VCCI: Proposal to Maintain 0% VAT on Export Services

Mon, 13 May 2024 10:10:00  |  Print  |  Email   Share:

The Vietnam Chamber of Commerce and Industry (VCCI) has proposed that the drafting body amend the regulations on VAT for export services to continue allowing these services to benefit from a 0% tax rate. They also suggest clearly defining how to determine revenue from abroad using a similar method.

VCCI has recently submitted its feedback to the National Assembly's Finance and Budget Committee regarding the Draft Law on VAT (amended).

According to VCCI, Article 9.1 of the Draft Amendment proposes to tax most export services, discontinuing the previous 0% tax rate. The only export services that would still enjoy the 0% tax rate are international transportation, leasing of vehicles outside Vietnam's territory, and some related services. Other export services would face higher tax obligations, depending on the specific service type, with rates such as 10% or 5%, or they would not be eligible for input tax deductions if they fall under non-taxable categories.

VCCI believes that this policy will increase the tax costs for many Vietnamese businesses providing services to customers abroad. The sectors most affected include online business, digital content production, app development, video game production, audiovisual services, entertainment, export support services, consultancy services, design services, computer services, and information services.

Analyzing this issue, VCCI notes that most of these businesses are currently competing with counterparts from other developing countries. If they have to bear a 10% or 5% VAT, they risk losing customers, market share, and growth opportunities, which would lead to job losses domestically and a reduction in foreign currency revenue for the country. For the software sector, exported software products would shift from a 0% VAT rate to a non-taxable category, meaning businesses would not be eligible for input tax deductions, increasing production costs by 2-3%.

According to VCCI, Vietnam has an export-oriented economy. Since the economic reforms, export goods have consistently been a key driver of the country's growth, with an average annual increase of nearly 15%. This success is significantly attributed to the VAT policy allowing a 0% tax rate on exported goods and input tax refunds for businesses. Although some companies have fraudulently exploited tax refunds, the substantial benefits of the 0% export tax policy cannot be denied. Initially, the tax authorities faced challenges in combating refund fraud, but over many years, and with considerable effort, this issue has been significantly reduced.

Given the current situation, VCCI suggests that the drafting body amend the VAT regulations on export services to continue allowing these services to benefit from a 0% tax rate, and to clearly define how to determine revenue from abroad using a similar method to that used for taxing imported services.

Additionally, VCCI reports that some export processing enterprises are facing double VAT on the same goods sold domestically. When enterprises in export processing zones sell goods domestically, they must file an import declaration and pay VAT on these goods to customs. At the VAT declaration period, the tax authorities then require the enterprise to declare and pay VAT again on the revenue from these goods.

On this issue, VCCI proposes that the drafting body clearly stipulate that export processing enterprises selling goods domestically should only pay VAT during customs procedures and should not be required to pay VAT on these goods again in the tax period.



By: By Huyen Chau (Enterprise Finance Magazine)./ Translator: LeAnh-Bizic


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