dfdl tax workshop - international transport 110310_final (amended)-hn
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8/7/2019 DFDL Tax Workshop - International Transport 110310_Final (amended)-HN
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Tax Workshop:Tax Workshop:
International TransportInternational Transportin Vietnamin Vietnam
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DFDL MEKONG
Established in Cambodia in 1995
Offices in eight cities in the Mekong Region
Phnom Penh, Cambodia
Vientiane, Laos
Ho Chi Minh City, Vietnam
Hanoi, Vietnam
Bangkok , Thailand
Koh Samui, Thailand
Phuket, Thailand
Yangon, Myanmar
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DFDL MEKONG
90-100 Legal Professionals
140-150 Total Staff
7 Full Offices 1 Regional Head Office
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EDWIN A. VANDERBRUGGEN
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Director, Regional Tax Practice
DFDLs Regional Tax Practice Group is headed by Edwin,
a tax lawyer, author and academic with 18 years
experience in advising multinational enterprises on
international tax , regional tax planning and tax disputes
University lecturer at Leiden University ITC (The
Netherlands), Handelshogeschool University (Belgium),
Chulalongkorn University (Thailand), ABAC University
(Thailand), National University of Economics (CFVG
Vietnam) Hanoi and Ho Chi Minh City.
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THE HO CHI MINH TAX TEAM (I):
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Huy Cam Luu
Senior Tax Adviser
Huy is a career tax lawyer with a J.D. from Hofstra and an LLM in taxation
from Georgetown University. He has over 7 years experience in top tier
law and tax advisory firms in New York. Huy combines his international
tax expertise with a detailed knowledge of Vietnam taxes. He has, among
other things, much experience with employee remuneration plans, real
estate development and designing international corporate tax
strategies.
Pham Ngoc Thuan
Senior Tax Adviser
Thuan is an experienced tax adviser with a degree in economics and
accounting. He has over 10 years work experience, most recently with a
big four tax advisory firm. He has advised, just to name a fewexamples, on tax implications of large construction and engineering
projects, major acquisitions and on several highly publicized real estate
developments.
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THE HO CHI MINH TAX TEAM (II):
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Dinh Le Xuan Thuy
Tax Adviser
Thuy is an experienced tax adviser with a background in accounting. She
has over 10 years experience and specializes in compliance review anddispute resolution with tax authorities. She has worked on tax due
diligence assignments, audits and appeal procedures and advises
mitigation measures.
Le Thuy My
Tax Adviser
My is a talented tax adviser with a degree in Foreign Economics from theForeign Trade University, Ho Chi Minh. She has had over two years
experience working in an international advisory firm and specializes in
tax advisory. Her expertise includes tax risk management, tax structuring
and tax compliance.
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RECENT DEAL LIST TAX PRACTICE GROUP
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From our Tax Practice Group deal List:
Tax efficient structuring of US$300 M complex hotel and tourism resort
Tax advice on US$4,200 M petrochemical plant
Tax due diligence of group of 6 real estate companies for acquisition bylisted equity fund
Tax advice on loan restructuring for French bank
Tax structuring for US$200 M power plant of listed power producer
Transfer pricing advisory services for multinational in financial services
sector, real estate development and manufacturing sector
Tax structuring advice for engineering services to public infrastructure
project
Pre-listing tax restructuring of large consumer group
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1a. Supply of international freight by
the carrier (via agents)
1b.Accessory services to
international freight
= recharged from vendors or not
2. Commission paid by carrier to his
agents
3. Purchase and resale of freight
service by forwarder4. Services and goods provided to
international transport
enterprises
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INTERNATIONAL TRANSPORT TRANSACTIONS
Carrier
Age t
Origi
Age t
Origi
Age t
Desti atio
Age t
Desti atio
Ve dor
Services/Goods
Fuel, cleaning,
repair, clearing, etc.
2
Forwarder
Forwarder
Customer
Customer
2
4
11
3
3
1
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Supply of Freight by carrier
0% What? - air, sea, land
- passenger, goods
- from out-in or in-out, include domesticlegs
- includes additional fees airfreight (peak,
CAF, BAF, demurrage, container retention)
Condition contract + bank transferE Between 2 offshore points
Above, not qualifying for conditions
10% Domestic
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VAT
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VAT
Forwarder Purchase and Resell
Transport Service
Used to be 10% but only on the mark-up portion. The new
rule allows for 0% (OL 3055)
Commission
E Principal determines price, + there is a contract +
for selling freight service
10% all other commissions
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ACCESSORY SERVICES
Carries (agent) charges or recharges certain fees
Example:
Port charge
Terminal handling charge Document fee, customs clearance fee
Goods consolidation
Domestic transport (if charged extra)
Storage
Container rental, container follow up
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Carries charges
Freight and accessory services
to customer via agent
FCT (VAT)
Freight normally 0% (contractand bank transfer)
THC VN supply by agent: 10%
VAT
THC VN supply by carrier: 5%
VAT
THC HK Exempt
FCT (CIT)
Freight OUTBOUND 2% (DTA?)
Freight INBOUND Exempt
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FREIGHT & ACCESSORY SERVICES
Vietnam
Carrier
gentgent
Customer
$100 Freight
$5 THC HK
$5 THC VN
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1. Supply by non-resident (via agent)
performance in VN: 5% VAT
(+5% CIT)
performance abroad: exempt of
VAT (+ exempt of CIT)
2. Supply by VN Resident: always
10% VAT
Example:
Freight outbound 100
THC Hong Kong 5Vietnam 5
Subject to VAT (FCT)
THC Vietnam 5 x 5% = 0.25
Subject to CIT (FCT) 5 x 5% = 0.25
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ACCESSORY SERVICES
Vietnam
Carrier
gentgent
Customer
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Resident forwarder resells
transport service from carrier
to customer
VAT
Forwarder used to charge
customer 10% VAT on 20
(deduct freight). Now it can
charge 0% on 120
Carrier does not charge VAT
to forwarder (0%)
FCT (CIT)
Forwarder withholds 2% CIT
on freight
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FORWARDER
Vietnam
Carrier
Customer
100
Forwarder
120
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Non-resident forwarder resells
transport service from carrier
to customer via agent
FCT (VAT)
Forwarder (agent) used tobe subject to VAT 5% on 20
(deduct freight). Now it is
0% on total 120.
FCT (CIT)
Forwarder (agent) subject toCIT 5% on 20 (deduct
freight)
Carrier is subject to 2% CIT on
freight (unless DTA) withheld
by its agent or other agent 17
FORWARDER
Vietnam
Carrier
Customer
100
Forwarder
120
gentgent
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Carrier pays commission to VN
resident agent .
Agent issues invoice to
carrier.
VAT
10% rate but can exempt
from VAT if principal
determines price of freight
sold by agents for
commission.
CIT
Includes in normally taxed
income at 25% (foreign tax
credit?) 18
COMMISSION
Vietnam
Carrier
gentgent
Customers
commission
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Agent issues invoice on behalf of
group for outbound (sometimes
inbound)
FCT (VAT)
Service, not freight
5% on entire amount
FCT (CIT)
5% on entire amount
Commission 10% but can
exempt in case if principal
determines price of express
freight, agreement.
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EXPRESS DELIVERY
Vietnam
Group
Customer
Settlement of fees and costs
gent
INB UND &
UTB UND
$
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Vendor provides services to
carrier
Eg. Repair, cleaning, storage,
etc.
VAT List of services (in Vietnam)
Circular 112: 0% VAT
tug boat, pilot, wharf, loading,
unloading, mooring, open &
close cargo, hatches, delivery,hold cargo, cleaning
Repair services in VN: 0% VAT
(in VN) for foreign customer
20
SERVICES SUPPLIED TO
INTERNATIONAL TRANSPORT ENTERPRISES
Vietnam
Carrier
gentgent
Vendor
Service to Carrier
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VAT
Export of services? 0% VAT to
non-resident without PE, bank
transfer and contract
Services performed abroad:Exempt
CIT
Included in taxable income at
25% (possible foreign tax
credit)
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SERVICES SUPPLIED TO
INTERNATIONAL TRANSPORT ENTERPRISES
Vietnam
Carrier
gentgent
Vendor
Service to Carrier
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DTA PRINCIPLES
Income from international traffic Article 8 DTA
Disposal over aircraft or vessel
Sea, air, inland waterways (not Vietnam)
Carrier or pool/ combination Includes income carried on primarily in connection with the
transportation
Local transport and storage
Containers rental (by transporter) Spare parts and technical services
Advertising, accommodation
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DTA PRINCIPLES
Business Income Article 7 DTA
PE or not
Dependent agent or independent agent
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1. Outbound international freight
Freight + additional freight
fees such as BAF, CAF, peak,
demurrage and container
detention
VN FCT (CIT): 2%
DTA exempt if
a. air and sea, not land
b. international traffic(same VN)
c. Carrier only (same VN)
How? Self assess + notice
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DTA EXEMPTIONS
Vietnam
Carrier
gentgent
Customer
$
$
DT ST TE
UTB UND
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2. Forwarder
Income from resale of freight
VN FCT (CIT): 5% on Mark-up
DTA: taxable in Vietnam if
forwarder has VN PE (agent)
of a dependent nature
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DTA EXEMPTIONS
Forwarder
Independent
gent
Independent
gent
Customer
DT ST TE
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3. Accessory services in VN
THC, document fee, storage,
container rental, catering,
accommodation
VN FCT (CIT): 5% except for
services performed abroad
DTA exempt under Art. 8.
Position GDT?
4. Intra group service fees (not
transport)
Management and head office
fees
VN FCT (CIT): 5%
DTA exempt under Art. 7 if no
PE26
DTA EXEMPTIONS
Vietnam
Carrier
gentgent
Customer
$
$
DT ST TE
UTB UND
INB UND
Accessory
Services
Accessory
Services
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5. Leasing of aircraft and vessels
6. Express delivery
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DTA EXEMPTIONS
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EXPORTED SERVICE
Facts:
A: port service company (Vietnam);
B: offshore carrier; C is agent of B in VN;
Bs vessel is on the way from Singapore to Hong Kong. In the middle of the
way, the vessel is in need to be repair the engine. B decides to hire A to
repair at port of Haiphong and provide certain services as below.
Pilotage services : US$100;
Repair service : US$100
Customs service : US$150
Tax effects:
Pilotage and repair: 0%;
Customs service: 10
If entire amount is made in cash, input VAT is not deductible accordingly for
pilotage and repair. 29
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EXAMPLE ON TAXABLE INCOME
Facts:
Foreign carrier A engages transportation for Vietnam N Co.;
Vietnamese X: an agent of A;
The route: from VN to US, transshipped in Singapore;
Vietnamese carrier B;
Foreign Carrier C;
The freight for whole route: US$250;
The freight from Vietnam to Singapore or from Singapore to US: US$100
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SCENARIO #1
A
Singapore
US$250
USVietnam
N Co Agent
X
US$250
Agent commission: US$10 (for selling freight); US$20 (for other service)
THC, DOC, CFS Fee: US$100 (performed in Vietnam)
Demurrage & Detention: US$20
TAX IMPLICATIONS: For A
FCWT (CIT): (250 + 20) x 2% FCT on service fee: 100 x 10% (VAT: 5% & CIT: 5%)
TAX IMPLICATIONS: For X
Agent commission for selling freight: US$10 exempt from VAT
Agent commission for other service: US$20 x 10% VAT (Taxable income for CIT)
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SCENARIO #2
A
Singapore
C VN-B
US$100US$100
USVietnam
N Co Agent
XUS$250
V T CIT
A: 250 x 0% (250 200) x 5%
B: Exempt 25% CIT
C: 100 x 0% 100 x 2%
Tax implications:
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SCENARIO #3
A
Singapore
C A
US$100
USVietnam
N Co Agent
XUS$250
V T CIT
A: 250 x 0% (250 100) x 2%C: 100 x 0% 100 x 2%
Tax implications:
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FREIGHT TAX AND RELATED SERVICE INCOME
Facts:
Offshore A (via Agent X) engages transportation for Vietnam N from US to
VN, transshipped at Singapore; Fees to be collected
Vietnam carrier B & offshore carrier C;
Freight for the whole route: US$250;
Freight for stage from Singapore to VN will beUS$100;
Handling fee in Singapore: US$10
Handling fee in Vietnam: US$10
Commission for X to collect freight (not sold) and other fees on behalf of the Carrier: US$15
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SCENARIO
A
Singapore
C A
US$100
US
Vietnam
N Co Agent
X
US$250
V T CIT
A: Freight 250 x 0%
Handling fee in Singapore: exempt
Handling fee in VN : 10 x 5%
Freight 250 exempt
Exempt
10 x 5%
C: Exempt Exempt
X: Commission for service of collection on
behalf : 15 x 10%
Taxable income
Tax implications:
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Offshore forwarder and Offshore Carrier
Facts:
- Vietnamese customer N;
- Agent X of an offshore Carrier A;
- Agent Y of an offshore Forwarder B;
- Agent Y buys freight from Agent X 100 and resell to N. 120
- Related service fee: X collects on behalf of A from Y: 20
- In turn, Y reimburses such related fees to N: 30 (collect on behalf of B)
- Goods from VN to US
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Offshore forwarder and Offshore Carrier
B
A
US$100
US
Vietnam
N Co Agent
Y
US$120
V T CIT
A: Freight : 100 x 0%
Related service: 20 x 5%
2%
(20 VAT) x 5%
B: Freight: 120 x 0% (120-100) x 5%
Relates services: 30 x 5% (30-VAT) x 5%
B : not allowed to deduct input VAT on invoice
from X (US$1)
Tax implications:
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US$120
Agent
X
US$ 30
US$100
US$ 20
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FREIGHT TAX x DTA EXEMPTION/REDUCTION
Facts:
Carrier A has vessel A1 x A2 (Japan)
Carrier B has vessel B1 x B2 (Hong Kong)
VN C hires A to carry goods from VNpabroad
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FREIGHT TAX x DTA EXEMPTION/REDUCTION
Scenario StageIssuer of
B/L to CVessel V T CIT
Benefi-
ciary
under
DT
The income subject
to rt. 8
Case 1
1 A A1 0% 2% A Entire income from
C2 A A2 0% 2% A
Case 2
1 A B1 0% 2% B Income from A
2 A A2 0%2%
(diff)A
Income from C
payments to B
Case 31 A B
10% 2% B Entire income from
A2 A B2 0% 2% B
Note: income of A (difference between income from C payment to B) taxed at
10% and not qualified for DTA exemption under art 8.
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E dwin Vanderbruggen
Director, Regional Tax Practice
Pham Ngoc Thuan
Senior Tax Adviser
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THANK YOU