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|Authorities have had to concoct regulations for more modern services such as Grab. Photo Le Toan|
In the past few years, the ride-hailing market in Vietnam has seen substantial growth, which has drawn certain attention to Vietnamese tax authorities who have been developing their viewpoint on taxation mechanisms in order to implement tax collection from tech-based drivers for income generated from the new business model in Vietnam.
On behalf of the tech-based drivers who earn more than VND100 million ($4,350) annually, Singapore-backed Grab Vietnam has charged 4.5 per cent of the earnings for their tax obligation since the end of last August, following Document No.384/TCT-TNCN outlining the tax policy for Grab’s business operations. Those include 3 per cent VAT and 1.5 per cent personal income tax.
While its tax duty in the nation has been at prolonged unease due a lack of frameworks for new kinds of business such as ride-hailing, that Grab is on the side of the drivers to carry out their tax liabilities has raised anguish on whether the firm takes advantage of their taxes to perform another purpose.
Regarding the issue, a representative of Grab Vietnam asserted to VIR that it always obeys local regulations during operation in the country. Since the new tax policy came into force, Grab said it has transparently performed declaration and collection of taxes from drivers and also on behalf of them to pay taxes to the government. “The detailed data regarding taxpayers are fully collected and reported to the tax authorities that assures the principle of their privacy protection following local regulations,” said the representative.
Clarifying driver queries, the Grab representative said that based on the relevant documents of the tax authorities, Grab is in charge of declaring, collecting and paying tax obligations for driver partners. On its side, the company is taking efforts to deploy more initiatives and services to meet the needs of the Vietnamese people and improve income for driver partners. Particularly, Grab is willing to work with Vietnamese tax authorities to apply science and technology in tax management.
Discussing the situation with VIR, Nguyen Hung Du, partner of tax services at Grant Thornton, assumed that Grab has received specific guidance from tax authorities for a new approach. The tax collection by Grab should go directly to local authorities and Grab plays a role of collection of taxes on behalf of the local authorities for income earned by business partners being drivers.
Chau Huy Quang, managing director of Rajah & Tann LCT law firm, said the issue is who would bear the risk in tax collection arising from this business model. It appears that the best way for the tax authority “to continue the current mechanism is to indirectly collect the tax of the drivers from ride-hailing operators” like Grab, GoViet, Baemin, and FastGo and allow the ride-hailing operators and drivers to internally resolve this.
However, as a protective view in favour of the drivers, the time of deduction and deducted amount by the ride-hailing operators against the drivers’ income should be clearly regulated. The reality is that drivers have to work hard to even generate income of VND300,000 ($13) a day, and this is made harder if the ride-hailing operators automatically deduct VND60,000 ($2.50) each day for an undetermined tax amount plus the operator’s fees, according to Quang.
Kieu Anh Vu, managing director at KAV Lawyers, told VIR that based on Document 384, Grab Vietnam has been paying taxes under the form of subtraction method that applies to businesses with the annual earning of less than VND1 billion ($43,500).
Vu said that Grab is a legal entity formed in Vietnam, so it is necessary to inspect whether it has met the full requirements to be an object of the credit method. Those standards include fulfilling the accounting system, invoices, and other documents, as well as annual turnover of more than VND1 billion.
Responding to the matter, the representative for Grab stated that the local tax authorities are building a legal framework that promotes equality for the benefits of all economic members. “Grab is committed to meeting its tax obligations in Vietnam in line with local regulations,” he added.