Công văn 3157/TCT-CS

OFFICIAL LETTER

ON VALUE ADDED TAX (VAT) RATES

To: The Tax Office of Ho Chi Minh City

The General Department of Taxation has received Official Letter No. 09/HC/12/2007 of December 14, 2007, of Phu Son Ship Repair, Chandler and Services Limited Liability Company, requesting guidance on VAT on services supplied directly for international transport. Regarding this matter, the General Department of Taxation gives its opinions as follows:

According to Point 1, Section II, Part B of the Finance Ministry’s Circular No. 122/2000/TT-BTC of December 29, 2000, and Point 1, Section III of Circular No. 82/2002/TT-BTC of September 18, 2002 (which took effect on January 1, 2000), the tax rate of 0% is applied to the repair of machines, equipment and means of transport, provision of software services to foreign parties and export-processing enterprises; labor export services.

According to Point 23, Section II, Part A of the Finance Ministry’s Circular No. 120/2003/TT-BTC of December 12, 2003, guiding the implementation of the Government’s Decree No. 158/2003/ND-CP of December 10, 2003, guiding the implementation of the VAT Law and the Law Amending and Supplementing a Number of Articles of the VAT Law, “goods and services supplied directly for international transport such as supplying fuel, raw materials, spare parts, water and food, food rations for passengers, providing cleaning services for seagoing ships, aircrafts or international trains, and the services of loading and unloading imported goods” are not liable to VAT. Services for international transport which are guided in Official Letter No. 12987/BTC-TCT of October 14, 2005, as “services for international transport and services provided and used outside Vietnam such as the services of preparing documents and papers on exported goods in Vietnam or preparing documents and papers on imported goods in foreign countries, storage yard services in Vietnam and foreign countries and inland transport services in foreign countries are not liable to VAT.

Under Point 1.23.d, Section II, Part A of the Finance Ministry’s Circular No. 32/2007/TT-BTC of April 9, 2007, guiding subjects not liable to VAT, “d- Goods and services supplied directly for international transport are goods and services sold by Vietnam-based business establishments directly to owners of vehicles engaged in international transport for use in international transport activities or for these vehicles, including:…

Goods and services provided to assure the operation of vehicles engaged in international transport such as petrol and oil, repair, painting and maintenance of vehicles and some other goods and services supplied to assure the operation of vehicles engaged in international transport,…” are not liable to VAT.

Point 2, Section II, Part A of Circular No. 32/2007/TT-BTC stipulates: “Business establishments are not entitled to input VAT credit and refund for goods and services used for the production and trading of goods or the provision of services not liable to VAT specified in Section II and shall include them into the historical cost of fixed assets, the value of raw materials or business expenses.”

Under the above guidance, from January 1, 2000, to December 31, 2003, the service of repairing machines, equipment and means of transport for foreign parties is subject to the VAT rate of 0%, if contracts signed with foreign parties, VAT invoices, vouchers on payments via bank to foreign parties are available as prescribed by the State Bank of Vietnam.

From January 1, 2004, on the service of repairing machines, equipment and means of transport for foreign parties is not liable to VAT. Business establishments are not entitled to input VAT credit and refund for goods and services used in the course of repair but shall include them in the historical cost of fixed assets, the value of raw materials or business expenses.

The General Department of Taxation informs the Tax Office of Ho Chi Minh City thereof implementation and guidance for concerned units.