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GENERAL DEPARTMENT OF TAXATION
HANOI CITY DEPARTMENT OF TAXATION
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THE SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
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No.:
35836/CT-TTHT
Re: Tax policies
for package tours of foreign contractors
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Hanoi, May 20, 2019
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To: Sungshin Vina Company Limited.
(Address: Lai Yen Industrial Zone, Lai Yen
Commune, Hoai Duc District, Hanoi City
TIN:
0500534507)
In response to the Official Dispatch No. SSVINA20190423 dated
April 24, 2019 of Sungshin Vina Company Limited (hereinafter referred to as
the “Company”) regarding tax policies, Hanoi City Department of Taxation
hereby gives some guidelines as follows:
- Pursuant to the Circular No. 103/2014/TT-BTC dated August 06, 2014 of
the Ministry of Finance of Vietnam providing guidance on tax liabilities
incurred by foreign organizations and individuals doing business or earning
income in Vietnam;
+ Article 1 stipulates the regulated entities of the
Circular as follows:
“Article 1. Regulated entities
This Circular applies to the following entities (except the those specified in Article 2
Chapter I):
1. Foreign organizations either having permanent establishments
established in Vietnam or not, or foreigners being either residents or
non-residents in Vietnam (hereinafter referred to as “foreign
contractors/sub-contractors”) that do business in Vietnam, or earn income in
Vietnam, under contracts, agreements or commitments made between foreign
contractors and Vietnamese entities, or between foreign contractors and foreign
sub-contractors, for performing partial tasks of main contracts.
…”
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Article 2. Entities not governed by this Circular
This Circular shall not apply to:
…
3. Foreign entities that earn income from services rendered and
used outside the territory of Vietnam.
Example 4:
Company H of Hong Kong provides material handling services
at a port in Hong Kong for Company A in Vietnam. Company A pays Company H for
material handling services at the Hong Kong port.
In this case, material handling services at Hong Kong port
are provided in Hong Kong, thus they are not taxable in Vietnam.
…”
+ Article 13 provides guidance on corporate income tax (CIT)
as follows:
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The CIT shall be calculated on the basis of revenue subject
to CIT and the applicable CIT rate (%).
CIT payable
=
Revenue subject to CIT
x
CIT rate
1. Revenue subject to CIT
a) Revenue subject to CIT
Revenue subject to CIT is the total revenue, exclusive of
VAT, earned by the foreign contractor or foreign sub-contractor, inclusive of
taxes payable. Revenue
subject to CIT includes the costs paid by the Vietnamese entity on behalf of
the foreign contractor or foreign sub-contractor (if any).
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2. CIT rate (%)
a) CIT rates (%) applied to business lines:
No.
Business lines
CIT rate (%)
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5
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2
…”
- Pursuant to Point c Clause 1 Article 9 of the Circular No.
219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance of Vietnam prescribing
the VAT rate of 0%:
“c) International transport prescribed in this Clause includes
passenger transport and freight transport along international routes from
Vietnam to other countries and vice versa, or any route the point of departure
and point of destination of which are both in foreign countries, regardless of
availability of vehicles for direct consignment. If the international transport contract
includes a domestic segment, the domestic segment is also included in the
international transport.
…”
Pursuant to these regulations, in case Sungshin Vina Company
Limited has purchased a package tour from a service provider in Korea according
to the signed service contract which includes 2 parts: a package tour
(including meals, accommodation, transport, etc.) which is completely used in
Korea and Vietnam – South Korea round tickets:
- The package tour which is provided by a Company in Korea and used
outside the territory of Vietnam shall not be subject to the foreign contractor tax.
- With regard to Korea and Vietnam – South Korea round tickets purchased
from a Company in Korea (the foreign contractor does not meet requirements
for direct declaration of tax in Vietnam), Sungshin Vina Company Limited
shall, when making payment to the foreign contractor, deduct, declare and pay CIT
on behalf of the foreign contractor which is equal to 2% of the earned revenue. International transport is not subject to VAT.
Any difficulties that arise during the implementation of
this document should be reported to the Tax Inspection Division No. 1 for
specific guidelines.
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DIRECTOR OF TAX DEPARTMENT
Mai Son