I. FREIGHT TAX PAYERS

1. Freight tax payers under this Circular�s guidance are foreign organizations and individuals that are engaged in goods transportation by sea-going ships from Vietnamese sea ports to foreign countries or between Vietnamese sea ports, including:

- Foreign organizations and individuals that use their own or chartered ships to perform the goods transportation service;

- Foreign organizations and individuals that are engaged in goods transportation by sea-going ships through their freight loading and unloading and/or forwarding agents being Vietnamese organizations or individuals, provided that such foreign organizations and individuals take legal liability for the transported goods.

2. This Circular shall not apply to organizations and individuals engaged in sea shipping business, that are established and operate under Vietnamese law, such as the Vietnam Sea Shipping Company or foreign-invested sea shipping companies established and operating under the Law on Foreign Investment in Vietnam.

II. THE FREIGHT TAX CALCULATION BASIS

1. Determination of payable freight tax:

Payable freight tax amount = total freight amount x freight tax rate

The freight that serves as basis for tax calculation is the whole freight amount collected from the activities of transporting goods from the Vietnamese loading port to the destination port for unloading such goods (including the freight for goods lots transported via entrepot ports) and/or the freight amount collected from the transportation of goods between Vietnamese ports.

The freight amounts that serve as basis for freight tax calculation shall not include freight amounts which have been taxed at Vietnamese ports and paid by foreign ship owners and the freight amounts paid to Vietnamese transport enterprises that have taken part in the transportation of goods from a Vietnamese port to an entrepot port.

The prescribed freight tax rate is 3%.

For example: Hoa Cuc enterprise acts as an agent for foreign transport firm Z. According to the transport agency contract, Hoa Cuc enterprise shall represent firm Z to receive and transport goods to foreign country(ies), issue bills of lading, collect freight, ...

Enterprise A of Vietnam hires firm Z (through Hoa Cuc enterprise) to transport goods from Vietnam to the United States with a freight of 100,000 USD.

Hoa Cuc enterprise hires sea-going ships of a Vietnamese enterprise or foreign sea-going ships to transport goods from Vietnam to Singapore with a freight of 20,000 USD, then from Singapore such goods shall be further transported to the United States.

Hoa Cuc enterprise shall have to deduct the freight tax paid by firm Z to the State budget. The deducted freight tax amount shall be (100,000 - 20,000) x 3%.

If foreign sea-going ships transport goods from Vietnam to Singapore, the sea-shipping agents shall collect freight tax from foreign ships with an amount of 20,000 x 3%.

2. The freight tax shall be paid in convertible foreign currencies.

III. FREIGHT TAX EXEMPTION AND REDUCTION

1. Foreign organizations and individuals that transport Vietnam�s export crude oil shall be entitled to the 60% reduction of the prescribed tax rate.

2. For particular cases, the State shall provide freight tax reduction for some specific goods items. Subjects eligible for freight tax exemption and/or reduction shall have to produce all documents proving their eligibility for tax exemption and/or reduction to the sea-shipping agents upon each transportation. The sea-shipping agents shall keep such documents and, at the end of each month, summarize them into the table of freight tax collection declaration.

3. Organizations and individuals of the foreign countries that have concluded agreements on the avoidance of double taxation with Vietnam shall be entitled to freight tax reduction levels determined according to such agreements� provisions. In these cases, the enterprise income tax rate to serve as basis for determining the exemption and/or reduction level according to the agreements shall be 1% in the total freight tax rate of 3% prescribed in this Circular.

IV. FREIGHT TAX PAYMENT DECLARATION AND INSPECTION OF FREIGHT TAX COLLECTION
AND PAYMENT

1. Authorized freight tax declaration, collection and payment:

The Ministry of Finance shall authorize the units acting as sea-shipping agents which have already been so licensed by the Vietnam Maritime Department, and freight forwarding agents for foreign transport firms to directly collect freight tax and remit it into the State budget.

Units acting as sea shipping agents or freight forwarding agents for transport firms owned by foreign organizations or individuals shall, besides having to register and declare tax payment for their agency activities and other business activities, have to make the registration and declaration of freight tax payment with the local tax departments. Particularly, agents for foreign transport firms shall have to send agency contracts (copied one) to the tax agency.

Each registration declaration shall be made in 2 copies and sent to the provincial/municipal tax department for checking and certification (one copy shall be returned to the sea-shipping agent, another shall be kept by the tax agency for monitoring the tax payment). In cases of any changes in the already registered norms for freight tax payment, or a change in acting as agents for other shipping firms or in cases of merger, split-up or dissolution, the units authorized to collect freight tax shall have to declare with the local tax agency 5 days before such changes take place and fully pay the freight tax amount they still owe to the State budget.

The freight tax payment registration declarations which have already been certified by the tax agency shall constitute the legal ground evidencing that the units have been authorized by the tax agency to collect freight tax.

2. The responsibility of the sea-going ship owners and agents for foreign transport firms:

a) The responsibility of the sea-going ship owners:

Foreign organizations and individuals being owners of sea-going ships that enter Vietnamese ports to perform the transportation of goods for export or between Vietnamese seaports shall have to accurately declare their freight revenues, fully produce such documents as transportation contracts, bills of lading and other relevant vouchers to the sea-shipping agents, which shall serve as basis for determining the payable freight tax amounts; pay or agree to pay the payable freight tax amounts as stated in the freight tax receipts billed by the units authorized to collect freight tax.

b) The responsibility of the agents for foreign transport firms and the units acting as sea-shipping agents:

- To accurately declare the freight turnover of the foreign sea-shipping firms which conduct sea-shipping business in Vietnam, fully provide such vouchers as transport contracts, bills of lading and other relevant vouchers to the tax agency when so requested.

- To check the goods transport contracts between the ship owners and goods owners, the table of freight rates announced by the ship owners which must be compatible with those on the world market at the time when the transport contracts are performed; to accurately calculate the collectible tax amount, deduct tax and/or to fully and promptly collect freight tax from ship owners.

- In cases where the ship owners and goods owners fail to provide or fail to fully provide documents to serve as basis for freight tax calculation, the sea shipping agents shall be entitled to fix the freight tax amount to be paid by the ship owners on the basis of the brief declaration of goods, the international freight rate index or other relevant vouchers.

- To notify the ship owners of the payable freight tax amount, and bill the freight tax receipts (issued by the Ministry of Finance) before the ships leave the ports. Each freight tax receipt shall be made in 4 copies:

+ Copy 1: For checking

+ Copy 2: Handed to the tax payer

+ Copy 3: Used for settlement

+ Copy 4: Kept at counterfoil

Monthly, basing themselves on the freight tax receipts, the sea-shipping agents shall tables of "freight tax collection declaration" and send them to the tax agency on the 5th of every month.

- To pay fully and on time the payable freight tax amount to the State budget according to the monthly tax notices of the tax agency.

3. Control of freight tax collection:

The port authorities, when carrying out the procedures for foreign transportation ships to leave the ports, shall have to inspect the payment of freight tax by the ship owners. The inspection shall be based on the tax receipts, compared with the relevant documents. In cases where the carriers have neither paid nor agreed to pay freight tax, the port authorities shall request such carriers to pay tax or agree to pay tax before the ships leave the ports. In particular cases where the ships must be permitted to depart from the ports, the port authorities shall make records with ship owners certifying that freight tax has not been paid. Such record shall be made in 3 copies, one shall be handed over to the ship owner, one to the local tax department and another kept by the port authority.

Monthly, basing itself on the dossiers for monitoring ships leaving and entering the port, the port authority shall sum up and make its declaration account, then send it to the local tax authority to serve as basis for checking the freight tax payment. Such monthly declaration account must be sent before the 5th of the following month.

4. Checking of the freight tax collection and payment by the tax authority:

- The tax authority shall have to check the freight tax collection declarations tables made by sea-shipping agents and agents for foreign transport firms, compare them with the freight tax receipts, the port authority�s account of ships leaving and entering the port and other relevant vouchers; and determine the freight tax amount that must be collected and that has already been remitted into the State budget by the agents authorized by the Ministry of Finance to collect the freight tax.

- It shall determine the freight tax amount to be paid by the agents, then issue and send monthly freight tax notices to such agents.

- It shall handle or propose the legal enforcement agencies to handle violations in the freight tax collection and payment according the current laws.

V. HANDLING OF VIOLATIONS AND SETTLEMENT OF COMPLAINTS

1. Handling of violations:

Foreign organizations and individuals that enter Vietnam to conduct the transportation of goods by sea-going ships and the units authorized to collect freight tax shall have to strictly abide by the provisions of the current tax legislation and this Circular�s guidance.

The foreign sea-going ship owners and/or the agency units authorized by the Ministry of Finance to collect the freight tax, that delay the payment or remittance of freight tax and/or fine for tax-related violations shall, besides having to fully pay or remit the tax and fine amounts as prescribed, have to pay a fine equal to 0.1% (one thousandth) of the delayedly paid or remitted amount for each day of delayed payment or remittance.

The agency units authorized by the Ministry of Finance to collect freight tax that fail to properly implement the regulations on registration and declaration for freight tax payment shall be handled according to the provisions of the Ordinance on Handling of Administrative Violations.

In cases where the units authorized to collect the freight tax fail to collect freight tax according to this Circular�s guidance and the responsibility therefor is determined as having rested with the authorized units, they shall have to pay fine equal to the uncollected freight tax amount.

2. Settlement of complaints:

The complaints about freight tax shall be settled by the tax agency(ies) directly managing the units authorized to collect tax. Complainants who do not satisfy with the settlement by the tax agency(ies) directly managing the tax collection may lodge their complaints to the General Department of Tax and the Ministry of Finance. The settlement decisions of the Minister of Finance shall be the final decisions. Pending the settlement decisions of the competent level(s), the complainants shall still have to strictly comply with the conclusions of the local tax agency directly managing the tax collection.

The tax complaints relating to provisions of an agreement signed between the Vietnamese Government and a foreign government shall be settled according to the procedures for settlement of complaints and disputes already provided for in such agreement.

VI. ORGANIZATION OF IMPLEMENTATION

1. The tax departments of the provinces and centrally-run cities shall assume the prime responsibility and coordinate with the authorized units, maritime agents and port authorities in organizing the collection of freight tax according to this Circular�s provisions.

The Ministry of Finance shall authorize the Vietnam Maritime Department to translate this Circular into English and supply such English translation to the agency units to serve as legal basis which shall be informed to foreign shipping firms entering the Vietnamese ports to conduct the goods transportation, so that the latter can pay freight tax as prescribed.

2. The units authorized to collect freight tax shall enjoy a remuneration equal to 1% of the actually collected freight tax amount. Such remuneration shall be deducted from the collected freight tax amount before such amount is remitted into the State budget�s account, and shall be used to cover the expenses for the tax collection and remittance, and reward individuals taking part in the tax collection and remittance.

3. This Circular takes effect from January 1st, 1999 and replaces the guiding circulars and documents as well as the Ministry of Finance�s regulations on the freight tax collection, which were previously issued.

Any problems arising in the course of implementation shall be reported by the concerned units to the Ministry of Finance for consideration and decision.

For the Minister of Finance

Vice Minister