The Vietnamese Chamber of Commerce and Industry (VCCI) has expressed concern that many Vietnamese businesses are setting up additional companies abroad to provide services to customers in order to reduce their tax obligations. This comment was made in response to the revised Value Added Tax (VAT) Law, which stipulates that export business services on the Internet, production of digital content, applications, and video games enjoy a 0% VAT rate.
The current regulations have been favorable for this industry, which is growing rapidly at an average rate of about 11% per year, with service export turnover reaching around $20 billion USD last year. However, VCCI mentioned that many businesses are still being taxed at a 10% rate because tax officials are not distinguishing between domestic consumption and export services. Businesses have provided tax authorities with a lot of information to prove their exports, but it seems that they are still facing challenges in demonstrating the difference between domestic and foreign customers.
VCCI believes that the proposed changes in the VAT Law, which suggest taxing most export services at a rate of 5-10% or not allowing input deductions, will increase tax costs for Vietnamese businesses providing services to foreign customers. This could potentially lead to a loss of customers, market share, and hinder opportunities for development, ultimately impacting domestic job opportunities and reducing foreign exchange revenue.
To address these concerns, VCCI has 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 keeping regulations that support the growth of the export services industry and maintaining competitiveness in the global market while also ensuring a fair and transparent tax system that benefits Vietnamese businesses.
