Taxing Out: How Vietnam’s Export Businesses are Reducing Tax Obligations but Facing Challenges in the process

The Vietnam Confederation of Commerce and Industry (VCCI) has highlighted the issue of taxation for Vietnamese businesses that operate overseas. According to VCCI, many companies have expanded their operations abroad in order to provide services to customers and reduce tax obligations.

Currently, export business services such as Internet-based services, digital content production, applications, and video games enjoy a 0% Value Added Tax (VAT) rate, with the industry growing at an average rate of about 11% per year. However, VCCI noted that some businesses are still being taxed at a 10% rate due to issues with tax officials not distinguishing between domestic consumption and export services.

Many companies have provided tax authorities with extensive information in an effort to comply with tax regulations but have faced challenges and increased costs. Some businesses have even established additional companies abroad to serve foreign customers in order to reduce tax obligations.

The Ministry of Finance is considering changes to the VAT Law, but VCCI and other stakeholders are advocating for the current 0% tax rate to be maintained for export services. The complexity of distinguishing between domestic and foreign users of exported services poses a challenge, but VCCI believes that there are ways to address this issue without increasing tax burdens on Vietnamese businesses.

VCCI raised concerns about proposed changes to tax regulations for service exports, suggesting that taxing these services at 5-10% could increase costs for Vietnamese businesses and affect their competitiveness on a global scale. The organization also highlighted the impact on the software sector, where export products may face additional production costs if VAT rates are increased.

In conclusion, VCCI is calling for a balanced approach that supports the growth of service exports while ensuring fair taxation practices. The organization emphasizes the importance of maintaining a competitive environment for Vietnamese businesses in the global market and advocates for policies that promote innovation and economic development.