Vietnamese companies increasingly hire Indian firms for software, digital marketing, design and back-office work, and they usually pay in US dollars by bank transfer. The surprise for many Indian exporters is tax at source: Vietnam has a foreign contractor tax regime that clients often apply to payments for services from abroad, which can shrink what you receive unless you plan for it in the contract. On the Indian side, each invoice is a row in your monthly EDF with "Vietnam" in the country column and a 9-month realisation clock.
Key takeaways
- Most Vietnamese clients prefer to pay in USD. VND invoices are possible but less common for cross-border services.
- Ask early whether the client will deduct foreign contractor tax, and whether your price is gross or net of it.
- India and Vietnam have a tax treaty. A tax residency certificate may help the client apply treaty relief; whether it does depends on the client's rules.
- Vietnamese banks often ask the paying client for the contract and invoice before remitting abroad.
- File one EDF per month, due within 30 days from the end of the invoice month. Realise within 9 months of each invoice date.
The questions to settle before you sign
Vietnamese procurement is usually contract-driven. Settle these points in the contract itself, not in emails afterwards.
| Question | Why it matters | What to agree |
|---|---|---|
| Currency | VND payments may arrive converted; USD is simpler | Invoice and payment currency, usually USD |
| Foreign contractor tax | Can reduce the amount paid to you | Whether prices are gross or net of it, and who bears it |
| Bank charges | Intermediary fees reduce receipts | Who pays charges (OUR, SHA, BEN) |
| Documentation | Client's bank may need contract and invoice | Bilingual contract if the client requests it |
| Payment terms | Affects realisation | Days from invoice; milestone triggers |
| Acceptance | Payment often follows formal acceptance | What counts as acceptance, and by when |
Vietnamese clients sometimes ask for a bilingual English-Vietnamese contract. That is a commercial choice; make sure the English version reflects exactly what you agreed.
Foreign contractor tax in plain terms
Vietnam taxes certain income earned by foreign entities from Vietnamese customers, and the paying client often withholds that tax before remitting. Whether and how it applies to your service, at what rate, and whether the India-Vietnam tax treaty reduces it, depends on the nature of the service and Vietnamese rules that change over time. Do not rely on rates from blog posts, including this one.
What you can control:
- Price it. Agree in the contract whether your fee is gross (client withholds from it) or net (client grosses up so you receive the full fee).
- Ask for evidence. If tax is withheld, ask for the official proof of payment to the Vietnamese tax authority.
- Offer a TRC. A tax residency certificate is the standard document for treaty claims. Ask the client whether their adviser wants one.
- Claim credit at home. With the right documents, foreign tax withheld may be creditable in India; our guide on foreign tax credit and Form 67 explains the process.
This is general information, not legal or tax advice.
How the money arrives
Payments typically come by SWIFT from the client's Vietnamese bank to your Indian bank, often via a correspondent bank in USD. Expect the client's bank to need the contract and invoice, and allow extra time for the first payment.
Your Indian bank is your AD bank and issues the FIRA or advice. Check that it shows the remitter, amount and a purpose code matching your service, for example P0802 or P0807 for software, or P1007 for advertising and market research work. Confirm the code with your bank.
Worked example: withholding and the EDF
Indigo Arc Technologies LLP, Kochi, builds an e-commerce app for Saigon Basket JSC in Ho Chi Minh City. The contract is for USD 40,000 in four milestones, priced gross: Saigon Basket may deduct any foreign contractor tax from each payment.
In January 2027, milestone 2 is accepted and Indigo Arc raises invoice IAT/27/J-02 for USD 10,000.
| Sr. | Recipient | Country | Invoice | Currency | Amount | NRV | Remarks |
|---|---|---|---|---|---|---|---|
| 1 | Saigon Basket JSC | Vietnam | IAT/27/J-02 | USD | 10,000 | See note | Milestone 2 of 4; client may deduct Vietnamese tax per contract cl. 9 |
How should NRV be shown? If the deduction amount is known and agreed when filing, the expected receipt is lower, and Indigo Arc can discuss with its AD bank whether to show the reduced figure as NRV with an explanation. If the amount is uncertain, many exporters show the invoice amount and explain the shortfall at realisation with the tax payment proof. Ask your bank which it prefers and stay consistent. Our guide on net realisable value explains the principle.
The January EDF is due by 2 March 2027. Field 1.1 is Software, 1.4 Internet, 1.12 Others, 1.17 Vietnam.
When the payment arrives in March, net of tax, Indigo Arc sends its bank the invoice, FIRA, the client's proof of tax paid and matching instructions. At around ₹8.5 lakh, the invoice is under ₹10 lakh, so the bank may instead close the entry on Indigo Arc's periodic realisation declaration, but the tax evidence stays in the file.
Realisation timing
The 9-month window runs from each invoice date. Vietnamese clients often pay after formal acceptance, so make acceptance criteria tight. If acceptance or bank documentation drags, request an extension from your AD bank with reasons before the 9 months end. Our realisation extension request letter helps.
GST on your side
Services to a Vietnamese client are generally an export of services when the Section 2(6) IGST Act conditions are met, making them zero-rated. Export under LUT and print "Supply meant for export under LUT without payment of IGST". Foreign tax withheld does not change your Indian GST position; the EDF does not change GST or income tax either.
Frequently asked questions
What currency should I invoice Vietnamese clients in?
USD is the most common choice for cross-border services and keeps realisation simple. VND invoicing is possible, but conversion can create a mismatch between the invoiced and received currency. Agree the currency in the contract.
Will my Vietnamese client deduct tax from my invoice?
It may. Vietnam has a foreign contractor tax regime that clients often apply to payments for services from abroad. Agree in the contract whether your price is gross or net of it, and ask for proof of any tax withheld.
Is there a tax treaty between India and Vietnam?
Yes, India and Vietnam have a double taxation avoidance agreement. Whether it reduces tax on your payments depends on the service and Vietnamese procedures. A tax residency certificate is the usual starting document.
What goes in the EDF country column for a Vietnamese client?
Write "Vietnam" in the Part 2B country column for each invoice to a Vietnamese recipient. If all invoices on that EDF are for Vietnamese clients, field 1.17 can also show Vietnam.
How do I handle a short payment because of Vietnamese withholding tax?
Keep the client's proof of tax paid, and give it to your AD bank with the invoice and FIRA when realisation is matched. Ask the bank how it wants the shortfall recorded, and consult your CA about foreign tax credit in India.
Bottom line
Vietnam rewards exporters who settle currency, tax-at-source and acceptance terms before work starts. Get those into the contract, and the EDF and realisation are routine. Prepare your monthly declaration with the free EDF form generator.
This guide is general information for Indian businesses, not legal or tax advice. Rules and bank processes change — confirm specifics with your AD bank or chartered accountant.