Many Vietnamese businesses have criticised the world’s technology groups for ‘making money in Vietnam but avoiding tax in Vietnam’. Google, Facebook, Uber and Apple earn big money in Vietnam from online ads and other services but do not have to pay tax.

National Assembly’s Deputy from Lai Chau province Bui Duc Thu, while emphasizing that all companies must pay tax on revenue they earn in Vietnamese territory, has requested state management agencies to clarify this.

Under Decree 72 on internet service management dated September 1, 2013, all the companies which provide cross-border services must comply with Vietnamese laws. 

This means that Facebook, Google and Uber, which have revenue in Vietnam must fulfill their tax duties in Vietnam.

Under the current laws, their activities of providing services must be covered by the Ministry of Finance’s Circular 134 on foreign contractor tax (FCT).

The circular stipulates that FCT is required if foreign individuals and institutions provide advertising and marketing services to Vietnamese individuals and institutions and the services are made overseas.

To declare and pay FCT, businesses have to set up representative offices or branches in Vietnam and must apply the Vietnamese accounting system.

However, both Facebook and Google do not have branches in Vietnam, which means that they do not follow Vietnam’s accounting standards.

Facebook only has a media representative in Vietnam, while it sets up a representative office in Vietnam. Meanwhile, Google does not have any legal entity, branch or representative, but it has staff working for Google in Vietnam.

As such, Vietnam not only cannot collect corporate income tax from the companies, but also cannot control the personal income tax payment. The workers of the companies are paid 2-3 times as much as the workers of other companies, but they don’t have to pay personal income tax to Vietnam.

Under Decree 72, the companies which provide cross-border services don’t have to set up representative offices in Vietnam. However, analysts commented that the regulation has ‘lent a hand’ to the companies to evade tax.

Meanwhile, a lawyer pointed out that there is no clear definition about the ‘services provided and consumed outside Vietnam’, or the ‘ad services made overseas’. As a result, it is difficult to apply the FCT to the companies providing across-border services.

As a result, he said, Vietnam loses a huge amount of money from failing to collect tax from the companies which earn hundreds of millions of dollars from the services provided to Vietnam.

Buu Dien