Công văn 4152/TCT-CS

To: Ha Noi Tax Department

The General Department of Taxation has received the Ha Noi Tax Department’s Official Letter No. 10836 of May 5, 2011, on invoices for difference of international transportation freights. Regarding this issue, the General Department of Taxation gives the following opinions:

Clause 1, Article 8 of the Law on Value Added Tax (VAT) stipulates: “The tax rate of 0% applies to exported goods and services, international transportation and goods and services not liable to value-added tax specified in Article 5 of this Law upon exportation…”

Article 1 of the Ministry of Finance’s Circular No. 112/2009/TT-BTC of June 2, 2009, guiding the conditions for applying the VAT rate of 0% to international transportation and aviation and maritime services, stipulates:

“Article 1. For international transportation:

To be eligible for the tax rate of 0%, international transportation must satisfy the following conditions:

- There is a contract between the carrier and the shipper on passenger, luggage and/or cargo transportation along international routes from Vietnam to abroad or vice versa in a law-prescribed form. For passenger transportation, the transportation contract is fare ticket. If the international transportation contract covers domestic transportation routes, international transportation is also carried out along domestic routes. International transportation businesses shall comply with regulations on transportation.

- There are documents on via-bank payment or other modes of payment regarded as via-bank payment; or documents on direct payment in case of transportation of individual passengers.”

Points 1.13 and 1.14, Section I, Part B of the Ministry of Finance’s Circular No. 129/2008/TT-BTC of December 26, 2008, guiding VAT calculation prices, stipulate:

“1.13. For transportation, loading and unloading, these prices are VAT-exclusive freight or loading and unloading charge rates, regardless of whether businesses directly carry out the transportation, loading and unloading or hire such service.

1.14. For tourist services in the form of tours under contracts signed with tourists at package prices (inclusive of meal, accommodations and travel), these package prices are inclusive of VAT.

In case a package price covers also air fares for tourists coming from abroad into Vietnam and from Vietnam to abroad, expenses for meals, accommodations and sight-seeing and some other expenses incurred abroad (if with lawful receipts), sums of money collected from tourists to cover these expenses may be subtracted from VAT calculation prices (turnover).”

Point 2.13, Section IV, Part B of Circular No. 129/2008/TT-BTC guiding invoice issuance, stipulates: “For business establishments which are allocated or leased land by the State for building houses for sale or lease or infrastructure for sale or lease, for transportation services; or international tour services, invoices shall be issued as follows:

a/ The line for the sale price shall be written with the VAT-exclusive sale price of the house or infrastructure (the house sale price and the land price or rent rate or infrastructure rent rate are written separately), transportation or package tour service turnover.

b/ The line for the VAT calculation price shall be written with the price determined under Point 1.8, Section I, Part B of this Circular; transportation or tourist service turnover minus expenses arising overseas such as those for meals, accommodations and travel.

c/ The lines for the VAT rate and payable amount and the payment price shall be written as prescribed.”

According to the above guidance, in case the Thang Loi Trading and Tourism Company buys international flight airfares and then re-sells these airfares to the Viet Foot Investment and Travel Service Joint-Stock Company, the turnover from selling international flight airfares is eligible for the tax rate of 0% according to the Ministry of Finance’s Official Letter No. 3055/BTC-TCT of March 15, 2010. The Thang Loi Trading and Tourism Company that buys international flight airfares shall issue a VAT invoice stating fare-selling turnover (money amount collected from the Viet Foot Investment and Travel Service Joint-Stock Company) eligible for the tax rate of 0%.

In case international transportation fares are included in the service package provided by the Thang Loi Trading and Tourism Company to their customers, the turnover from selling international flight airfares is eligible for the tax rate of 0%; other services included in the service package are subject to VAT under regulations (similar to travel service activities). The Thang Loi Trading and Tourism Company shall make invoices with the line for sale price written with VAT-exclusive service package price, the line for VAT calculation price written with the service package price minus the international flight airfare price, and the lines for the VAT rate and amount and the payment price written as prescribed.

Above is the General Department of Taxation’s reply to the Ha Noi Tax Department for implementation.