Tool · Foreign contractor tax

How much of a royalty reaches the franchisor?

When a Vietnamese franchisee pays a foreign franchisor, Vietnam's foreign contractor tax applies: 10% corporate income tax, plus 5% VAT unless the payment is for a transfer of IP rights. Who carries those taxes depends on how the agreement is worded. Enter the figure and the wording to see the split.

1. Royalty amount in the agreementAmount per paymentCurrency

2. Who bears the Vietnamese taxes?Gross — the amount includes all Vietnamese taxes
Taxes are deducted from the stated amount. The franchisor receives less than the contract figure.Franchisee bears VAT; CIT comes out of the amount
The stated amount excludes VAT. The franchisee pays VAT on top; CIT is withheld from the amount.Net — the franchisor must receive the full amount
The franchisee grosses up and pays both taxes on top of the stated amount.

3. Is VAT payable on this payment?Yes — a royalty or fee for services (5% VAT)No — a transfer of IP rights or technology (VAT-exempt)

A franchise fee often mixes a trademark licence with training and support; how the agreement splits them decides the VAT treatment. Agree it with a tax adviser.

Foreign contractor tax on this payment

VAT base	USD 10,000
VAT (5%)	USD 500
CIT base (excludes VAT)	USD 9,500
CIT (10%)	USD 950
Franchisor receives	USD 8,550
Total cost to franchisee	USD 10,000

Source: PwC Worldwide Tax Summaries (23 Sept 2026) · Circular 103/2014/TT-BTC on foreign contractor tax, Articles 12–13 (Ministry of Finance; English translation) (6 Aug 2014)

Illustrative only, under the direct method with no tax-treaty relief. PwC notes that Vietnam's treaty limits are usually higher than the 10% domestic rate, so treaties rarely lower it. Not tax advice.

How the calculation works

Gross: VAT is charged on the full amount; CIT is charged on the amount less VAT.Source: Circular 103/2014/TT-BTC on foreign contractor tax, Articles 12–13 (Ministry of Finance; English translation) (6 Aug 2014)
Amount excludes VAT: the VAT base is the amount divided by (1 − 5%) (Article 12.1(b.1)).Source: Circular 103/2014/TT-BTC on foreign contractor tax, Articles 12–13 (Ministry of Finance; English translation) (6 Aug 2014)
Amount excludes CIT: the CIT base is the amount divided by (1 − 10%) (Article 13.1(b.1)); VAT is then grossed up on that figure.Source: Circular 103/2014/TT-BTC on foreign contractor tax, Articles 12–13 (Ministry of Finance; English translation) (6 Aug 2014)
The rates — 10% CIT on royalties, VAT exempt for IP and technology transfers and 5% otherwise — are from PwC.Source: PwC Worldwide Tax Summaries (23 Sept 2026)
The government's policy Q&A portal still applies Circular 103 to foreign contractors; check whether later guidance changes the formulas before you rely on them.Source: Government policy Q&A portal, chinhsachonline.chinhphu.vn (undated; date shown is when we checked it) (9 Oct 2026)

Read the full guide to royalty tax in Vietnam, or start from how to franchise in Vietnam.