Circular No. 16/1999/TT-BTC guides the implementation of freight tax for foreign shipping companies' cargo transportation activities entering Vietnam to operate maritime transport.

CIRCULAR

Guidelines for Implementing the Tax on Freight Rates for Foreign Shipping Companies Operating in Vietnam

Engaged in Sea Cargo Transport Business

Entering Vietnam to Exploit Transportation Services

 

Pursuant to the Law on Corporate Income Tax adopted by the National Assembly at its Ninth Session on May 10, 1997;

Pursuant to Decree No. 30/1998/NĐ-CP dated May 13, 1998, detailing the implementation of the Law on Corporate Income Tax;

Pursuant to Circular No. 1554/CP-KTTH dated December 31, 1998 of the Prime Minister regarding the collection of freight tax from foreign ships;

The Ministry of Finance hereby provides guidelines for the collection of the tax on freight rates for foreign shipping companies engaged in sea cargo transport business as follows:

I. TAXPAYERS OF THE FREIGHT TAX

1- The taxpayers of the freight tax under these Guidelines are foreign organizations and individuals conducting sea cargo transport business using ships from Vietnamese ports to overseas destinations or between Vietnamese ports, including:

Foreign organizations and individuals owning ships or leasing ships to provide cargo transportation services.

Foreign organizations and individuals conducting sea cargo transport business through Vietnamese agents for loading and unloading, and transportation, where the Vietnamese organizations and individuals are responsible for handling the cargo but the foreign organizations and individuals bear legal responsibility for the cargo of the consignors.

2- These Guidelines shall not apply to foreign shipping companies established and operating under Vietnamese laws such as the Vietnam Ocean Transport Company or foreign-invested ocean transport companies established and operating under the Law on Investment by Foreign Investors in Vietnam.

II. BASIS FOR CALCULATING THE FREIGHT TAX

1. Determination of the freight tax payable:

The freight revenue serving as the basis for calculating the freight tax includes all freight charges collected from transporting goods from Vietnamese loading ports to the final discharge port (including freight charges for goods transshipped through intermediate ports) and/or freight charges collected from transporting goods between Vietnamese ports.

The freight revenue serving as the basis for calculating the freight tax does not include freight charges already subject to freight tax at Vietnamese ports for foreign ship owners and freight charges paid to Vietnamese transportation enterprises for transporting goods from Vietnamese ports to intermediate ports.

The rate of the freight tax prescribed is 3%.

Example: Enterprise Hoa Cúc acts as an agent for Foreign Shipping Company Z. According to the agency agreement, Enterprise Hoa Cúc represents Company Z in receiving goods for export, issuing bills of lading, collecting freight charges...

Vietnamese Enterprise A hires Company Z (through Enterprise Hoa Cúc) to transport goods from Vietnam to the United States with a total freight charge of $100,000.

Enterprise Hoa Cúc hires a Vietnamese ship or a foreign ship to transport goods from Vietnam to Singapore with a freight charge of $20,000, and from Singapore, the goods will be transported further to the United States.

Enterprise Hoa Cúc is responsible for withholding the freight tax due from Company Z and remitting it to the State Budget. The amount of withheld freight tax will be: ($100,000 - $20,000) x 3%.

If a foreign ship transports goods from Vietnam to Singapore, the ship agency authority will collect the freight tax from the foreign ship with an amount of: $20,000 x 3%.

2. The currency for paying the freight tax is convertible foreign currency.

III. EXEMPTIONS AND REDUCTIONS IN THE FREIGHT TAX

1- Foreign organizations and individuals transporting crude oil exports from Vietnam are entitled to a 60% reduction in the prescribed tax rate.

2- In special cases, the State may stipulate reductions in the freight tax for specific goods. Entities eligible for exemptions or reductions must submit complete documentation proving their eligibility to the ship agency authority for each shipment. The ship agency authority retains these documents and compiles them into the Monthly Declaration Form for Collection of Freight Tax as Appendix 2 attached to this Circular.

3- For foreign organizations and individuals from countries that have signed Double Taxation Avoidance Agreements with Vietnam, the level of exemption or reduction shall be determined according to the provisions of the signed Agreement. In these cases, the corporate income tax rate of 1% of the total freight tax rate of 3% prescribed in this Circular serves as the basis for determining the level of exemption or reduction under the Agreement.

IV. DECLARATION AND PAYMENT OF THE FREIGHT TAX AND INSPECTION OF THE PAYMENT OF THE FREIGHT TAX

1. Authorization for declaration and payment of the freight tax:

The Ministry of Finance authorizes ship agency units that have been granted licenses to operate ship agency services by the Vietnam Maritime Administration and agents handling cargo shipments for foreign shipping companies to directly collect and remit the freight tax to the State Budget in accordance with this Circular.

Ship agency units and cargo handling agents for foreign shipping companies, in addition to registering and declaring taxes for their own agency activities and other business operations, must also declare and pay the freight tax to the local Tax Office in accordance with the form set out in Appendix 1 attached to this Circular. Agents for foreign shipping companies must submit a copy of the agency contract to the tax authority.

The registration form is prepared in two copies, one sent to the Tax Office for inspection and confirmation (one copy returned to the ship agency unit, one copy retained by the tax authority for record keeping). When there are changes to the registered tax payment criteria or when changing to represent other shipping companies, or in cases of merger, division, or dissolution, authorized units must declare these changes to the local tax authority at least five days before the change occurs and settle all outstanding freight tax debts to the State Budget.

The registration form for declaration and payment of the freight tax, once confirmed by the tax authority, serves as the legal basis confirming that the unit has been authorized by the tax authority to collect the freight tax.

2. Responsibilities of ship owners and agents for foreign shipping companies:

a) Responsibilities of ship owners:

Foreign organizations and individuals who are the owners of seagoingvessels when their vessels enter Vietnamese ports to carry out export shippingor transport goods between Vietnamese ports shall be responsible for declaringaccurately the revenue from freight charges, providing complete documents suchas transportation contracts, bills of lading, and other related documents to theship agency units as the basis for determining the freight tax payable. Paymentor acceptance of payment for the freight tax payable must be recorded on thefreight tax receipt issued by the authorized tax collection unit.

b) Responsibilities of foreign shipping company agents and shipagency units:

Accurately declare the revenue from freight charges of foreignseagoing shipping companies operating in Vietnam, provide complete documentssuch as transportation contracts, bills of lading, and other related documents tothe tax authority upon request.

Check the transportation contracts between ship owners and shippers,ensure that the ship owner's published freight rates are consistent with worldmarket rates at the time of contract execution. Accurately calculate the amountof tax due, deduct tax payments and/or collect the full, timely freight tax thatthe ship owner must pay.

In cases where the ship owner or shipper does not provide or providesinsufficient documentation to serve as the basis for calculating the freight taxpaid, the ship agency unit has the right to determine the amount of freight taxpaid by the ship owner based on the cargo declaration form, international freightrates, or other related documents.

Notify the ship owner of the freight tax payable, issue a freight taxpayment receipt (issued by the Ministry of Finance according to Appendix 3 attachedto this Circular) before the vessel leaves the port. The freight tax receipt iswritten in four copies:

Copy 1: For verification

Copy 2: Given to the taxpayer

Copy 3: Used for payment

Copy 4: Kept at the stub of the receipt

Monthly, based on the freight tax receipts, the ship agency unit shallprepare a "Freight Tax Declaration Form" according to the model in Appendix 2attached to this Circular and send it to the tax authority on the 5th day of eachmonth.

Timely and fully remit the freight tax payable into the State Budgetaccording to the monthly tax notification of the tax authority.

3. Control of Freight Tax Collection:

Port authorities, when processing departure procedures for foreignvessels, have the responsibility to check the payment of freight taxes by theship owners. The inspection is based on the tax payment receipt, compared withrelated files. If the carrier has not paid or accepted to pay the freight tax, theport authority requires the carrier to pay or accept to pay the tax beforeallowing the vessel to leave the port. In special cases where the vessel mustleave the port, the port authority will prepare a record with the ship ownerconfirming the non-payment of the freight tax (according to the model inAppendix 4 attached to this Circular). The record is made in three copies, onefor the ship owner, one sent to the local Tax Department, and one kept by thePort Authority.

Monthly, based on the records of vessels entering and leaving theport, the Port Authority compiles a Port Authority Declaration Form (accordingto the model in Appendix 5 attached to this Circular) and sends it to the localTax Department as the basis for checking the payment of freight taxes. Themonthly report is sent before the 5th day of the following month.

4. Inspection of Freight Tax Collection by the Tax Authority:

The tax authority has the responsibility to inspect the declarationforms of freight tax collection by ship agency units and foreign shippingcompany agents, compare them with the freight tax receipts, the Port Authority'sdeclaration forms about vessels entering and leaving the port, and other relateddocuments; determine the amount of freight tax due and already paid into thebudget by the authorized tax collection units.

Determine the freight tax that the agency must pay, issue a monthlynotification of the freight tax payable to the agency.

Handle or recommend legal agencies to handle violations of freighttax collection according to current laws.

V. VIOLATION HANDLING AND COMPLAINT RESOLUTION.

1/ Handling Violations:

Foreign organizations and individuals entering Vietnam to operate seagoingvessel transportation and units authorized to collect freight tax shall strictlyimplement the current tax laws and guidelines set forth in this Circular.

Foreign ship owners and/or units authorized by the Ministry ofFinance to collect freight tax who delay payment of freight tax and/or fines fortax violations, in addition to paying the full amount of tax and fines asrequired, will also be subject to a daily fine of 0.1% (one thousandth) of theamount delayed.

Units authorized by the Ministry of Finance to collect freight taxwho fail to comply with regulations regarding registration, declaration, andpayment of freight tax will be penalized according to the AdministrativePenalties Ordinance.

Units authorized to collect freight tax who fail to collect freighttax as directed in this Circular and if the cause is determined to be the faultof the authorized unit, the authorized unit must pay a penalty equal to theamount of lost freight tax.

2/ Complaint Resolution:

Complaints about freight tax directly managed by the tax authorityshall be handled by the authorized unit. If the complainant is unsatisfied withthe handling by the direct tax management authority, they may submit a complaintto the General Department of Taxation and the Ministry of Finance. The decisionof the Minister of Finance is final. While awaiting the decision of thecompetent authority, the complainant must still strictly adhere to theconclusion of the local tax authority that has been issued.

Complaints related to tax provisions under an Agreement signedbetween the Government of Vietnam and the Government of another country shallbe resolved according to the dispute resolution procedures stipulated in thatAgreement.

VI. IMPLEMENTATION

1- The provincial and centrally-administered city Tax Departmentslead coordination with authorized units, maritime agents, and Port Authorities toimplement freight tax collection in accordance with the provisions of thisCircular.

The Ministry of Finance authorizes the Vietnam MaritimeAdministration to translate and provide an English version of this Circular toserve as a legal basis for informing foreign shipping companies enteringVietnamese ports to operate transportation services about the requirements forpaying freight tax.

2- Units authorized to collect freight tax shall be entitled to a commission of 1% of the actual amount of freight tax collected. This commission amount shall be deducted from the collected freight tax before depositing it into the State Budget account and shall be used to cover expenses related to the collection and submission of taxes and to reward individuals involved in the collection and submission of taxes.

3- This Circular takes effect from January 1, 1999, and replaces all previous Circulars and guiding documents issued by the Ministry of Finance regarding the collection of freight tax.

In the course of implementation, if there are any difficulties, units are requested to report to the Ministry of Finance for consideration and decision.

 Appendix No. 1 (Issued together with Circular No. 16/1999/TT-BTC dated February 4, 1999)

SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

----------------------------

FREIGHT TAX COLLECTION REGISTRATION FORM FOR MARITIME TRANSPORT

Respectfully submitted to:…(1)

1.         Name of agency acting as marine vessel agent:…(2)

2.         Name of Director:…(3)

3.         Decision on establishment of enterprise number…dated…issued by…

License issued by the Vietnam Maritime Administration…on…month…year…

4.         Start date of agency service…(4)

5.         Agency for shipping company:…(5)

6.         Business location:…(6)

7.         Total business capital:…(Vietnamese Dong) (7)

Of which: Statutory capital…

                                     State budget capital…

                                     Other sources…

8.         Accounting method applied:…

9.         Bank account number…at…

Treasury account number…at…

10.       Registration for tax payment…(8)

We hereby undertake responsibility that the above information is true and request authorization to collect freight tax.

Date…month...year…Date…month…year...

Checker of declaration form at marine vessel agency

Credit organization branch in province/city and basic credit cooperative…

(Signature and stamp)

 

Confirmation of marine vessel agency…

authorized to collect freight tax for marine vessels.

 

Date…month…year

Tax authority leader signature and stamp

 

Guidance on content declaration registration for freight tax

Declaration registration for freight tax

1.         Direct management tax collection authority at the place of business

2.         Record the name of the agency for maritime transport (according to the establishment decision)

3.         Name of the director of the maritime transport agency

4.         Start date of business operation

5.         Agency for shipping companies. Record foreign shipping companies usually represented by the agency.

6.         Business location: Main office and branch offices (if any) where agency services are provided.

7.         Business capital: Declare various sources of capital at the time of registration (in Vietnamese Dong).

8.         Registration for tax payment at which treasury or bank?

 

 

Appendix No. 3

Appendix No 3

MINISTRY OF FINANCE SOCIALIST REPUBLIC OF VIET NAM

GENERAL DEPARTMENT OF TAXATION INDEPENDENCE - FREEDOM - HAPPINESS

- : -----------------------

Ministry of Finance Socialist Republic of Vietnam

General Department of Taxation Independence - Freedom - Happiness

-------------------------Model CTT 28

 

FREIGHT TAX RECEIPT

(Copy 1: Control Copy)

Receipt of Freight tax

(No1 : Checking)

Ship name:Nationality

M.V Flag

Arrival date:Departure date:

Arrived onSailed on

Loading port:

Port of loading

 

Amount of tax recorded in words: Date... month... year...

(Total amount in words) Date

TUQ. GENERAL DEPARTMENT OF TAXATION - MINISTRY OF FINANCE

on behalf of the general department of taxation

of the ministry of finance

REVENUE DEPARTMENT

revenue department

(Signed and stamped)

… (Name of economic organization) requests to change the Certificate of Registration for Currency Exchange Agent with the following content:

SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

---------------

DECLARATION FORM OF PORT AUTHORITY

1- Port authority…

2- Address…(Main office)

3- Account number…At…

 

 

 

- The declaration form is made in two copies

(One copy sent to the tax authority)

- The tax amount column is filled according to the receipt

Freight tax presented by the ship owner or captain

If no receipt is available: Cross out (X)