Digital content exporters open foreign offices to avoid tax

Vietnamese businesses exporting digital content are setting up offices abroad to avoid the 10% value-added tax, according to the Vietnam Federation of Commerce and Industry.

Although their exports are eligible for VAT waiver, many still have to pay the tax since “tax officials cannot differentiate between exports and domestic sales,” the VCCI said in a recent comment on a bill for amending VAT laws.

Exports of online services, such as creating smartphone apps and games, are galloping at an annual rate of 11%. Last year they were worth US$20 billion.

The VCCI said though many of these exporters provide documents to prove they sell their services abroad, tax officials refuse to acknowledge their exports.

They therefore have to set up offices overseas to avoid the VAT, it added.

The Ministry of Finance admitted there are issues as online services are “invisible” and therefore it is difficult to determine whether the companies were selling them overseas or in Vietnam.

It has proposed a discount VAT starting from 5% for these companies instead of a full waiver.