Circular No. 713/TC/TCT on the application of the Double Taxation Avoidance Agreement in international transportation activities

LETTER

OF THE MINISTRY OF FINANCE NUMBER 713/TC/TCT ON DECEMBER 22, 2001
REGARDING THE APPLICATION OF DOUBLE TAXATION AGREEMENTS
IN INTERNATIONAL TRANSPORT ACTIVITIES

Respected: - Provincial Tax Departments

- Vietnam Maritime Agents Association

- Shipping Agents

In the process of applying Double Taxation Agreements for international transport activities from 2000 to 2001, there were some difficulties related to the procedures for applying these agreements. To address these practical difficulties in implementing the agreements, the Ministry of Finance provides temporary guidance on the procedures for applying the agreements specifically for the field of international transport activities as follows:

1. Regarding Article 8 of the Agreements concerning international transport activities, which are guided by Point 3.2 Part II Circular No. 95/1997/TT/BTC dated December 29, 1997, and Point 5 Circular No. 37/2000/TT/BTC dated May 5, 2000 of the Ministry of Finance, the Ministry of Finance provides specific guidance as follows:

"The provisions of Article 8 shall only apply to the current corporate income tax rate of 1% fixed on freight charges for goods and passengers subject to taxation for passenger ships and ordinary cargo ships operating on routes between Vietnamese seaports and foreign ports, or 0.4% on the total freight charges for crude oil export tankers of Vietnam operating on routes between Vietnamese seaports and foreign ports, as stipulated in Circular No. 16/1999/TT/BTC dated February 4, 1999 of the Ministry of Finance guiding the implementation of taxes on freight charges for foreign shipping companies' operations in Vietnam."

2. The procedure and formalities for applying Article 8 to international transport activities:

In cases where organizations or individuals residing abroad engage in international maritime cargo transportation between Vietnamese seaports and foreign ports and are entitled to tax exemptions or reductions under the Agreements, the following applies:

a. The entity must submit an application to the provincial tax authority where the ship agency of that entity is registered to request tax exemption or reduction according to the Agreement's provisions. The entity may authorize the ship agency or a legally authorized representative to submit the application on behalf of the taxpayer. The application for tax exemption or reduction under the Agreement includes:

i. A residency certificate issued by the tax authority of the foreign country confirming that the relevant entity is a resident and has tax obligations in that country (specifying the tax year) as provided in the Agreement with Vietnam;

ii. A certified copy of the transportation contract confirmed by the entity requesting the exemption or reduction;

iii. A copy of the business registration at the place of residence or a tax registration certificate issued by the place of residence;

iv. Original tax payment documents (including the tax declaration form and tax notification from the tax authority) if the tax has already been paid and a refund is requested;

v. If the taxpayer authorizes the ship agency to submit the application for tax exemption or reduction without specifying service fees or liability for compensation in the contract, the agency must provide a valid power of attorney from the taxpayer as stipulated in Clause 3 of this Circular;

vi. An application for tax exemption or reduction under the Agreement as prescribed in point (vii), Clause 2.1 Part V of Circular No. 95/1997/TT/BTC dated December 29.

The documents specified herein must be legalized according to the provisions of point 3 of this Circular.

b. The provincial tax authority will base its decision on the application for tax exemption or reduction and the specific terms of each Agreement within thirty days from the date of receipt of the complete application as specified in point a above:

i. For scheduled shipping lines, the decision on tax exemption or reduction will apply to the entire twelve-month period of the calendar year in which the decision is made;

ii. For non-scheduled shipping lines, the decision on tax exemption or reduction by a provincial tax authority will apply to the entire twelve-month period of the calendar year in which the decision is made across all international seaports in Vietnam;

c. Shipping agencies authorized to collect freight taxes must collect the full 3% tax as prescribed in Circular No. 16/1999/TT/BTC and implement tax exemptions or reductions under the Agreement only after receiving a tax exemption or reduction decision from the provincial or city tax authority as specified in point b above.

d. In cases where direct refunds of taxes from the State Budget are required, the application will be submitted to the General Department of Taxation (Ministry of Finance) to process the refund of taxes according to the current regulations in Clause 2 Section II of Circular No. 52/TC/TCT dated August 16, 1997 of the Ministry of Finance guiding the implementation of Double Taxation Agreements between Vietnam and other countries (with corresponding changes to the application documents as specified in point a above).

3. The legalization of foreign public documents according to Point 8 of Circular No. 37/2000/TT/BTC dated May 5, 2000 of the Ministry of Finance is carried out as follows:

"3.1. The signatures and seals on the following documents issued by state authorities of countries that have signed Agreements with Vietnam must be legalized, i.e., they must bear the apostille stamp of the Vietnamese diplomatic mission abroad as stipulated in Circular No. 01/1999/TT-NG dated June 3, 1999 of the Ministry of Foreign Affairs:

i. Residency certificates issued by foreign tax authorities;

ii. Copies of business registrations at the place of residence or tax registration certificates issued by the place of residence.

3.2. Economic contracts, service provision contracts, agency contracts, trust contracts, and cargo transportation contracts (as stipulated in Part V of Circular No. 95/1997/TT/BTC dated December 29, 1997 of the Ministry of Finance) do not need to be legalized.

3.3. Documents and materials from countries that have signed mutual legal assistance treaties with Vietnam do not need to be legalized:

i. Republic of Poland;

ii. Czech Republic;

iii. Hungary;

iv. Bulgaria;

v. Lao People's Democratic Republic;

vi. Russian Federation"

The Ministry of Finance provides guidance for the Tax Departments and maritime agents to be aware of and implement. This circular takes effect from the date of issuance. During implementation, any difficulties should be reported to the Ministry of Finance for consideration and timely resolution and supplementary guidance.