The Tax & Customs Working Group of the VBF proposed to support foreign-invested firms with zero VAT treatment

According to the working group’s members, the requirements for services consumed outside Vietnam are vague and not defined in any way in the law. This leads to a discretionary interpretation of the tax authorities when taxpayers take their position to apply zero per cent VAT for exported services.

The current practice of tax authorities would discourage taxpayers to apply zero VAT on exported services, which would eventually make Vietnamese service providers less competitive in terms of pricing in the international market if they have to charge 10 per cent VAT instead of zero.

“The working group thus proposes that the Ministry of Finance adjusts regulations with a clear definition of exported services. Alternatively, exported services should be based on the status of the foreign customer and source of payment for the service fee for simple tax administration,” Mark Gillin, head of VBF's Tax & Customs Working Group, said.

According to the ministry's Circular No.219/2013/TT-BTC from 2013, a zero per cent rate applies to exported goods and services to overseas and non-tariff areas, goods and services consumed outside Vietnam and in non-tariff areas, goods processed for export or in-country exports, goods sold to duty-free shops, and certain exported services, as well as construction and installations carried out for export processing enterprises, among others.