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VCCI reflects that many Vietnamese businesses have established additional companies abroad to provide services to customers to reduce tax obligations. This comment was made by the Vietnam Confederation of Commerce and Industry (VCCI) when commenting on the revised Value Added Tax (VAT) Law. According to current regulations, export business services on the Internet, production of digital content, applications, video games… enjoy 0% VAT. This is also a fast growing industry, an average of about 11% per year. Last year, service export turnover of domestic companies was about 20 billion USD. However, VCCI cited feedback from many businesses saying they were still subject to the 10% tax rate because “tax officials do not distinguish between domestic consumption and export services”. According to this organization, businesses have provided tax authorities with a lot of information such as data of intermediary platforms (Google, Apple), user IP, bank payments, contracts, emails. Some units were even forced to separate the product into two versions for the domestic and foreign markets, but it was still not accepted by the tax authorities. “Many individuals and businesses set up additional companies abroad to provide services to customers around the world, in order to reduce tax obligations,” VCCI said. This problem was also acknowledged by the Ministry of Finance when amending the VAT Law. According to this agency, services are intangible, so determining consumption in Vietnam or abroad is “very difficult”, for both tax authorities and payers. Furthermore, the determination will increase management costs for the tax industry. Therefore, instead of the current 0% rate, this Ministry proposes to tax most export services to 5-10% or not deduct inputs because they are not subject to tax. Non-taxed sectors are narrowed down to only international transportation, overseas transportation vehicle rental and some related services. Commenting, VCCI believes that such regulations will increase tax costs of many Vietnamese businesses providing services to foreign customers. Meanwhile, most companies in this industry are competing with competitors from other countries. “If they are subject to 5-10% VAT, it will lead to the risk of losing customers, market share, and difficult opportunities for development,” VCCI commented, adding that this regulation could lead to loss of domestic job opportunities. , reducing national foreign exchange revenue. As for the software sector, export products will change from 0% to non-taxable. That is, businesses are not allowed to deduct inputs, causing production costs to increase by 2-3%. In fact, export services are often industries that require highly qualified labor and do not require large investment capital like the manufacturing and processing industry. According to VCCI, these are fields suitable for Vietnam’s economic context. At the same time, exporting services on the Internet helps increase the country’s soft power. Some units cheat to profit from tax refunds, but this cannot negate the benefits of the 0% export tax policy. “Request that the Ministry of Finance keep the regulations, allowing exported services to enjoy a tax rate of 0%,” VCCI proposed. At the meeting of the National Assembly Standing Committee last month, the appraisal report of the Finance and Budget Committee also commented that increasing taxes on service exports will affect service areas such as payment, marketing, Sales and logistics support center.
