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Mar 24, 2021 / 17:46

AmCham suggests revisions to Law on Tax Administration

All foreign enterprises, who operate and earn revenue in Vietnam, must comply with tax obligations in the country, local taxation authority said.

The Vietnamese taxation authority met with the American Chamber of Commerce in Vietnam (AmCham) on March 23 for clarifying regulations related to the draft circular on Law on Tax Administration to ensure efficient regulatory work as well as creating favorable conditions for businesses and taxpayers.

 An overview of the meeting held by the Vietnam Chamber of Commerce and Industry on March 23. Photo: VCCI

At the meeting, AmCham argued that, in Article 3, definitions of “e-commerce activities” and “digital-based business” are overly broad and seem to include every business transaction with a Vietnamese customer conducted through the internet. 

“We recommend a narrower definition to cover specific business activities such as: excluding business-to-business activities since they are already subject to existing Foreign Contractor Tax (FCT) rules, and/or including de minimise thresholds to exclude activities/business with minimal transactions in Vietnam,” he said.

Article 3 should provide clear and detailed definitions to allow taxpayers and withholding agents to determine which transactions are in-scope and to minimize confusion and relieve foreign suppliers of administrative and compliance burdens for limited transactions in Vietnam, according to AmCham.

AmCham representative also requested Vietnam’s tax authority to confirm that it is not mandatory for overseas supplier to make tax registration in Vietnam. The Vietnamese government needs to clarify the legislative hierarchy between Vietnam’s existing Foreign Contractor Tax (FCT) rules and the draft circular, he said.

In situations where foreign suppliers are protected under tax treaties, they should not be required to register for corporate income tax (CIT). Moreover, as foreign suppliers are protected under tax treaties, they also should not be required to advance the payment of CIT.

The government should create a mechanism to let Vietnamese business-to-business customers and financial institutions agents know whether a foreign supplier is eligible  for tax treaty protection and/or apply for tax treaty protection to prevent over-withholding of CIT.

Given this scenario, Vietnam should create separate procedures of registration, filings, and forms for value-added tax (VAT) and CIT so that overseas suppliers can decide whether to register or not, and whether to register for VAT and/or CIT, according to AmCham.

 Luu Duc Huy, Director of Tax Policy under the General Department of Taxation said the Vietnamese tax authority will consider AmCham's feedback. However, he affirmed that foreign enterprises, who operate and earn revenue in Vietnam, must comply with tax obligations in Vietnam.

A number of foreign e-commerce providers and technology firms working in Vietnam like Facebook, Amazon, YouTube, Netflix (the US), iflix (Malaysia), WeTV, iQiYi, Alibaba (China) earn billions of dollars in Vietnam and yet  pay no taxes.

The meeting between Vietnam’s tax authority and AmCham was held following a request submitted by the US Chamber of Commerce, Computer & Communications Industry Association, Information Technology Industry Council and Asia Internet Coalition to Minister of Finance Dinh Tien Dung on Chapter 9 of the above-mentioned circular.