Many domestic online travel agencies (OTAs) have plans to register their businesses in countries like Singapore to avoid tax obligations, which will help them compete on price with foreign OTAs.
The Ministry of Finance has reported to the Prime Minister on the inadequacy of tax obligations between domestic tourism businesses and foreign online travel agents.
Travel firms said tax inequality exists between domestic tourism businesses and foreign online travel agents.
Vietnamese law stipulates that businesses, organizations and individuals doing business in Vietnam have to make tax declaration and payment. But foreign OTAs do not operate under Vietnamese law, do not register business and do not have representative offices in Vietnam, so there is no basis for assigning responsibility for tax declaration and payment.
According to the provisions of the Ministry of Finance’s Official Letter 848 dated 2017, enterprises in Vietnam that cooperate with foreign OTAs will be the party to pay tax. Currently, Vietnamese tourism businesses are heavily dependent on the number of customers booking services through famous foreign OTAs, so they have to pay taxes on their own.
Online travel websites are booming. Photo: Luong Bang
Tourism companies have complained about the difference in invoice issuance between domestic and foreign OTAs. When a customer orders a service through a domestic OTA, the domestic OTA will issue an invoice directly to the customer, and the hotel will issue an invoice to the domestic OTA. Therefore, in addition to paying corporate income tax of 20%, domestic OTAs have to pay 10% value added tax (VAT).
For customers who book services through foreign OTAs, these agencies will only provide payment confirmation invoices, not VAT invoices in Vietnam. Foreign OTAs do not pay both corporate income tax and value added tax.
“This has led to the fact that domestic OTAs have failed to compete on price with foreign OTAs, causing an unequal business environment. Many domestic OTAs have plans to register business in countries like Singapore to avoid tax obligations, allowing them to compete on price with foreign OTAs," local tourism firms said.
In response to this complaint, citing legal provisions in the Law on Tax Administration, Circular 105 of the Ministry of Finance, the General Department of Taxation said that the current tax policy does not have discriminatory provisions on taxes for Vietnamese or foreign online travel agencies.
A foreign online travel agency that does not have a representative office in Vietnam but has business operations in Vietnam is identified as a foreign supplier with business operations in Vietnam. It is responsible for registering tax directly or authorizing tax registration, tax declaration and tax payment in Vietnam.
The Ministry of Finance is developing a circular guiding the implementation of the Law on Tax Administration and Decree 126. This draft circular will guide specifically the procedures for tax registration, declaration and payment of foreign suppliers without a permanent establishment in Vietnam that conducts e-commerce, digital-based business and other services that generate income in Vietnam.