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Deputy Minister of Finance Vu Thi Mai said that under Vietnam’s Value Added Tax and Corporate Income Tax laws, foreign companies abroad that derive income from Vietnam will be subject to value-added tax (VAT) and corporate income tax (CIT).
Mai’s confirmation came in response to VIR’s enquiry over a petition accusing overseas online hotel booking service providers of committing tax fraud on Vietnam-sourced income.
Vietnamese online hotel booking service provider Vntrip.vn, for instance, recently sent a petition to the Government Office, claiming that overseas-based firm Agoda is showing “signals of tax fraud in Vietnam”.
Under the petition, Vntrip.vn’s director Le Dac Lam claimed that when a Vietnamese customer pays $100 through Agoda, the firm will collect $20 in fees while passing on $80 to the Vietnamese hotel. “Therefore, that $20 lies outside Vietnam and the country fails to collect any tax on this $20 kept by Agoda.”
Mai said if Vietnam-based hotel service providers have contract-based transactions with foreign entities, they are required to deduct VAT and CIT, and they must, on behalf of these overseas partners, pay these charges to local tax agencies.
Mai’s statement means that firms like Agoda have tax obligations for their Vietnam-sourced income, and Vietnamese entities have an obligation to withhold tax upon their payment to these firms. And these Vietnamese entities will be the ones to be punished under Vietnam’s Law on Tax Administration if they fail to fulfil their tax-withholding obligations.
Following Vntrip.vn’s petition, on January 18, 2017, the Ministry of Finance issued Document 848 detailing the country’s tax policies and tax management regarding overseas online hotel booking service providers with Vietnam-sourced income.
“This document is a management measure. It requires tax agencies to review online hotel booking services and take a closer watch [for firms’ tax obligations],” Mai told VIR.
Under the Law on Tax Administration’s Article 108 on penalties applicable to acts of tax evasion or tax fraud, taxpayers committing any of the following offenses shall pay in full the amount of tax payable pursuant to the regulations and shall be fined an amount of up to three times the amount evaded:
1. Failing to submit a tax registration file; failing to submit a tax declaration file; failing to submit a tax declaration file within 90 days of the deadline for submission stipulated in Clauses 1, 2, 3, and 5 of Article 32 of the law, or from the expiry date of the extended time-limit for submission stipulated in Article 33 of the law
2. Failing to record revenue relating to determination of an amount of tax payable in accounting books
3. Failing to issue an invoice upon selling goods or services, or recording a value lower than the actually paid value of goods or services sold on a sale invoice
4. Using unlawful invoices or source documents for cost accounting of input raw materials or goods in activities giving rise to tax obligations, resulting in a reduction of the amount of tax payable or an increase in the amount of tax creditable or refundable
5. Using unlawful source documents or other documents to determine falsely an amount of tax payable or refundable