VALUE-ADDED TAX IN LOGISTTICS SECTORS: WHEN DOES 0% APPLY AND WHEN DOES 10%?

Value-Added Tax (VAT) has always been a critical issue, particularly for businesses operating in the logistics sector. Determining and applying the correct tax rate (0% or 10%) not only directly impacts costs but also serves as a key factor in helping businesses avoid significant risks during tax inspections and audits.

Today, we will delve into the specific regulations on the application of VAT in the logistics sector in Vietnam.

Cases Where Logistics Services Are Eligible for 0% Tax Rate

Logistics services are subject to the 0% tax rate when directly associated with export activities, international transportation, or the provision of services to foreign organizations.

However, a mandatory condition is that businesses must fully comply with the requirements on contracts, documentation, and payment as prescribed by law.

1. Export Services

Services are subjected to 0% tax rate when the following conditions are satisfied:

• Contract: Provided to clients abroad, or clients within non-tariff zones or export processing zones.
• Payment: Must be made via bank transfer (non-cash payment).
• Special note (Aircraft/Ship repair): Import procedures must be completed when brought into Vietnam, and export procedures must be completed upon completion of repair.

2. International Transport Services

This service is defined as the transportation of passengers, luggage, or goods along international routes, including:

• Routes: Transportation shall cover routes from Vietnam to overseas destinations, from overseas to Vietnam, or where both the departure and arrival points are located outside Vietnam.
• Documentation: A valid transportation contract shall be required. In the case of passenger transport, airline, train, or ship tickets shall be deemed sufficient as transportation contracts.
• Compliance with law: International transportation businesses must fully comply with regulations on licensing, routes, and vehicles.
•  Payment: Must be made via bank transfer or through methods recognized by law as bank payments.
• Exception: For individual customers purchasing international tickets, direct payment (cash or card) is acceptable.

3. Air Transport Services

Services provided for international flight routes are subjected to the 0% tax rate when:

• Performed at an international airport or international cargo terminal.
• A contract or request from a foreign airline is in place.
• Payment documentation is made via bank transfer (or an equivalent method).
• Note: Passenger service fees for international flights do not require a contract or bank transfer payment.

4. Maritime Services

Applicable to services performed within port areas, provided to foreign organizations or ship agents, subject to the following conditions: a contract is in place and payment is made via bank transfer.

5. Services Supporting Export Activities

Services such as customs clearance, container handling, warehousing, container cleaning, etc., when directly associated with exported goods and accompanied by proper documentation, shall be subject to the 0% tax rate.

In summary: The 0% tax rate applies when logistics services are directly related to international activities and businesses have prepared contracts and valid payment documents.

Under what circumstances are Logistics Services subject to the 10% tax rate?

The 10% tax rate is applied by default to domestic logistics services (within the country).

For example:

• Transportation of goods between provinces and cities within Vietnam.
• Loading, unloading, and warehousing of goods at domestic ports.

Important note: If a service that would otherwise qualify for the 0% tax rate fails to meet the required conditions regarding documentation, contracts, or payment, the entire transaction shall be adjusted by the tax authorities to the 10% rate.

Common Risks and Mitigation Measures

Some common errors that cause logistics businesses to lose eligibility for the 0% tax rate:

Conclusion

The application of the 0% or 10% tax rate in the logistics sector depends on the nature of the service and the completeness and accuracy of the accompanying documentation. To maximize benefits and ensure compliance, businesses need to invest in thorough preparation of contracts, documentations, and payment procedures.

We hope that the detailed information provided by TPM has helped you gain a clearer understanding of VAT application in the logistics industry. Should your business require in-depth consultation or a detailed review on VAT matters or other accounting issues, please contact TPM Tax Agency for timely and accurate support.

Quyen Nguyen