Vietnamese businesses are establishing additional companies abroad to provide services to customers in order to reduce their tax obligations, according to the Vietnam Chamber of Commerce and Industry (VCCI). This move comes in response to the revised Value Added Tax (VAT) Law, which has led to confusion and challenges for many businesses trying to prove their exports.
Current regulations state that export business services on the Internet, production of digital content, applications, and video games enjoy a 0% VAT rate. However, some businesses are still being taxed at a 10% rate because tax officials are not distinguishing between domestic consumption and export services. To avoid this, some businesses have set up additional companies abroad to serve customers worldwide and reduce tax obligations.
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 challenges, VCCI has proposed keeping the current 0% VAT rate for export services while finding a way to determine revenue generated from abroad using the same method applied to taxing imported services. The organization emphasizes 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.
In summary, Vietnamese businesses are taking advantage of loopholes in the current regulations by establishing additional companies abroad to provide services to customers in order to reduce their tax obligations. The proposed changes in the VAT Law could potentially harm these businesses by increasing their costs and hindering their competitiveness in the global market. It is crucial for authorities
