Managing Foreign Contractor Tax (FCT) in Business Central Vietnam

For foreign enterprises operating in Vietnam, cross-border transactions are a daily occurrence. Whether you are paying for global software licenses, management fees to your headquarters, or technical consultancy from abroad, you are likely subject to Foreign Contractor Tax (FCT). In Business Central, managing this manually is a nightmare for compliance.

What is FCT? FCT is a combination of Value Added Tax (VAT) and Corporate Income Tax (CIT) applied to foreign entities that do not have a legal entity in Vietnam but earn income from contracts with Vietnamese organizations.

The Complexity of FCT Calculation

The challenge lies in the different tax rates based on the nature of the service. Without a localized ERP setup, accountants often have to calculate these outside the system in Excel, leading to reconciliation errors.

Nature of Service	VAT Rate	CIT Rate	Total Effective FCT
Services (Consultancy, IT)	5%	5%	10%
Royalties (Software Licenses)	Exempt	10%	10%
Trading / Goods Delivery	Exempt	1%	1%

How We Automate FCT in Business Central

We have developed a dedicated FCT Management Module within Dynamics 365 Business Central to streamline this process:

1

Vendor Tax Mapping: Automatically identify cross-border vendors and assign the correct FCT tax group based on the service category.

2

Net-to-Gross Calculation: Effortlessly calculate "Gross-up" amounts if the contract stipulates that the Vietnamese entity bears the tax burden.

3

Automatic Tax Posting: When a purchase invoice is posted, the system automatically creates the corresponding FCT liability entries in the General Ledger.

4

FCT Tax Returns: Generate the official 01/NTK tax declaration form directly from Business Central, ready for submission to the tax portal.

Why Legal Accuracy Matters

Tax audits in Vietnam are rigorous. Discrepancies in FCT withholding can lead to non-deductible expenses and heavy interest on late payments. At Song Nghia, we ensure your Business Central environment acts as your first line of defense in tax compliance.

Song Thanh Nghia

Service Manager

Vietnam Tax & ERP Compliance Expert

📧 nghia@songnghia.com

🌐 www.songnghia.com

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● FCT Automation | Circular 103/2014/TT-BTC Specialists