DFDL Tax Workshop - International Transport 110310_Final

8/7/2019 DFDL Tax Workshop - International Transport 110310_Final

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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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CORE SECTORS

ONE REGION ONE FIRM

Tax

Real Estate Corporate

Project Finance & Energy and Infrastructure

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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.

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Forwarder

Forwarder

Customer

Customer

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3

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Supply ofFreight 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

10% but only on the mark-up portion

Commission

E Principal determines price, + there is a contract

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 charges customer

10% VAT on 20 (deduct

freight)

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) subject toVAT 5% on 20 (deduct

freight)

FCT (CIT)

Forwarder (agent) subject to

CIT 5% on 20 (deductfreight)

Carrier is subject to 2% CIT on

freight (unless DTA) withheld

by its agent or other agent17

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

transport

CIT

Includes in normally taxed

income at 25% (foreign tax

credit?)

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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 if principal determines

price, agreement.

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EXPRESS DELIVERY

Vietnam

Group

Customer

Settlement offees 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, latches, delivery,hold cargo, cleaning

Repair services in VN: 0% VAT

(in VN) for foreign customer

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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

retention

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

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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: 10% (for selling freight); US$20 (for other service)

THC, DOC, CFS Fee: US$100 (performed in Vietnam)

Demurrage & Retention: 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$25 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 B

US$100 US$100

USVietnam

N Co Agent

XUS$250

V T CIT

A: (250 200) x 50% x 10% (250 200 VAT) 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;

Vietnam carrier B & offshore carrier C;

Freight for the whole route: US$250;

Freight for each stage will beUS$100;

Handling fee in Singapore: US$10

Handling fee in Vietnam: US$10

Commission for X to sell freight: US$5 Commission for X to follow up container: US$5

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SCENARIO #1

A

Singapore

B C

US$100 US$100

US

Vietnam

N Co Agent

X

US$250

V T CIT

A: Freight (250 200) x 50% x 10%

Handling fee in Singapore: exempt

Handling fee in VN : 10 x 5%

(250 200 VAT) x 5%

Exempt

10 x 5%

B: 100 x 0% 100 as taxable income

C: Exempt Exempt

X: Selling freight: 5 exempt VAT

follow up container: 5 x 10%

Taxable income

Taxable income

Tax implications:

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SCENARIO #2

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%

Exempt

Exempt

10 x 5%

C: Freight: 100 x 0% Exempt

X: Commission for selling freight: 5 exempt

Commission for follow up container: 10%

Taxable income

Taxable income

Tax implications:

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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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INVOICING RULES

The Invoice should have the following description:

- Service fee subject to VAT collected on behalf: xxxx

- Sea freight subject to VAT of 0% collected on behalf: xxxx

NOTE: the amount does not included VAT portion withheld under FCT

regime.

VAT rate and VAT amount:

- For EP enterprise clients: cross out the lines re: VAT rate and VAT amount

- For other clients: VAT rate: cross out this line;

VAT amount: equal to the VAT portion withheld under FCT regime.

(OL 3947/TCT-CS 25/9/2009)

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Edwin Vanderbruggen

Director, Regional Tax Practice

[email protected]

Pham Ngoc Thuan

Senior Tax Adviser

[email protected]

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THANK YOU

Documents

DFDL Tax Workshop - International Transport 110310_Final