Official letter 2191/CTBNI-TTHT about Tax policy for the compensation of defective goods is as follows:
In case, the income from fines and compensations received by the counterparty party in breach of the contract received by the foreign party (foreign contractor) is subject to contractor tax. Foreign contractors are not required to declare, calculate and pay VAT but must declare, calculate and pay CIT according to the percentage of 2% CIT. The company declares and pays tax on behalf of the foreign contractor according to form 01/NTNN issued together with Circular 80/2021/TT-BTC.
