Changing global business climate strikes Vietnam firms

Changes in the global business environment, along with newly issued regulations and guidance on corporate income tax obligations, have been substantially affecting the operations of many businesses in Vietnam.

Changing global business climate strikes Vietnam firms
Employees work at September 23 Garment and Textile Company in Danang city -nh:

Companies should properly invest the correct resources in order to meet and comply with new regulations, as well as to avoid tax risks, according to EY Vietnam experts at the 2019 Tax Symposium, “How to better accommodate to increasingly stringent tax administration systems driven by digitalization”. Co-organized by EY Vietnam and the Vietnam CFO Club on September 13 in Hanoi, the symposium attracted more than 400 participants from businesses in Vietnam.

Speakers noted that the tax environment has been affected by trade wars, political instability, world economic uncertainties and rapid technological advancements. In the context of escalating trade conflicts throughout the world, countries are using tariffs as major weapons to reestablish fairness in trade.

However, they also create pressure on businesses and require them to restructure their global value and supply chains.

In 2015, the Organization for Economic Co-operation and Development (OECD) introduced its policy recommendations through the Base Erosion and Profit Shifting (BEPS) Inclusive Framework with 15 actions. BEPS has attracted the participation of more than 100 countries worldwide, including Vietnam. All member countries are required to adopt the recommendations.

In addition, the rapid development of e-commerce and the fourth industrial revolution have brought new challenges to many countries in taxing the digitalized economy. On June 9, G20 ministers of finance and central bank governors agreed that a global system to tax internet-based giants is urgently needed.

On that basis, Vietnam’s tax policies have changed considerably. The recent tax regulatory amendments aim at reducing tax compliance costs and increasing the information technology application for businesses to better comply with tax regulations.

The revised Tax Administration Law, passed by the National Assembly on June 13, 2019, will take effect from July 1, 2020. The law introduces new regimes on the implementation and management of taxes on the internet platform (e-tax).

 

For the first time, the law sets regulations on e-invoices, to become effective from July 1, 2022. It also requires the sellers of goods and services to issue e-invoices to buyers. Additionally, sellers’ computers used for invoice calculation and issuing e-invoices must be registered and connected with the tax authorities’ data system.

The law, for the first time, introduces tax administration rules for e-commerce activities. Foreign suppliers running e-commerce businesses, but having no permanent establishment in Vietnam, are obliged to register, declare and pay taxes in the country.

In addition, commercial banks are responsible for withholding and making tax payments on behalf of overseas businesses and individuals conducting e-commerce activities and deriving income from Vietnam.

Besides the tax policy changes and administrative reforms, tax inspection and examination activities are expected to become gradually more effective. The focuses of the State Inspectorate in the future are inspecting businesses whose tax contributions are potentially significant, and enhancing after-tax-return examinations, especially for businesses that have inter-company transactions and transfer pricing issues.

“The inspection activities will be more effective, given the aid of advanced technology,” said Huong Vu, General Director of EY Consulting Vietnam. “As the tax authorities’ management has become more effective, businesses must be better compliant to avoid tax penalties and back taxes." SGT

Truc Diem

Highlights of Vietnam’s economy in H1/2019

Highlights of Vietnam’s economy in H1/2019

Vietnam`s economy kept growing track in the first half this year with maintained GDP growth rate and stable CPI.

Vietnam plans to become leading digital economy in ASEAN by 2030

Vietnam plans to become leading digital economy in ASEAN by 2030

Vietnam will become a leading digital country and economy in the ASEAN region by 2030 and allow testing of new technologies in the digital economy.  

 
 
 
 
 
Leave your comment on an article

OR QUICK LOGIN