Buying software, online ads and AI tools from overseas providers: foreign contractor tax, invoices and deductibility in Vietnam

The short answer

Vietnamese businesses are spending more and more on digital services from overseas: online advertising, SaaS, cloud hosting and AI tools. The tax obligations depend mainly on whether the overseas provider has registered, self-declared and paid tax in Vietnam.

• Provider registered and self-filing through the tax portal for overseas providers: the Vietnamese buyer generally does not need to withhold foreign contractor tax (FCT).

• Provider not registered: the Vietnamese business must withhold, declare and pay FCT (VAT and CIT as a percentage of revenue, depending on the type of service).

For the cost to be deductible for CIT, the business needs:

• a contract or accepted terms of service;

• the provider's invoice or payment receipt in the company's name;

• non-cash payment, ideally by a card or account in the company's name;

• completed FCT obligations, where applicable.

Why will this stay a hot topic for years?

Cross-border spending on digital services is growing fast, especially with the wave of AI adoption. At the same time, the tax authority has stronger tools:

• the 2025 Law on Tax Administration makes it explicit that foreign organisations and individuals doing business on digital platforms are taxpayers in Vietnam;

• bank and international card payment data are increasingly connected;

• the tax authority is focusing audits on foreign providers and e-commerce.

A software subscription costing a few tens of millions of dong a month, left untreated for several years, can become a significant reassessment in an audit.

Two scenarios and how to handle them

Criterion	Provider registered for tax in Vietnam	Provider not registered in Vietnam
Who declares and pays	The provider itself	The Vietnamese business withholds and pays on its behalf
How to tell	The invoice or receipt shows the provider's Vietnamese tax code; the provider appears on the list published by the tax authority	No Vietnamese tax code and not on the list
Input VAT	VAT self-declared by the provider usually comes without a Vietnamese VAT invoice that can be credited	Creditable on the basis of the receipt for VAT paid on the foreign party's behalf, if the conditions are met
CIT deductibility	Deductible with valid documents and payment	Deductible with valid documents and payment, once FCT obligations are fulfilled

Classification drives the tax rate

Where withholding applies, the FCT rate depends on how the expense is classified. Common groups:

• Ordinary services (online advertising, consulting, data hosting and so on): VAT and CIT at the deemed percentages for services.

• Royalties and software licence fees: CIT at the deemed rate for royalties, which is usually higher than for services. For VAT, computer software and transfers of intellectual property rights are not subject to VAT under VAT law, where the conditions are met.

• Software-as-a-service (SaaS) and subscription AI tools: the line between a "service" and a "software licence" is often unclear. The classification directly affects both VAT and CIT.

This is the area most prone to disputes. Businesses should assess the substance of each contract: does the buyer receive a right to use software, or a service operated by the provider? The conclusion should be documented in writing.

Five common blind spots

1. Employees paying for AI tools and software on personal cards and claiming reimbursement. The documents are in the individual's name and payment comes from a personal account. It is very hard to show that the cost belongs to the business, and FCT is usually overlooked.

   
   

2. Not checking whether the provider is registered before paying, leading to over- or under-withholding.

   
   

3. Invoices without the company's name, address and tax code. Many platforms allow billing details to be updated, but businesses do not enter them.

   
   

4. "Net" contracts (the provider receives the full amount and the Vietnamese party bears the tax) without grossing up the taxable revenue, leading to underpaid FCT.

   
   

5. Ignoring data issues. Cloud and AI services that process customer or employee data also raise personal data protection and cross-border data transfer obligations, not just tax.

Illustrative case

Company R, an e-commerce business, has three groups of digital spending each year:

Expense	Current position	Solution
Advertising on social media and search platforms: VND 1.2 billion	Paid by company card; providers registered for tax in Vietnam	No FCT withholding. Update company details on the accounts so receipts show the correct name and tax code. Keep monthly records
Subscription AI and design tools: about VND 200 million	15 employees pay on personal cards and are reimbursed monthly	Move to company accounts paid by company card. Check whether each provider is registered
Warehouse software from an unregistered overseas company: VND 300 million	No FCT ever withheld	Classify the expense (service or licence), declare and pay FCT for the missed periods, and file amendments within the 5-year window

After the clean-up, all of Company R's digital spending was properly supported for deduction. The missing FCT was dealt with proactively, before the tax authority found it.

Checklist for finance teams

1. List every overseas digital service provider, including those employees are paying for themselves.

2. Check whether each provider is on the list of providers registered for tax in Vietnam.

3. Classify each expense by substance: service, software licence or goods.

4. Standardise payment through company cards or accounts. Update billing details on each platform.

5. Declare and pay FCT on time for unregistered providers. File amendments for missed periods.

6. Keep terms of service, invoices and payment records month by month.

FAQs

Is FCT payable on advertising bought from overseas platforms?

If the provider has registered, self-declared and paid tax in Vietnam, the buyer generally need not withhold. If it has not, the Vietnamese business must withhold and pay FCT on its behalf.

Is overseas software without a Vietnamese VAT invoice deductible?

It can be, with a contract or terms of service, the provider's documents, non-cash payment and completed FCT obligations where applicable.

Can VAT charged by a self-registered overseas provider be credited?

Usually not, because the business has neither a Vietnamese VAT invoice nor a receipt for VAT paid on the provider's behalf. Where the business itself withholds and pays VAT, it can credit that VAT on the basis of the payment receipt, if the conditions are met.

What if employees buy AI tools for work on personal cards?

The risk of disallowed expenses and missed FCT is high. The business should move to accounts and payment methods in its own name.

Legal basis

• Law on Tax Administration No. 108/2025/QH15 and Decree No. 252/2026/ND-CP (foreign organisations and individuals doing business on digital platforms as taxpayers).

• VAT Law No. 48/2024/QH15, as amended by Law No. 149/2025/QH15.

• CIT Law No. 67/2025/QH15 and Decree No. 320/2025/ND-CP.

• Current rules on foreign contractor tax and on tax administration of overseas providers.

• Law on Personal Data Protection and implementing regulations.

How W&A can help

Cross-border digital spending will keep growing strongly in the coming years, alongside closer scrutiny from the tax authority. W&A helps businesses get it right from the start:

• Review of all overseas digital spending: identifying registered and unregistered providers, items requiring FCT withholding and items at risk of disallowance.

• Classification of software, SaaS and AI contracts: assessing "service" versus "licence" and documenting the reasoning.

• FCT filings and payments, including amendments for missed periods.

• Policies for procuring and paying for digital services within the business.

• Personal data protection advice when using overseas cloud and AI services.