In today’s blog post we asked our IP expert Mr. Son Doan to clarify the provisions of the Official Letter on taxing the transfer of the right to use trade marks, issued by the Ministry of Finance of Vietnam.
On 7 November 2016 the Ministry of Finance of Vietnam issued the Official Letter 15888/BCT-CST to provide detailed guidance on foreign contractor withholding tax (FCWT) applicable to income of foreign contractors from transfer of right to use a trade mark. According to the Official Letter:
- Pursuant to the Law on Intellectual Property, when a Vietnamese party uses a trade mark and makes payments to a foreign party for the transfer of use right, this should be considered as transfer of the right to use a trade marks in accordance with the Law on Intellectual Property, distinguishable from the assignment intellectual property rights.
- As a result the income of foreign contractors from transfer of the rights to use a trade mark should be subject to FCWT with applicable tax rates as follows:
- CIT rate on taxable revenue is 10%
- VAT rate is 10% (if foreign contractor declare VAT under the credit method) or 5% (if foreign contractors declare VAT under the deemed method).
This means that if a foreign owner fully transfers the ownership of a trade mark to a Vietnamese party, there will be no taxes applied. However, if the foreign company merely grants the right to use the brand to the local Vietnamese businesses, then Vietnam tax authorities will collect the CIT and also the VAT. Continue reading “Explaining the New Regulations of Foreign Contractor Withholding Tax on Trade Marks in Vietnam” »