(Chinhphu.vn) – The NYK Line (Vietnam) Co., Ltd. is a joint venture, operating in the field of providing freight agency services by sea. The company has performed shipping agency services at the request of foreign shipping companies in Vietnam.

Currently, the Company has problems related to the application of tax exemption and reduction under the Agreement on avoidance of double taxation between Vietnam and Japan, specifically is as follows:

On December 20, 2017, the Company signed a contract "Consulting on maritime assessment of Petec Cai Mep Port", contents of consultancy are:

- Safety assessment for related activities of LNG vessels including: Maritime in Vung Tau - Thi Vai Channel, the process of docking and cargo handling at PETEC wharf, the return of LNG tanker at the turning basin ...

- Assessment of  the maximum capacity of LNG Thi Vai project to expand the maritime capacity.

The above works will be carried out and completed within 4 months (not including the time for representatives of investors, functional agencies to review, comment and approve if any).

Pursuant to Article 7 of the Double Taxation Avoidance Agreement between Vietnam and Japan and Clause c, Section 1.2, Article 11 of the Circular No. 205/2013 / TT-BTC dated December 24, 2013 of the Ministry of Finance, the Income generated from this consulting service is eligible for the application of a double taxation avoidance agreement between Vietnam and Japan for not establishing a permanent establishment in Vietnam.

Through the receiving and responding system to recommendations of businesses, the NYK Line (Vietnam) Co., Ltd. requested authorities to guide the application of the Vietnam-Japan Tax Agreement (Agreement) to the revenue arisen from consulting services of the NYK- PORTCOAST.

Regarding this issue, The General Department of Taxation - the Ministry of Finance has the following opinions:

Pursuant to Clause 1, Clause 4, Article 5 of the Agreement on permanent establishments:

"1.. In the context of this Agreement, the term "permanent establishment" means a fixed business establishment through which, the enterprise carries out all or part of its business activity ... ".

"4. An enterprise of a contracting State shall be deemed to have a permanent establishment in the other Contracting State If the enterprise performs in the other Contracting State the provision of services including consultancy services through those employees or other subjects provided that such activities are prolonged (in the same project or two or more related projects) over a period of time or more than 6 months in the 12th period continuous month ”.

Pursuant to Article 7 (1) of the Agreement on Corporate Income:

"The profit of an enterprise in a Contracting State shall be taxable only in that State, unless the enterprise conducts business in the other Contracting State through a permanent establishment in the other State. If the enterprise operates in the above manner, then the profits of the enterprise may be taxed in the other State but only on the income distributed to that permanent establishment ”; and:

Based on the provisions of the consulting services contract provided by the Company:

In case the NYK - PORTCOAST Joint Venture performs consulting services in Vietnam through employees or other subjects, such activities last for the same project or two or more related projects, within a period of time or more than 6 months in a period of 12 consecutive months, the consultancy contractor is obliged to pay CIT in Vietnam for the income allocated to its permanent establishment in Vietnam.

In order to have a basis to determine the establishment of a permanent establishment in Vietnam in accordance with the provisions of the Agreements between NYK - PORTCOAST (Consultant Contractors), the City Tax Department is requested. Ho Chi Minh actually inspects the implementation of the work items of consultants and sub-consultants (if any) under the consultancy contract No. 08/2017 / DAK-NYK-PORTCOAST / D, in which Note the following:

- Check the implementation and completion of actual work items under the Contract;

Actual time of consultancy contractors implementing work items under the Contract through employees, subcontractors, other subjects (if any);

Actual warranty period of consulting contractors.

Time for implementation of additional work items arising (if any) under the Contract.