The Ministry of Finance is drafting amendments to the Law on Value Added Tax which will be proposed to the National Assembly for consideration in the 7th meeting in May this year. (Photo: VNA) The Ministry of Finance is drafting amendments to the Law on ValueAdded Tax which will be proposed to the National Assembly for consideration inthe 7th meeting in May this year.
In the draft, the ministry wants to impose VAT on most exportedservices, instead of the zero rate as currently.
Specifically, only international transportation and vehicle rentaloutside Vietnam and some related services are proposed to be maintained at zerotax rates, while others will be subject to VAT rate, commonly at 10%.
The reason for the amendment is that tax authorities found itdifficult to distinguish between revenues from exported services and fromdomestically consumed.
VCCI said that the imposition of 10% VAT rate when exporting willmake it difficult for Vietnamese services providers to compete with foreignrivals.
International trade of services increased strongly in the globalmarket during the past two decades and is forecast to remain robust in comingyears, along with the vibrant development of Internet and remote worksolutions, VCCI said, citing statistics of the World Bank that global export ofservices jumped from 400 billion USD in 1980s to more than 7.2 trillion USD in2022, with an average annual growth rate of 6.5% from 2003 to date.
The international transportation service accounts for asignificant proportion but it is dropping, from 30% in 1982 to 17% in 2020,while telecommunications and IT services are rising.
Statistics showed that global telecommunications and IT servicesexport is expanding at 12.3% annually on average from 2004. The rate has beenrising more rapidly since the COVID-19 pandemic.
According to the VCCI services export has huge potential fordevelopment. Vietnam’s export of services reached 20 billion USD in 2023 withan average annual growth rate of 11%, higher than the country’s gross domesticgrowth rate. Vietnam is running a trade deficit of services worth more than 10billion USD each year.
Providing exported services does not require huge capital likeinvesting in manufacturing and processing industry, which is appropriate in acapital-shortage economy like Vietnam.
In addition, Internet-based services export helps promote thecountry’s image and increase “soft power”, VCCI said.
Vietnam is an export-oriented economy with export being animportant growth driver with an average annual growth rate of nearly 15%, VCCIsaid, emphasising that zero VAT on exported services plays a significant role.
According to VCCI, most countries around the world are imposingzero VAT on exported services and allow tax refunds on inputs.
Thus, VAT on exported services should be kept at zero, VCCI said.
Major exporting services of Vietnam include manufacturingoutsource, maintenance and repairing, tourism and transportation, insurance,financial services, IT and information services./.
VNA
