What is the VAT rate for international transportation, including domestic segments in Vietnam?

What is the VAT rate for international transportation, including domestic segments in Vietnam?

Based on Point c Clause 1 Article 9 of Circular 219/2013/TT-BTC which stipulates the 0% tax rate as follows:

0% Tax Rate

1. A 0% tax rate is applied to exported goods and services; construction and installation activities of projects overseas and in non-taxable areas; international transportation; goods and services not subject to VAT when exported, except for cases where the 0% tax rate is not applicable as guided in Clause 3 of this Article.

Exported goods and services are those sold or provided to organizations or individuals abroad and consumed outside Vietnam; sold or provided to organizations or individuals in non-taxable areas; goods and services supplied to foreign customers as prescribed by law.

...

c) International transportation stipulated in this clause includes the transportation of passengers, luggage, and cargo on international routes from Vietnam abroad or from abroad to Vietnam, or both departure and arrival points are abroad, regardless of whether direct transportation means are available or not. In cases where the international transportation contract includes domestic transportation segments, international transportation includes the domestic segment.

...

From the above regulation, it can be seen that if the international transportation contract includes domestic transportation segments, the VAT rate for international transportation, including domestic segments, is applied as for international transportation, which is 0%.

What is the VAT rate for international transportation, including domestic segments in Vietnam? (Image from Internet)

What are the conditions for applying a 0% tax rate to international transportation, including domestic segments in Vietnam?

According to Point c Clause 2 Article 9 of Circular 219/2013/TT-BTC which stipulates the conditions for applying a 0% tax rate as follows:

0% Tax Rate

2. Conditions for applying a 0% tax rate:

...

c) For international transportation:

- There must be a transportation contract of passengers, luggage, and goods between the carrier and the hirer according to the international leg from Vietnam to abroad or from abroad to Vietnam or both departure and arrival points are abroad in forms consistent with legal regulations. For passenger transport, the transport contract is the ticket. The international transportation business must comply with legal regulations on transportation.

- There must be a payment document through the bank or other forms of payment considered as payment through the bank. For the case of passenger transportation to individuals, there must be direct payment documents.

...

Thus, the conditions for applying a 0% tax rate to international transportation, including domestic segments, include:

- There is a transportation contract of passengers, luggage, and goods between the carrier and the hirer according to the international leg from Vietnam to abroad or from abroad to Vietnam or both departure and arrival points are abroad in forms consistent with legal regulations.

For passenger transport, the transport contract is the ticket. The international transportation business must comply with legal regulations on transportation.

- There is a payment document through the bank or other forms of payment considered as payment through the bank.

For the case of passenger transportation to individuals, there must be direct payment documents.

Which entities are VAT payers in Vietnam?

Based on Article 3 of Circular 219/2013/TT-BTC which stipulates the entities liable for VAT:

The entities liable for VAT are organizations and individuals that produce and trade in VAT-liable goods and services in Vietnam, regardless of industry, form, or business organization (hereinafter referred to as business establishments), and organizations, individuals that import goods or purchase services from abroad that are subject to VAT (hereinafter referred to as importers) including:

- Business organizations established and registered under the Enterprise Law, the State Enterprise Law (now the Enterprise Law), the Cooperative Law, and other specialized business laws;

- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, armed forces units, career organizations, and other organizations;

- Enterprises with foreign invested capital and foreign parties involved in business cooperation under the Law on Foreign Investment in Vietnam (now the Investment Law); organizations, individuals from abroad conducting business activities in Vietnam without establishing a legal entity in Vietnam;

- Individuals, households, independent business groups, and other entities that have production, business, and import activities;

- Organizations and individuals conducting business in Vietnam purchasing services (including cases of purchasing services associated with goods) from foreign organizations that have no permanent establishment in Vietnam, individuals overseas who are not residents in Vietnam, the organization, and individual purchasing services are the taxpayer, except for cases not required to declare, calculate, and pay VAT as guided in Clause 2 Article 5 of Circular 219/2013/TT-BTC.

Regulations on permanent establishments and non-resident entities are implemented according to the laws on corporate income tax and personal income tax.

- Branches of export processing enterprises established to engage in trading activities and activities directly related to the trading of goods in Vietnam according to the laws on industrial zones, export processing zones, and economic zones.