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Tag: Tax

  • PepsiCo loses tax fight with ATO

    PepsiCo loses tax fight with ATO

    PepsiCo has been ordered by the Federal Court to pay royalty withholding tax and, in the alternative, diverted products tax (DPT), which would apply.

    The first time it has been considered in court, DPT is a new tool to ensure large global businesses operating in the country are paying the correct amount of tax by the level of their economic activities.

    The tool was designed to prevent the diversion of profits offshore through contrived arrangements and imposes a 40 percent tax penalty rate to be paid upfront.

    It is a separate tax liability from income tax; therefore, a taxpayer may have an income tax assessment and DPT assessment for the same period.

    The Australian Taxation Office (ATO) has been targeting arrangements where royalty withholding tax has not been paid because payments have been mischaracterized, mainly for using intangible assets, such as trademarks.

    “The PepsiCo matter is a lead case for our strategy to target arrangements where royalty withholding tax should have been paid,” remarked Deputy Commissioner Rebecca Saint.

    “While there may still be more to play out in this matter, it sends strong signals to other businesses with similar arrangements to review and consider their tax outcomes.”

    The Tax Avoidance Taskforce (TAT) focuses on multinational tax avoidance and profit shifting. Most large businesses are meeting their tax obligations; however, the ATO said it will continue to use all the tools to challenge those who don’t.

    Since 2016, the TAT has secured more than $27.7 billion in additional tax revenue from multinational enterprises and large public and private businesses (up to 31 August this year).

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  • More global digital platforms pay taxes in Vietnam

    More global digital platforms pay taxes in Vietnam

    Seven four cross-border digital platforms, including Meta, Google, Netflix, and TikTok, have paid taxes of VND8.02 trillion (US$334.1 million) this year, more than double the amount last year.

    The General Department of Taxation said as of June some 57 had paid taxes, and urged others who had yet to declare and pay taxes to do so.

    Since March 2022, when the department’s electronic information portal for foreign service providers to pay taxes online easily was set up, a total of VND11.5 trillion has been paid.

    Also, 375 e-commerce platforms have provided tax authorities with information about organizations and individuals that did business through them.

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  • Tax collections from Meta, Google, TikTok soar

    Tax collections from Meta, Google, TikTok soar

    Sixty-seven cross-border digital platforms, including Meta, Google, TikTok, and Microsoft have paid taxes of VND5.8 trillion (US$241.7 million) so far this year compared with VND3.5 trillion for 2022.

    The General Department of Taxation said it would urge other foreign service providers who have yet to declare and pay taxes to do so, and upgrade its electronic information portal to facilitate online payment.

    As of Sept. 18 some 350 e-commerce platforms had provided tax authorities with information about 191,000 organizations and individuals that did a total of VND44.5 trillion worth of business through them.

    Tax collections in the first nine months stood at VND1,050 trillion, down 5% from the same period last year, according to the department.

    Taxes on crude oil were down 20% at VND46 trillion.

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  • Samsung tax refund delayed for two years in HCMC

    Samsung tax refund delayed for two years in HCMC

    A Samsung subsidiary based in Ho Chi Minh City has not received a VAT refund of US$44 million for two years due to red tape.

    Samsung Electronics HCMC CE Complex (SEHC), which exports around 90% of its products, formally became an export-processing company in May 2021, making it eligible for value-added tax incentives.

    But the VAT refund for before and after the transition it was supposed to receive never arrived, Youn Chel Woon, its CEO, said at a meeting between South Korean companies and HCMC authorities Wednesday.

    Vietnam offers a number of tax incentives to foreign enterprises and exporters, including VAT breaks.

    SEHC became eligible for a refund of $24 million from the time before it became an export-processing enterprise, and $20 million from the period between June 2021 and December 2022.

    The city tax department has been examining the situation since July and recently submitted a report to the General Department of Taxation.

    Woon urged city authorities to be more proactive in refunding taxes, saying some of his company’s suppliers are also having difficulty getting tax refunds promised by the government.

    Another South Korean firm, CJ Foods Vietnam, has not received tax refunds for lacking the title deeds for the land on which its factory is built.

    It was supposed to receive the documents in 2019.

    Issues with tax refunds are among the main problems South Korean companies face in Vietnam, Choi Bundo, chairman of the Korea Chamber of Business in Vietnam, said.

    “Resolving tax refund problems is taking longer and longer. We seek a solution from the authorities.”

    Nguyen Tien Dung, deputy head of the city tax department, referring to the SEHC case, said the reason for the delay is that the Ministry of Finance is yet to decide whether the refund would be made by the tax or customs department.

    As for the CJ Foods delay, he said some changes are occurring at the Hiep Phuoc Industrial Park where the company has its factory, and once they are complete it would receive the title deeds.

    The city government has instructed relevant authorities to resolve this issue by September this year, he added.

    South Korea is the fourth biggest investor in HCMC with $5.5 billion in 2,135 projects.

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  • No special consumption tax on online games

    No special consumption tax on online games

    The government has rejected a proposal by the Ministry of Finance to slap a special consumption tax on online games and sought more scientific data to tax sugary drinks.

    But in a recent decision, it instructed its agencies to use other legal means to limit playing time.

    Earlier this year the ministry had suggested imposing the tax on online games as a means to dissuade people from playing them, saying they have negative impacts on players’ health and society.

    But industry insiders and experts criticized the proposal, saying gaming has the potential to become a new industry.

    The tax would decrease the competitiveness of Vietnamese game producers and cause them to move overseas, they said.

    The ministry had also proposed taxing sugary drinks since they cause obesity, but the government has asked for more scientific data to back that claim.

    It also tasked the ministry with studying the possibility of taxing e-cigarettes to ensure Vietnam’s international commitments would not be breached.

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  • Online platforms pay $166M in tax in Vietnam

    Online platforms pay $166M in tax in Vietnam

    Vietnam collected VND3.94 trillion (US$166.5 million) in taxes from 57 foreign online platforms including Google, Apple, Facebook, Netflix, and TikTok in the first half of this year.

    Of the sum, VND3.4 trillion was paid directly via the portal of the General Department of Taxation (GDT), which was established last March to make it easier for cross-border giants to pay their taxes in Vietnam.

    Their representatives in Vietnam paid the remaining sum.

    The GDT also said that tax revenue from e-commerce platforms in the first five months of this year reached VND246 billion, equal to 34% of 2022’s revenue.

    It said the tax revenue collected from e-commerce providers in 2022 and 2021 was VND716 billion and VND261 billion, respectively.

    The tax authority has recorded data from over 330 e-commerce platforms through the e-commerce portal operating since the end of last year.

    Particularly in the first quarter of this year, 64,300 individuals and 22,840 organizations traded on those platforms with 9 billion transactions registering a total value of VND11.5 trillion.

    The GDT said it is working on setting up rules on exploiting information from e-commerce platforms’ databases to manage taxes more effectively.

    This agency is checking and comparing information of several taxpayers who are e-commerce platform owners, payment intermediaries, partners of foreign companies in Vietnam, and foreign suppliers that do not have a fixed business establishment in Vietnam.

    So far, it has inspected 15 enterprises and handled, fined, or collected tax arrears of VND129 billion, reducing tax loss by VND986 billion and reducing VAT deduction by VND114 billion.

  • Global minimum tax will hurt Vietnam investment

    Global minimum tax will hurt Vietnam investment

    The proposed global minimum tax would weaken the international business environment in Vietnam by eliminating preferential tax policies for foreign direct investment (FDI), said Samsung Vietnam CEO Choi Joo Ho.

    The global minimum corporate tax rate of 15% on profits would remove exemptions and reductions that much of Vietnam’s FDI relies on, Ho told a conference Tuesday.

    The new tax is slated for 2024 but has not yet been approved in Vietnam. It is still under consideration in the country.

    However, the regime was approved by 136 countries in 2021.

    It is considered the deepest overhaul of cross-border tax rules in decades. The overhaul aims to ensure that tech giants such as Apple and Google will not have an unfair advantage by booking their profits in low-tax countries such as Ireland.

    The tax would apply to multinationals with total revenues of at least EUR750 million ($819 million) in two of the preceding four years.

    This means that such a company investing in a foreign country would have to be taxed by that country by at least 15%.

    The U.K., Japan, Korea, and the E.U. will impose the tax next year.

    Vietnam is considering the policy and Deputy Prime Minister Le Minh Khai has asked the Ministry of Finance to evaluate the situation and decide if Vietnam should collect the tax.

    Samsung CEO Choi said the new tax would force foreign companies currently enjoying tax incentives in Vietnam to pay the global minimum tax rate of 15% in the country where the parent company exists.

    Thus such profits obtained in Vietnam would be collected by the tax authorities of another country (not Vietnam) through the exercise of the right to tax the profits, he said.

    This additional payment of tax would create a financial burden for businesses, affecting financial planning and business strategies, and directly reducing the competitiveness of products made in Vietnam, he said.

    “The Vietnamese government needs to make assertive decisions in the process of responding to the global minimum tax,” he said.

    Attending the conference, Minister of Finance Ho Duc Phoc acknowledged that tax incentives would no longer have much effect on FDI revenue in Vietnam if the global minimum tax were applied.

    According to data from his ministry more than 70 businesses in Vietnam are likely to be negatively affected by the tax if it is applied in 2024.

    Dang Ngoc Minh, Deputy Director of the General Department of Taxation, said that in Vietnam, about 335 projects with registered capital of over US$100 million in manufacturing and processing industries are enjoying corporate income tax incentives with rates of lower than 15%.

    On the list are Samsung, Intel, LG, Bosch, Sharp, Panasonic, Foxconn, and Pegatron, with registered capital accounting for nearly 30% of total FDI in Vietnam, or about US$131.3 billion.

    All the above major companies are likely to be negatively affected by the global minimum tax, said Minh.

    What to do?

    Samsung CEO Ho said that in order to maintain FDI Vietnam needs to develop monetary support mechanisms to supplement incentives for businesses that will lose preferential policies if the new tax rate is applied.

    Tang Pham, Deputy General Director of Tax Consulting at EY Vietnam, said many countries such as India and Thailand have directly supported businesses with cash.

    “The trend of shifting incentives is being considered by many countries,” she said.

    She said that cash support or direct offset against tax obligations that meet Organization for Economic Co-operation and Development (OECD) standards could encourage businesses to increase investment. Such measures could help to maintain investment efficiency when imposing a new tax.

  • Finance ministry again moots tax on sweetened beverages

    Finance ministry again moots tax on sweetened beverages

    The Ministry of Finance is again considering imposing a tax on sweetened beverages eight years after failing to get other ministries’ backing for it.

    A “reasonable” special consumption tax on sugary drinks would help protect people’s health in line with the World Health Organization’s recommendation and international practice, it said.

    Consumption of sweetened beverages in Vietnam had surged by nearly eight times between 2002 and 2018 to 50.7 liters per person per year.

    Surveys by the National Institute of Nutrition in 2001-10 and 2011-20 found the overweight children rate rising quickly in urban and rural areas.

    In 2012 15 countries were imposing a tax on sweetened beverages, but by 2021 it had risen to 50, including six in Vietnam’s neighborhood: Thailand, the Philippines, Malaysia, Laos, Cambodia, and Myanmar.

    “WHO recommends that governments take actions to encourage people to consume healthy food, including using tax measures on sugary drinks to orient consumption,” the ministry said.

    In 2014 the ministry had proposed a 10% special consumption tax on sweetened beverages, but other ministries opposed it. The Ministries of Planning and Investment and Justice said the argument for the tax was not convincing, and the Ministry of Industry and Trade said it could have a negative impact on businesses.

    The finance ministry is also considering hikes in the special consumption tax on beer and other alcoholic beverages and cigarettes.

    Between 2016 and 2019 it had increased the rate on beer and certain alcoholic beverages from 55% to 65% and on cigarettes and cigars from 70% to 75%.

    But the hikes do not seem have had much effect, the ministry admitted.

    Vietnam remained the biggest beer consumer in Southeast Asia and third biggest in Asia. In 2019 an average person consumed 47.6 liters a year, 20% more than in 2015.

    In 2020 around 42.3% of Vietnamese men smoked, while the government’s target had been to bring it down to 37%.

    But the country’s taxes on alcoholic drinks remain lower than in other countries, and account for only 30% of retail price compared to 40-85% elsewhere, according to WHO.

    On cigarettes, the rate is 35% compared to 70% in Thailand, 69% in Singapore, 57% in Malaysia, and 51% in Indonesia. It is as high as 80% in France and 75% in Germany.

    Another reason for the ministry’s proposal to increase the tax is that prices of alcoholic drinks have been rising slower than average incomes.

    In 1998 it had taken a person 8.2% of their annual income to buy 10 liters of Vodka Hanoi, but by 2014 the ratio had dropped to 2.2%. In the case of red wine, the rate had dropped from 5.9% to 1.6%.

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  • Taxing housing necessary but challenging

    Taxing housing necessary but challenging

    Experts say that taxing housing will help make the real estate market more transparent and prevent speculation, but it is necessary to digitize data, ensure fairness, and avoid overlapping taxes.

    The government plans to enact a new law on real estate taxation in place of the Law on Agricultural Land Use and the Law on Non-Agricultural Land Use, and separating houses and land for tax purposes.

    There is currently a very low tax on lands and, unusually for any country, none on houses.

    The Government is on course to submit the bill to the National Assembly for comments in October 2024 and approval in May 2025.

    Several experts said they agree that taxing houses and lands is necessary in the context that the property market is opaque and plagued by speculation, lack of systematization and ineffective management.

    Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, said taxing housing and land would help make the real estate market fairer and more transparent.

    Nguyen Van Duoc, general director of Trong Tin Accounting and Tax Consulting Company, supported an increase in the tax rates on lands but warned it is necessary to safeguard the interests of the public and not adversely affect the market.

    “Taxing houses and other construction is also reasonable. Many countries around the world have done it for a long time.”

    Nguyen Mac Hoai Nam, general director of Nam Phat Investment Consulting Company, said tax policies often have a direct and almost immediate impact on investment behavior, speculation and buying and selling of properties.

    He explained that taxing houses and lands would enable authorities to monitor the market closely, increasing its transparency and making policymaking and management more efficient.

    But analysts also warned there would be many challenges in doing this.

    Duoc pointed out that taxing depends on databases and the capability of management agencies.

    Chau said to tax houses and other properties, it is necessary to reduce land-use fees to avoid excessive taxation.

    The land-use fee is collected once and not annually and accounts for 10% of the value of an apartment and 30% of a townhouse.

    In the case of villas, it accounts for 50%.

    If land-use fees remain high, the addition of property tax would make the burden excessive, he said, pointing out that developed countries collect house and land taxes annually.

    Nam suggested starting taxes on housing and land at moderate rates and then gradually increasing them so that people could get used to it.

    “It is also necessary to consider lowering the land-use fee.”

    First, government agencies need to get comprehensive data on housing and lands and come up with a convincing valuation method for the taxes.

    The data should be collated in time to ensure the new law is passed by mid-2025.

    Huynh The Du, a lecturer in public policy at Fulbright University Vietnam, said the database cannot be completed anytime soon.

    The country has over 27 million households living in more than 2.5 billion square meters of housing, but data on their prices is scant and many houses have not been traded for decades, he pointed out.

    In any case, the prices registered during transactions are much lower than market rates, he further pointed out.

    Dang Hung Vo, a former deputy minister of natural resources and environment, said the government should not rush to tax houses and apartments, but focus on taxing lands.

    This is more feasible because the country has an established land management system, he said.

    Urban residential lands are managed relatively well, and so taxing them is easy and efficient, he said.

    Meanwhile, it is necessary to perfect the system for assessing land prices to ensure they are close to market rates.

    “This is the first step before thinking about taxing houses.”

    It is difficult and complicated to tax housing due to the lack of an effective management system, he said.

    Analysts said local governments should collect the housing tax for investing in infrastructure and utilities like bridges and roads and planting trees.

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  • Amazon taxes 10 million products in Vietnam

    Amazon taxes 10 million products in Vietnam

    Vietnamese vendors have sold nearly 10 million products on Amazon this year, totaling an export value over 45% more than 2021, according to a report by the American e-commerce giant.

    During the pandemic, there were “thousands” of Vietnamese vendors on Amazon, and their top-selling products were in the categories of kitchen ware, home appliances, garment and textile and healthcare.

    Several Vietnamese brands such as AnEco (maker of compostable garbage bags), Lafooco (cashew exporter), Sunhouse (home appliances manufacturer) and HMG (3D card manufacturer) have been hailed by Amazon for succeeding in their e-commerce initiatives and creating jobs for locals.

    Nguyen Le Thang Long, deputy director of An Phat, which makes AnEco products, said that sales through Amazon have surged nearly five times from 2021.

    Phung Minh Thuy, founder of HMG, said that her company receives hundreds of orders through Amazon each day.

    Vietnam ranks fifth among the top 10 markets globally in terms of e-commerce and retail sales growth at 19%, behind the Philippines, India, Indonesia and Brazil, according to market research firm eMarketer.

    Vietnam’s e-commerce exports revenue is set to rise 20% annually between 2021 and 2026, according to consultancy firm AlphaBeta.

    With a strong national policy to support exports, abundant production capacity, and rapid development of e-commerce, Vietnam is at a golden stage for online exports to take off, said Gijae Seong, managing director of Amazon Global Selling Vietnam.

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  • Vietnam collects $231 mln in taxes from online platforms

    Vietnam collects $231 mln in taxes from online platforms

    The Finance Ministry said online platforms including Facebook and Google have paid VND5.59 trillion (US$231.6 million) in taxes from 2018 to August this year.

    In a report sent to the National Assembly, the ministry said the tax was paid by cross-border and e-commerce platforms, with Facebook and Google contributing the most, at VND2.099 trillion and VND2.115 trillion, respectively.

    They were followed by Microsoft with VND714 billion.

    Last year’s collection of VND1.591 trillion was 39% more than in 2020.

    From the beginning of 2018 until the end of this August, tax authorities collected VND1.082 trillion in taxes from organizations and individuals earning income from doing business online, including VND261 billion collected last year and almost VND521 billion in the first eight months of this year.

    The ministry launched an electronic portal and a mobile application (eTax Mobile) in March for foreign suppliers to declare, register and pay taxes.

    So far, there have been nearly 70,000 transactions made through the portal and app, with more than VND308 billion of tax collected.

    Of this, $22.2 million was paid by 30 major foreign suppliers including Microsoft, Facebook, Netflix, Samsung, TikTok and eBay.

    In order to manage and avoid tax revenue losses in the digital platform business, the finance ministry is working to complete relevant legislation.

    At the end of August, the ministry submitted amendments to Decree 126 issued in 2020, stipulating that e-commerce platforms have to provide information, declare and paying taxes on behalf of sellers.

    The ministry also proposed amending a number of special regulations to ensure a consistent legal basis for the management of e-commerce platforms.

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  • High Taxes Are Driving a Crypto Exodus in Japan

    Japan’s cryptocurrency industry is undergoing a wave of exits to friendlier markets due to the high corporate tax rate.

    At least 20 firms are choosing to establish their crypto business elsewhere and leave Japan, said Sota Watanabe, chief executive of digital infrastructure developer Stake Technologies, in an interview with Bloomberg.

    Crypto firms have been exiting Japan in recent years due to pressure from high taxes including a corporate tax rate of about 30 percent and an individual tax rate of up to 55 percent for crypto gains.

    In an effort to maintain the competitiveness of crypto in Japan, two of the top industry bodies – the Japan Cryptoasset Business Association and the Japan Virtual and Crypto assets Exchange Association – are reportedly submitting a proposal to the financial regulator for tax changes.

    According to a separate report citing a memo, the two groups planned to ask the government to stop taxing paper gains for crypto holdings held by companies for purposes other than short-term trading. The lobby groups also propose a uniform 20 percent income tax on individual investors’ crypto gains, instead of the current arrangement with rates as high as 55 percent.

    According to Watanabe, Japan is lagging behind in the global tech race while a growing number of governments elsewhere are ramping up efforts to woo crypto firms.

    Japan is an impossible place to do business,» he said. «The global battle for a Web 3.0 hegemony is underway, and yet, Japan isn’t even at the start line.

    Stake Technologies relocated to Singapore in 2020 over tax pressures but Watanabe hopes to return to his home country of Japan, assuming that the government will yield to industry calls and lower corporate taxes on crypto next year. He also noted that it may take a few more years before the tax rate for individual investors is reduced.

  • Nowhere to hide for online sellers as taxman catches up

    Nowhere to hide for online sellers as taxman catches up

    Many individuals who have been earning thousands of dollars from Facebook, Google, YouTube, and other online platforms have been taxed in recent years, officials said.

    The HCMC Tax Department for instance said at a forum Friday that it collected over VND8 billion ($342,759) each from two individuals last year and this year on their earnings from YouTube and TikTok.

    In 2018 it collected VND4 billion from a man who earned VND41 billion from Google, it said.

    It also found a person in Quang Nam Province earning nearly VND17 billion from Google and passed on his details to authorities there.

    In 2017 it discovered a woman had sold cosmetics worth over VND499 billion through live streams between 2013 and 2016.

    She had to pay over VND9 billion in taxes and fines.

    An individual who supplied the goods to her had to pay over VND1.7 billion.

    The Hanoi Tax Department said it has discovered at least 1,194 people with incomes from foreign entities like Google and Facebook and collected VND129.3 billion last year and VND134 billion in 2020 from them.

    Last year it set up a database, which now has 32,084 online shops and 2,307 online property landlords, for collecting taxes.

    There are 139 companies operating e-commerce platforms in Vietnam, and they record an average of 3.5 million visits a day, according to the General Department of Taxation.

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  • VN-Index bounces back after tumble

    VN-Index bounces back after tumble

    Vietnam’s benchmark VN-Index rose 1.47 percent to 1,166.48 points Thursday but with plunging trade.

    The index closed nearly 17 points higher after losing almost 32 points on Wednesday.

    Trading on the Ho Chi Minh Stock Exchange (HoSE) fell by 27.9 percent to VND9.06 trillion ($388 million).

    The VN-30 basket, comprising the 30 largest capped stocks, saw 24 tickers gain.

    BVH of insurance company Bao Viet Holdings and VRE of retail real estate arm Vincom Retail led with a 3.8 percent gain.

    VCB of state-owned lender Vietcombank rose 3.7 percent.

    Other gainers included PNJ of Phu Nhuan Jewelry and VIC of biggest private conglomerate Vingroup, up 3.6 percent and 3.4 percent respectively.

    Four blue chips fell, with GAS of state-owned Petrovietnam Gas losing 1.8 percent, and FPT of IT giant FPT Corporation falling 0.5 percent. Foreign investors were net buyers to the tune of VND487.46 billion ($20.86 million).

    The HNX-Index at the Hanoi Stock Exchange, where mid and small caps list, was down 0.02 percent while the UPCoM-Index at the Unlisted Public Companies Market was up by 0.19 percent.

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  • Finance ministry proposes tax cuts on gasoline

    Finance ministry proposes tax cuts on gasoline

    The Ministry of Finance has apprised the government of its plan to reduce special consumption tax and value-added tax on gasoline to bring its prices down.

    The plan was announced Thursday by a ministry official without disclosing further details.

    Currently special consumption tax is at 8-10 percent and value-added tax is at 10 percent.

    Gasoline prices rose to an all-time high of VND32,870 ($1.41) per liter last Tuesday.

    VND/literVietnam’s gasoline pricesRON 95E5 RON 92Dec 25 2022Jan 11 2022Jan 21 2022Feb 11 2022Feb 21 2022Jan 3 2022Nov 3 2022Mar 21 2022Jan 4 2022Dec 4 2022Apr 21 2022Apr 5 2022Nov 5 2022May 23 2022Jun 1 2022Jun 13 2022Jun 21 202220k22.5k25k27.5k30k32.5k35kApr 21 2022● E5 RON 92: 27 130

    Prices have surged by 65-70 percent since the end of 2021, burdening both consumers and businesses.

    Earlier this month, the ministry had considered halving the environment tax on fuel, but critics said a cut of VND500-1,000 is too little to have an effect and called for reduction in other taxes.

    Taxes and fees account for 35 percent of gasoline prices.

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