Công văn 4576/TCT-CS

OFFICIAL LETTER

ON TAX POLICIES TOWARD INTERNATIONAL CARGO TRANSPORT AND FORWARDING SERVICES

To: The Tax Department of Ho Chi Minh City

In reply to Official Letters No. 9853/CT-TTHT of September 11, 2007, and No. 9844/CT-TTHT of October 2, 2007, of the Tax Department of Ho Chi Minh City on tax policies towards foreign contractors providing international cargo transport services, the General Department of Taxation gives the following opinions:

According to the provisions of Point 23, Section II, Part A of Circular No. 120/2003/TT-BTC of December 12, 2003, and Point 1.23, Section II, Part A of the Finance Ministry’s Circular No. 32/2007/TT-BTC of April 9, 2007, providing guidance on value added tax (VAT), international transport services are not subject to VAT.

According to the provisions of the Finance Ministry’s Circular No. 05/2005/TT-BTC of January 11, 2005, guiding tax regimes applicable to foreign organizations without the legal status in Vietnam and foreign individuals doing business or having income generated in Vietnam, foreign organizations and individuals doing business without presence in Vietnam and having income generated in Vietnam must pay taxes.

Pursuant to the Finance Ministry’s Circular No. 16/1999/TT-BTC of February 2, 1999, guiding the freight tax on shipping activities of foreign transport companies conducting transport business in Vietnam.

In case foreign companies, directly or through their Vietnam-based agents, provide services of sea or air cargo transport and forwarding from Vietnam to foreign countries, turnovers from these services are not subject to VAT. They shall pay business income tax (BIT) on turnover from international cargo transport and forwarding under the above Circular No. 05/2005/TT-BTC As the turnover from international transport is subject to freight tax (for international sea transport under Circular No. 16/1999/TT-BTC) or VAT and BIT (for international air transport under Circular No. 05/2005/TT-BTC) the turnover used for calculation of BIT in this case does not cover international transport freight payable to carriers. Foreign companies and their Vietnam-based agencies shall supply vouchers proving freight amounts paid to carriers. Otherwise, their taxable income will include all freight amounts collected from customers.

Since inbound cargo transport are services provided to overseas customers outside Vietnam, they are not liable to VAT and BIT under the Finance Ministry’s Circular No. 05/2005/TT-BTC of January 11, 2005.

Regarding tax policies towards cargo delivery, forwarding and storage applicable to postal express services, the General Department of Taxation issued Official Letter No. 4853/TCT-PCCS of December 21, 2006, which provides guidance in accordance with Circular No. 05/2005/TT-BTC of January 11, 2005, and applies as from the effective date of Circular No. 05/2005/TT-BTC.

The General Department of Taxation gives this reply to the Tax Department of Ho Chi Minh City for information and compliance.