcontract

Turkey Viet Nam

Paramont Co Main contract

(Deemed method) Gross FCT = USD20 mil

BEE co
VN suppliers AYE Co
(Deemed method)

Subcontract 25% USD6 million Subcontract 20%

Subject to FCWT Subject to FCWT Not subject to FCWT

Answer

The correct answer is D

Only the sub-contracted amount to the Vietnamese sub-contractor can be excluded from taxable revenue.

Taxable revenue = Main contract value – Subcontract value to AYE Co = USD20 mil – (USD20 mil x 20%) = USD16 million

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