In a recently announced statement about a proposal for compiling an amended draft on the Law on Tax Management, the ministry offered to increase the time for tax inspection.
Currently, the maximum time for a tax inspection is 45 working days and 70 working days for complicated cases. However, conducting tax inspections at large-scale or multinational companies with a complicated structure and related-party transactions are time-consuming.
The ministry said that it normally took more than one year for tax inspection at foreign-invested companies such as Metro and BigC and the tax watchdogs must collect information from mother companies or foreign tax agencies.
The ministry cited statistics of the Organisation for Economic Co-operation and Development that time for implementing an inspection of transfer pricing averaged 573 working days in the world.
The current regulations are no longer suitable for implementing tax inspections at all companies, the ministry said.
The ministry proposed that the time for tax inspection at companies with related-party and cross-border transactions be increased to 360 working days.
Taxing online transactions
According to the finance ministry, the law needed to be amended to efficiently calculate and collect taxes from global technology companies such as Google and Facebook.
The ministry said most global technology companies did not register their business or have official representative offices in Viet Nam while their transactions were cross-border, making it hard to calculate and collect taxes.
For example, Google and Facebook provided online advertising services in Viet Nam in two ways. The first was through agencies in Viet Nam and the second was conducted through online payment via credit cards or e-wallets.
The ministry said that it was difficult to clarify the real values of transactions conducted in the second way.
In addition, it was also not easy to verify advertising revenues from click counts of foreign Internet companies as doing this would require checks of payment transactions at banks of both buyers and services providers but banks of foreign Internet companies were mostly abroad.
“The tax management of online businesses faces difficulties in clarifying taxpayers, revenues, business scale and transaction history,” the ministry said, adding that co-ordination between relevant ministries and agencies must be enhanced to better manage tax collection from e-commerce businesses.
Accordingly, the finance ministry proposed the State Bank of Viet Nam to study the regulation of requiring cross-border payment transactions to be conducted through local payment gateway (the National Payment Corporation of Viet Nam).
Only by this, could tax watchdogs manage values of cross-border transactions to impose tax, the ministry said, adding that many countries in the world such as European countries, India and South Korea, had such a regulation.
The finance ministry also proposed the Ministry of Information and Communications require foreign technologies companies such as Google, Facebook and Apple to declare and pay foreign contractor tax on the services provided to Vietnamese organisations or individuals.
The ministry also called for enhanced co-operation with foreign tax agencies and Internet services providers like VDC, FPT, Mobifone, Vinaphone and Viettel to better manage values of e-commerce transactions and banking payments.
For individuals selling things online, the finance ministry proposed to impose value added tax and individual income tax on products with prices above VND1 million (US$44) and when transacted two times per day or more.
The ministry said that business through social network pages was booming in Viet Nam but tax management was still lagging behind.
The Ministry of Finance also proposed investigation function to be empowered to tax watchdogs, adding that some 80 countries in the world currently had tax investigation bodies.
Check business operation
The ministry has sent a document to the Ministry of Planning and Investment to request checks on business operation, after finding that thousands of import-export companies halted operation or removed their office addresses without reporting.
This triggered worries that those firms took advantage of open business registry procedures to start a business then halt operations to avoid and evade taxes.
The ministry’s statistics showed that in 2015 and 2016, more than 1,000 firms abandoned their addresses and had no operations in at least six months.
More than 15,400 others had no import-export activities in at least six months without reporting to the management agencies while their information on the business registration portal was still “operating”.
Twenty-four firms were found with tax violations but they abandoned their addresses without completing bankruptcy and dissolving procedures following established regulations to avoid paying tax arrears and fines.
Especially, eight of them had tax arrears worth VND12 billion.
With the aim of tackling this issue, the finance ministry proposed the Ministry of Planning and Investment to complete the mechanism for co-operating in managing business operations.