The Vietnamese Chamber of Commerce and Industry (VCCI) has raised concerns over the increasing number of businesses establishing additional companies abroad to provide services to customers in order to reduce their tax obligations. This was in response to the revised Value Added Tax (VAT) Law, which stipulates that certain industries, such as export business services on the Internet, production of digital content, applications, and video games enjoy a 0% VAT rate.
The growth of this industry is rapid with an average rate of about 11% per year and last year’s service export turnover reaching around $20 billion USD. However, VCCI pointed out that many businesses are still being taxed at a 10% rate because tax officials are not distinguishing between domestic consumption and export services. Despite providing a lot of information to prove their exports, businesses have faced challenges in demonstrating the difference between domestic and foreign customers. Some businesses have even resorted to setting up additional companies abroad to serve customers worldwide and reduce tax obligations.
VCCI believes that the proposed changes in the VAT Law could increase tax costs for Vietnamese businesses providing services to foreign customers, potentially leading to a loss of customers, market share, and hindering opportunities for development. This could impact domestic job opportunities and reduce foreign exchange revenue. To address this issue, VCCI proposed that authorities find a way to determine revenue generated from abroad using the same method applied to taxing imported services. The organization emphasized the importance of maintaining regulations that support the growth of the export services industry while ensuring a fair and transparent tax system that benefits Vietnamese businesses.
The current regulations stipulate that certain industries enjoy a 0% VAT rate but some businesses are still being taxed at a higher rate due to confusion over whether they are providing services domestically or abroad.
To address this issue, VCCI suggests finding a way for authorities to determine revenue generated from abroad using similar methods used for import taxes.
Additionally, maintaining regulations supporting the growth of the export service industry while ensuring fairness in taxation will benefit both Vietnamese businesses and consumers alike.
It is important for authorities to clarify whether these businesses are serving domestic or foreign customers so that they can be correctly charged taxes accordingly.
Some businesses have been forced to set up additional companies abroad just so they can avoid paying high taxes on their exports. This has led some experts in Vietnam’s business community to worry about how it will impact local job opportunities and foreign exchange revenue.
The proposed changes in Vietnam’s Value Added Tax (VAT) Law aim
