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THE MINISTRY OF FINANCE
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SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
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No. 6873 TC/TCT
Re: Guidance on
settlement of unsolved application files for freight tax exemption under the
Agreement on the avoidance of double taxation
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Hanoi, June 22, 2004
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To:
- The Department of Taxation of provinces and centrally
managed cities
- Association of Shipping Agents
- Shipping Agents
In the recent time, the Ministry of Finance - the General
Department of Taxation released a number of Official Letters providing guidance
on freight tax exemption under the Agreement on the avoidance of double
taxation (“DTA”). Different shipping agents prepared the application files for
freight tax exemption in accordance with the guidance as set forth in these
Official Letters. On September 24, 2003, the Ministry of Finance received
Official Letter No. 274/CV-Visaba from the Vietnam Shipping Agents and Brokers
Association posing its queries regarding to the procedures for freight tax
exemption and reduction under the DTA. To solve radically queries of the
shipping agents and foreign shipping companies with respect to the procedures
for application of freight tax exemption under the DTA in the recent time, the
Ministry of Finance provides the following guidelines:
I. REGULATIONS ON FREIGHT TAX AND SCOPE OF FREIGHT TAX
EXEMPTION AND REDUCTION UNDER THE DTA:
1. Regulations on freight tax:
Circular No. 16/1999/TT/BTC dated February 4, 1999 of the
Ministry of Finance providing guidelines for the implementation of freight tax
levied on maritime shipping services of foreign shipping companies operating in
Vietnam provides that:
1.1 Freight tax payers: foreign organizations and
individuals engaging in transportation of cargo by vessels from a seaport in
Vietnam to overseas or between different seaports in Vietnam. Circular No.
16/1999/TT/BTC dated February 4, 1999 of the Ministry of Finance shall not
apply to maritime shipping services of foreign individuals and entities
established and operating under the laws of Vietnam.
1.2. The freight which is used as the basis for calculation
of tax shall be the total freight arised from the transportation of cargo from
the port of loading in Vietnam to the last port of delivery (including freight
in respect of cargo which is transhipped through transit ports) and/or freight
arised from the transportation of cargo between ports of Vietnam.
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2. Scope of the freight tax reduction and exemption under
the DTA
Pursuant to each DAT to which Vietnam is a signatory and in
effect, the rate of corporate income tax shall, as the basis for determining
the reduction or exemption under the provisions of the DTA, be 1% or 0.5% of
the total of freight tax rate of 3%.
II. GENERAL REGULATIONS ON PROCEDURES FOR AND APPLICATION
FILES FOR EXEMPTION FROM FREIGHT TAX UNDER THE DTA.
Regulations on procedures for and application files for
freight tax exemption currently were provided in Circular No. 95/1997/TT/TCT
dated December 29, 1997, Circular No. 37/2000/TT/BTC dated May 5, 2000 and
Circular No. 52 TC/TCT dated August 16, 1997, further detailed in Official
Letter No. 713 TC/TCT dated January 22, 2002 of the Ministry of Finance,
Official Letter No. 4870 TCT/HTQT dated December 25, 2002 and Official Letter
No. 1635 TC/HTQT dated May 13, 2003 of the General Department of Taxation on
handling the problems on freight tax reduction and exemption under the DTA.
Upon the following necessary procedures, the tax agency shall consider and
approve the freight tax reduction and exemption in line with each DTA entered
into between Vietnam and other countries:
- Application letter with full information on the shipping
company, applicable articles of the DTA and commitments of true declaration
made by applicant;
- Power of attorney made by foreign shipping company to
Vietnamese agent or legal representation acting as applicant;
- Tax residence certificate to determine the country which
entered into the DTA with Vietnam for the appropriate application.
- Business registration certificate or tax registration
certificate to determine scope and related provisions of the DTA.
- Ship operation documents and the list of turnovers subject
to freight tax reduction and exemption for each ship to determine reduction and
exemption beneficiary who is direct managing person (owning means of transport)
and the reduced and exempted amount in compliance with the scope of application
under Article 8 of the International Transportation of the Agreement on the
avoidance of double taxation.
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1. Simplified procedures for application file for freight
tax reduction and exemption under the DTA.
- Shipping agents (shipping companies) are entitled to use
the certification letter issued by port authorities certified their ships
entering into Vietnam ports (specifying name of agent, name of ship, name of
shipping company, entry/exit date) in stead of submission of ship operation
documentation as currently provisions. Hence, shipping agents (shipping
company) is entitled to submit one of their following documentations: a copy of
shipping registration certificate that is notarized or certified by shipping
agent (shipping company); a copy of ship leasing contract that is notarized or
certified by shipping agent (shipping company); an original or copy of the
fixed route ship permit certified by the port authority; an original or copy of
entrying permit certified by the port authority; an original of the port
authority’s certification on ships owned by these shipping companies entered
into Vietnam ports.
- Tax residence certificate (legalized copy): tax residence
certificate in which the year is unclear but granted in or after the period of
1999-2000 shall be approved . This stipulation only applies to files for
requesting the application of the DAT for the period of 1999-2001. The
application files from 2002 up to now shall be applied in accordance with the
current provisions (provided that tax residence certificate must clearly state
the residence year at the country where the tax residence certificate granted).
- In order to take advantage for shipping companies having
their official agents or head office of these agents and sub-agents or branches
located in different areas in Vietnam, these agents or shipping companies shall
submit the originals of residence certificate and business registration
certificate, those are legalization, and its copies (notarized or certified by
orginal agents) to the Department of Taxation where the sub-agents or branches
of shipping companies located and the location of submitting these originals
must be clearly stated in the file requesting the application of the DTA.
2. Handling outstanding freight tax of the period 1999-2001
In fact, certain shipping agents do not properly keep these
documents as stated in above and the collection and payment for and on behalf
of foreign shipping companies have not exactly accounted, the settlement of
outstanding file shall be determined upon the consideration of the actual file
requesting the freight tax exemption of shipping agents (shipping companies),
specifically:
2.1 For shipping company transported via fixed route in
which the agent contract that signed with Vietnamese enterprises is liquidated
before the year 2002 and shipping company transported via non-fixed route:
In fact, it is difficult for shipping agents to contact with
shipping companies to complete the application file for freight tax exemption
under the DTA, and thus the Ministry of Finance shall not collect outstanding
freight tax of the period 1999-2001. However, shipping agents, for clear
explanation, shall have responsibility for submitting the application files,
attached to the following documents to the Department of Taxation which
directly suppervised the agent.
- Tax residence certificate, business registration
certificate or tax registration certificate (if any);
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- Name, address of Vietnamese enterprise that is a new
shipping agent of the shipping company (if any);
- Detailed information on the foreign shipping company
(name, address and tax code); and
- The table of outstanding freight tax and outstanding
amount of container storage.
The Department of Taxation shall consider and settle the
exemption from freight tax (after comparing data between shipping agent and the
Department of Taxation). The Department of Taxation shall synthesize
information on foreign shipping companies and actual exempted amount in order
to report to the General Department of Taxation for exchanging information with
foreign tax agencies.
2.2. For fixed route shipping company operating in Vietnam
through shipping agents being Vietnamese enterprises:
Pursuant to the Official Letter No. 713 TC/TCT dated January
22, 2002 of the Ministry of Finance guiding the order, procedures for exemption
and reduction of 1% freight tax applicable to shipping agents and shipping
companies for tax finalization of the year 2001, the General Department of
Taxation shall not collect outstanding freight tax of the period of 1999-2000.
The Department of Taxation shall consider the freight tax
exemption for the year 2001 vis-µ-vis application file of shipping companies
satisfying the proper documentations which have been submitted by shipping
companies. Upon the list of 2001 outstanding freight tax for each ship, the
Department of Taxation shall settle upon the shipping operation documentation
as follows:
- If the ship have shipping operation documentation, the
Department of Taxation shall consider and exempt from all 2001’ outstanding
freight tax of each ship.
- If the ship does not have shipping operation
documentation, the Department of Taxation shall retroactively collect all 2001’
outstanding freight tax of such ship. This freight tax shall be divided into 6
months and the first payment is July 2004. If the shipping agents submitted the
additional documents, the paid freight tax will be refunded or deducted to
payable tax amount of the next payment.
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In case, where the shipping companies are a tax residence in
Singapore, Norway, England, Denmark, Ukraine, India, Canada and Taiwan (those
countries entered into DAT with Vietnam, in which Article 8 stated the
exempting from container storage fees), the storage fees of those shipping
companies shall also be considered together with the application file for
exemption of freight tax under the DTA for containers attached with the ship
which is considering for freight tax exemption in the list compiled in
compliance with the guidelines of the Official Letter No. 4870 TCT/HTQT dated
December 25, 2002 and Official Letter No. 1635 TCT/HTQT dated May 13, 2003 of
General Department of Taxation.
3. Guidelines for calculation of turnover of freight charges
and collect other receivable.
Turnover for freight tax calculation are freight charges and
other fees that the customer have to pay to the transporter, this amount is
equivalent to “freight charge” stated in Bill of Lading of shipping companies
(means net freight charge and additional fee for fluctuation of prices, war
risks). Based on those, the Department of Taxation will check and recalculate
the turnover that shipping agents declared turnover is net freight charges
(without additional fee) in order to reduce taxable amount, the Department of
Taxation will collect retroactively the unpaid tax on the undeclared freight
and take administrative sanction against the shipping agent after deciding
exempting 1% of freight tax following the Agreement on Tax.
Where other turnovers of shipping companies incurred other
than freight charges such as container storage amount (for the DTA do not
provide the exemption of freight tax for container storage amount), turnover
received from liquidation of container, documentation fees, etc., the Department
of Taxation shall retroactively collect in accordance with provisions of the
Circular 169/1998/TT-BTC dated December 22, 1998 of the Ministry of Finance (5%
of corporate income tax) dividing into implemented 6 months after issuing
decision on exemption from 1% freight tax under the DTA.
IV. FINALIZATION OF CORPORATE INCOME TAX FOR INTERNATIONAL
SEA SHIPPING ACTIVITIES UNDER THE DTA FROM 2002 ONWARD:
1. Shipping agents (shipping companies) shall be responsible
for finalizing freight tax from 2002 onward with the Department of Taxation in
accordance with Official Letter No. 713 TC/TCT dated January 22, 2002 (as
detailed in Official Letter No. 4870 TCT/HTQT dated December 25, 2002 and
Official Letter No. 1635 TCT/HTQT dated May 13, 2003) and guidelines for simplying
procedures as stated in Section III.1 of this Official Letter.
2. The determination of freight taxable turnover and other
incomes other than freight tax shall be applied in accordance with Section
III.3 of this official letter.
The Ministry of Finance notifies the Department of Taxation,
shipping agents and Association for implementation.
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FOR THE MINISTRY OF FINANCE
ON BEHALF OF GENERAL DIRECTOR OF THE GENERAL DEPARTMENT OF TAXATION
DEPUTY GENERAL DIRECTOR
Nguyen Thi Cuc