Công văn 5039/TCT-CS

To: Vietnam Logistics Business Association (VLA)
(Address: 5^th floor, Cang Sai Gon Building, No. 3, Nguyen Tat Thanh street, district 4, Ho Chi Minh City)

In response to VLA’s Official Dispatch No. 46/VPHH dated October 14, 2017 regarding withholding tax on sale of goods at bonded warehouses under document No. 874/PC-VPCP dated August 23, 2017 of Government Office, below are opinions of General Department of Taxation:

Clause 2d Article 2 of the Law on Corporate income tax No. 14/2008/QH12 dated June 3, 2008:

“d) Foreign enterprises without Vietnam-based permanent establishments shall pay tax on taxable incomes generated in Vietnam”.

Clause 2 Article 11 of Law No. 14/2008/QH12: “The tax calculation method applicable to enterprises specified in Points c and d, Clause 2, Article 2 of this Law complies with the Governments regulations.”

Clause 3 Article 3 of the Government's Decree No. 218/2013/ND-CP dated December 26, 2013:

“3. The taxable income incurred in Vietnam of foreign enterprises specified in Point c and d, Clause 2, Article 2 of the Law on corporate income tax is the income earned in Vietnam from provision of services, distribution and supply of goods, grant of loans, copyrights for Vietnamese or foreign organizations and individuals doing business in Vietnam, regardless of business location".

Clause 3 Article 11 of Decree No. 218/2013/ND-CP:

“3. For enterprises specified at Point c and d, Clause 2, Article 2 of the Law on corporate income tax, the income tax payable by enterprises is a percentage (%) of the revenue from sale of goods and services in Vietnam. To be specific: …

b) Providing and supplying goods in Vietnam in the form of in-country export or international commercial terms (Incoterms): 1%;”

Clause 5 Article 1 on regulated entities of Circular No. 103/2014/TT-BTC dated August 6, 2014 of the Ministry of Finance on withholding tax:

“5. Any foreign entity that exercises its right to export, import, distribute goods in Vietnam, buy goods to export, or sell goods to Vietnamese traders in accordance with trade laws”.

- Clause 5 Article 2 of Decree No. 103/2014/TT-BTC on unregulated entities:

“5. Any foreign entity using a bonded warehouse or inland clearance depot (ICD) as a warehouse serving international transport, transit of goods, or storage of goods to be processed by other enterprises”.

Pursuant to the aforementioned regulations, withholding tax shall not apply to a foreign organization or individual uses a bonded warehouse as a warehouse serving international transport, transit of goods, or storage of goods to be processed by other enterprises. In case a foreign organization or individual uses a bonded warehouse in Vietnam to distribute goods, withholding tax shall be impose on the income earned in Vietnam according to regulations.

Therefore, VLA”s request for cancellation of withholding tax on sale of goods at bonded warehouses is not conformable with provisions of the Law on Corporate income tax and its instructional documents.

For your reference and compliance./.