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  c  
  
DFDL MEKONG

j Established in Cambodia in 1995

j Offices in eight cities in the Mekong Region
Ô ëhnom ëenh, Cambodia
Ô Vientiane, Laos
Ô Ho Chi Minh City, Vietnam
Ô Hanoi, Vietnam
Ô Bangkok , Thailand
Ô Koh Samui, Thailand
Ô ëhuket, Thailand
Ô Yangon, Myanmar

2
DFDL MEKONG

j 90-100 Legal ërofessionals

j 140-150 Total Staff
j 7 Full Offices
j 1 Regional Head Office

3
CORE SECTORS

—

— m —


j Tax
j Real Estate
j Corporate
j ëroject Finance & Energy and Infrastructure

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EDWIN A. VANDERBRUGGEN

2    c
  

j DFDL͛s Regional Tax ëractice 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
j 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):

 c 
^
 
 
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 four͟ tax advisory firm. He has advised, just to name a few
examples, on tax implications of large construction and engineering
projects, major acquisitions and on several highly publicized real estate
developments.

 
^

 
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.
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THE HO CHI MINH TAX TEAM (II):

2 c


 
Thuy is an experienced tax adviser with a background in accounting. She
has over 10 years experience and specializes in compliance review and
dispute resolution with tax authorities. She has worked on tax due
diligence assignments, audits and appeal procedures and advises
mitigation measures.
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My is a talented tax adviser with a degree in Foreign Economics from the
Foreign 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 ëRACTICE GROUë

`   c
      

j Tax efficient structuring of US$300 M complex hotel and tourism resort

j Tax advice on US$4,200 M petrochemical plant
j Tax due diligence of group of 6 real estate companies for acquisition by
listed equity fund
j Tax advice on loan restructuring for French bank
j Tax structuring for US$200 M power plant of listed power producer
j Transfer pricing advisory services for multinational in financial services
sector, real estate development and manufacturing sector
j Tax structuring advice for engineering services to public infrastructure
project
j ëre-listing tax restructuring of large consumer group
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9
 INTERNATIONAL TRANSëORT TRANSACTIONS

 
1a. Supply of international freight by 4  
the carrier (via agents) 2
!"#
2
1b. Accessory services to Fuel, cleaning,
repair, clearing, etc.
international freight
= recharged from vendors or not    
1
 2  
2. Commission paid by carrier to his
agents `$ 
1 1
3. ëurchase and resale of freight 3
service by forwarder
4. Services and goods provided to    `$ 

international transport 3
enterprises
  

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VAT

! 
% ` &
 

0% What? - air, sea, land
- passenger, goods
- from out-in or in-out, include domestic
legs
- includes additional fees airfreight (peak,
CAF, BAF, demurrage, container retention)
Condition contract + bank transfer
E Between 2 offshore points
Above, not qualifying for conditions
10% Domestic
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VAT

`$      

Transport Service
Used to be 10% but only on the mark-up portion. The new
rule allows for 0% (OL 3055)
Commission
E ërincipal 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:
j ëort charge
j Terminal handling charge
j Document fee, customs clearance fee
j Goods consolidation
j Domestic transport (if charged extra)
j Storage
j Container rental, container follow up

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FREIGHT & ACCESSORY SERVICES

j Carries charges
ʹ Freight and accessory services
to customer via agent  

j FCT (VAT) $100 Freight

ʹ Freight normally 0% (contract $5 THC HK
and bank transfer) $5 THC VN
  
ʹ THC VN supply by agent: 10%  
VAT
THC VN supply by carrier: 5%
VAT
ʹ THC HK Exempt
  
j FCT (CIT)
ʹ Freight OUTBOUND 2% (DTA?)
ʹ Freight INBOUND Exempt

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ACCESSORY SERVICES

1. Supply by non-resident (via agent)

ʹ performance in VN: 5% VAT
(+5% CIT)  
ʹ performance abroad: exempt of
VAT (+ exempt of CIT)
2. Supply by VN Resident: always
  
10% VAT  
Example:
Freight outbound 100
THC Hong Kong 5
Vietnam 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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FORWARDER

j Resident forwarder resells

transport service from carrier  
to customer
j VAT 100

ʹ Forwarder used to charge   

customer 10% VAT on 20 `$ 
(deduct freight). Now it can
charge 0% on 120 120
ʹ Carrier does not charge VAT
to forwarder (0%)
  
j FCT (CIT)
ʹ Forwarder withholds 2% CIT
on freight
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FORWARDER

j Non-resident forwarder resells

transport service from carrier  
to customer via agent
j FCT (VAT) 100
ʹ Forwarder (agent) used to
`$ 
be subject to VAT 5% on 20
(deduct freight). Now it is
0% on total 120.   

j FCT (CIT)  

ʹ Forwarder (agent) subject to 120

CIT 5% on 20 (deduct
freight)   
j Carrier is subject to 2% CIT on
freight (unless DTA) withheld
by its agent or other agent 17
COMMISSION

j Carrier pays commission to VN

resident agent .
 
ʹ Agent issues invoice to
carrier. commission

j VAT
ʹ 10% rate but can exempt   
 
from VAT if principal
determines price of freight
sold by agents for
commission.
  
j CIT
ʹ Includes in normally taxed
income at 25% (foreign tax
credit?) 18
EXëRESS DELIVERY

Agent issues invoice on behalf of

group for outbound (sometimes 
inbound)
' (2)
j FCT (VAT)
(c' (2 Settlement of   
ʹ Service, not freight fees and costs

ʹ 5% on entire amount 
j FCT (CIT)
ʹ 5% on entire amount $

j Commission 10% but can

exempt in case if principal   

determines price of express

freight, agreement.
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SERVICES SUëëLIED TO
INTERNATIONAL TRANSëORT ENTERëRISES

j Vendor provides services to

carrier  
ʹ Eg. Repair, cleaning, storage,
etc.
j VAT
ʹ List of services (in Vietnam)   
Circular 112: 0% VAT  

tug boat, pilot, wharf, loading,

unloading, mooring, open & Service to Carrier

close cargo, hatches, delivery,

hold cargo, cleaning 
ʹ Repair services in VN: 0% VAT
(in VN) for foreign customer

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SERVICES SUëëLIED TO
INTERNATIONAL TRANSëORT ENTERëRISES

j VAT
ʹ Export of services? 0% VAT to  
non-resident without ëE, bank
transfer and contract
ʹ Services performed abroad:
Exempt   
j CIT  

ʹ Included in taxable income at

25% (possible foreign tax Service to Carrier

credit)


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DTA ëRINCIëLES

Income from international traffic Article 8 DTA

j Disposal over aircraft or vessel
j Sea, air, inland waterways (not Vietnam)
j Carrier or pool/ combination
j Includes income carried on primarily in connection with the
transportation
ʹ Local transport and storage
ʹ Containers rental (by transporter)
ʹ Spare parts and technical services
ʹ Advertising, accommodation

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DTA ëRINCIëLES

Business Income Article 7 DTA

j ëE or not
j Dependent agent or independent agent

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DTA EXEMëTIONS

1. Outbound international freight

j Freight + additional freight  
fees such as BAF, CAF, peak,
demurrage and container $ 2c !c c*
detention
  
j VN FCT (CIT): 2%  
j DTA exempt if
a. air and sea, not land $ (c' (2

b. ͞international traffic͟
(same VN)   
c. Carrier only (same VN)
j How? Self assess + notice

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DTA EXEMëTIONS

2. Forwarder
`$ 
j Income from resale of freight
j VN FCT (CIT): 5% on Mark-up
2c !c c*
j DTA: taxable in Vietnam if
forwarder has VN ëE (agent)   
 
of a dependent nature

  

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DTA EXEMëTIONS

3. Accessory services in VN
j THC, document fee, storage,
container rental, catering,  

accommodation
j VN FCT (CIT): 5% except for $ Accessory
Services 2c !c c*
services performed abroad
  
j DTA exempt under Art. 8.  
(c' (2
ëosition GDT? ' (2

4. Intra group service fees (not $ Accessory

transport) Services

j Management and head office

fees   

j VN FCT (CIT): 5%
j DTA exempt under Art. 7 if no
ëE
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DTA EXEMëTIONS

5. Leasing of aircraft and vessels

6. Express delivery

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28
EXëORTED SERVICE

`  

j A: port service company (Vietnam);

j B: offshore carrier; C is agent of B in VN;
j B͛s 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.
j ëilotage services : US$100;
j Repair service : US$100
j Customs service : US$150
j Tax effects:
ëilotage and repair: 0%;
Customs service: 10
If entire amount is made in cash, input VAT is not deductible accordingly for
pilotage and repair. 29
EXAMëLE ON TAXABLE INCOME

`  

j Foreign carrier A engages transportation for Vietnam N Co.;

j Vietnamese X: an agent of A;
j The route: from VN to US, transshipped in Singapore;
j Vietnamese carrier B;
j Foreign Carrier C;
j The freight for whole route: US$250;
j The freight from Vietnam to Singapore or from Singapore to US: US$100

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 SCENARIO #1

Vietnam Singapore US

N Co Agent w
X US$250
US$250

j Agent commission: US$10 (for selling freight); US$20 (for other service)
j THC, DOC, CFS Fee: US$100 (performed in Vietnam)
j Demurrage & Detention: US$20
TAX IMëLICATIONS: For A
j FCWT (CIT): (250 + 20) x 2%
j FCT on service fee: 100 x 10% (VAT: 5% & CIT: 5%)
TAX IMëLICATIONS: For X
j Agent commission for selling freight: US$10 exempt from VAT
j Agent commission for other service: US$20 x 10% VAT (Taxable income for CIT)

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 SCENARIO #2

Vietnam Singapore US

N Co Agent

X US$100
US$250 US$100
c
  

 c c
A: 250 x 0% (250 ʹ 200) x 5%
B: Exempt 25% CIT
C: 100 x 0% 100 x 2%

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 SCENARIO #3

Vietnam Singapore US

N Co Agent w
X US$100
US$250
c
  

 c c
A: 250 x 0% (250 ʹ 100) x 2%
C: 100 x 0% 100 x 2%

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FREIGHT TAX AND RELATED SERVICE INCOME

`  

j Offshore A (via Agent X) engages transportation for Vietnam N from US to

VN, transshipped at Singapore; Fees to be collected
j Vietnam carrier B & offshore carrier C;
j Freight for the whole route: US$250;
j Freight for stage from Singapore to VN will beUS$100;
j Handling fee in Singapore: US$10
j Handling fee in Vietnam: US$10
j Commission for X to collect freight (not sold) and other fees on behalf of
the Carrier: US$15

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 SCENARIO

w
Vietnam
Singapore
Agent US
N Co w
X
US$250 US$100

c
  

 c c
A: Freight 250 x 0% Freight 250 exempt
Handling fee in Singapore: exempt Exempt
Handling fee in VN : 10 x 5% 10 x 5%
C: Exempt Exempt
X: Commission for service of collection on Taxable income
behalf : 15 x 10%

35
Offshore forwarder and Offshore Carrier

`  

- 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
 Offshore forwarder and Offshore Carrier

Vietnam US$120

US$ 30 US$ 20 
Agent Agent US
N Co w
Y X
US$100
US$120 US$100
c
  

 c c
A: Freight : 100 x 0% 2%
Related service: 20 x 5% (20 ʹ 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)

37
FREIGHT TAX x DTA EXEMëTION/REDUCTION

`  

j Carrier A has vessel A1 x A2 (Japan)

j Carrier B has vessel B1 x B2 (Hong Kong)
j VN C hires A to carry goods from VN mabroad

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FREIGHT TAX x DTA EXEMëTION/REDUCTION

'%+
  %  
c &, 
!  !    c c
'#     -.
2c
1 A A1 0% 2% A Entire income from
Case 1 C
2 A A2 0% 2% A
1 A B1 0% 2% B Income from A
Case 2 2% Income from C ʹ
2 A A2 0% A
(diff) payments to B
1 A B1 0% 2% B Entire income from
Case 3 A
2 A B2 0% 2% B
Note: income of A (difference between income from C ʹ payment to B) taxed at
10% and not qualified for DTA exemption under art 8.

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INVOICING RULES

j The Invoice should have the following description:

- ͞Service fee subject to VAT collected on behalf: xxxx͟
- ͞Sea freight subject to VAT of 0% collected on behalf: xxxx͟

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

j VAT rate and VAT amount:

- For Eë 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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THANK YOU

R





Director, Regional Tax ëractice
Edwin.Vanderbruggen@dfdlmekong.com



Senior Tax Adviser
Thuan.ëham@dfdlmekong.com

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