According to the VCCI, Article 5 of the draft stipulates that foreign suppliers without a permanent establishment in Vietnam must provide proof of VAT payment on behalf of the foreign party to deduct input VAT.

However, the VCCI argues that this regulation is not suitable for cases where foreign suppliers have already registered to pay taxes directly through the e-portal of the Vietnamese tax authority.

Specifically, foreign suppliers issue invoices in accordance with international practices and independently calculate corporate income tax and VAT using the direct method for declaration and payment to the Vietnamese tax authority.

On the invoice, the foreign supplier indicates the VAT amount already declared and paid to the Vietnamese tax authority and requests the Vietnamese party to reimburse this VAT amount. This means the Vietnamese party does not directly pay the VAT to the Vietnamese tax authority.

According to the VCCI, Decree 70, amending Decree 123 on invoices and documents, stipulates that in cases where foreign suppliers voluntarily register to use electronic invoices, they must register to use electronic invoices through the electronic information portal designated for foreign suppliers without a permanent establishment in Vietnam, managed by the General Department of Taxation.

"This regulation facilitates Vietnamese enterprises by allowing them to rely on electronic invoices registered by foreign suppliers in Vietnam to deduct input VAT. However, the draft’s requirement for enterprises to have 'proof of VAT payment on behalf of the foreign party' may lead to the interpretation that the Vietnamese party must declare and pay VAT on behalf of the foreign supplier. This creates a conflict with the self-declaration and self-payment mechanism outlined in Decree 70," the VCCI noted.

To ensure consistency and transparency in procedures, the VCCI proposes that the drafting agency clarify the case of VAT for foreign suppliers.

Furthermore, the VCCI notes, the draft stipulates that foreign organisations and individuals conducting business in Vietnam, who authorise or hire certain Vietnamese organisations to perform part of the distribution services or other services related to the sale of goods in Vietnam, are subject to VAT.

According to feedback from businesses, this regulation lacks clarity and leads to inconsistent interpretations in practice.

This regulation is presumed to ensure that foreign contractors from foreign enterprises distributing goods in Vietnam without a commercial presence in Vietnam are still subject to taxation in Vietnam.

However, in practice, there are cases where foreign organisations only deliver goods at foreign borders without using any services in Vietnam with the receiving enterprise. Subsequently, the foreign organisation purchases services from another enterprise.

In such cases, it is unclear whether the additional purchased services are subject to VAT. Therefore, the VCCI proposes that the drafting agency supplement and clarify this matter.