Proposal to apply 0% tax rate for digital content service group

VDCA's document proposes a 0% tax rate for digital content and digital entertainment services.

Specifically, according to VDCA, the draft Law on Value Added Tax (amended) for digital content services is an important step in perfecting the legal framework to meet the development requirements of the digital economy and international integration.

Proposal to apply 0% tax to digital content service group.

However, through the review process, some contents of the draft need to be considered for adjustment because they may cause disadvantages for businesses operating in the fields of digital content production and film production, especially the international competitiveness and attractiveness of the Vietnamese market to investors.

At point a, clause 1, article 9 of the draft law proposes to apply a tax rate of 10% to products and services on digital platforms without distinguishing between export and domestic consumption. With this new draft, exported digital content services will no longer enjoy the current 0% tax rate.

Because tax authorities have difficulty distinguishing between revenue from exported services and domestic consumption, causing inadequacies in tax management. However, VDCA believes that applying a tax rate of 10% will lead to negative impacts on digital content businesses, especially on international competitiveness and the attractiveness of the Vietnamese market.

VDCA Chairman Nguyen Minh Hong said: Paying a 10% tax rate when exporting cross-border digital platform services can reduce the competitiveness of Vietnamese suppliers compared to other countries - where a 0% tax rate is applied to exported services along with input tax, helping businesses reduce costs.

In addition, the principle of VAT is an indirect tax in which the tax payer must be the final consumer. However, for digital products, the consumer is the viewer, so businesses do not collect VAT. Imposing tax on the above products invisibly directly affects the business's revenue. This creates great financial pressure for those businesses.

According to Mr. Nguyen Minh Hong, VAT is currently not consistent with the principle of destination where consumption is, tax is levied there, the 0% tax rate is set to give the right to levy VAT to the country consuming the service. This is an international practice that all countries follow. The imposition of a 10% tax makes our services subject to double taxation.

In addition, services provided on digital platforms are actually subject to double taxation. For content creators who do not reside in the US, they are deducted 24-30% income tax for views from the US before receiving payment. When returning to Vietnam, they are subject to an additional 7-30% tax, including VAT and income tax. Therefore, applying a 10% tax rate reduces the incentive to develop the cultural industry.

Therefore, VDCA proposes: Cases where the 0% tax rate is not applied include:

Therefore, VDCA proposed that the Ministry of Finance consider the regulation: Cases not subject to the 0% tax rate include: digital content products in the entertainment group, electronic games, digital movies, digital photos, digital music, digital advertising provided on digital platforms where the business establishment cannot provide documents proving consumption outside Vietnam or in duty-free zones as prescribed by the Government.

In addition, VDCA proposed to maintain the 5% tax rate for cultural activities, exhibitions, physical education and sports; art performances; and film production to ensure sustainable development and public reception of these public service products.

Source: https://kinhtedothi.vn/de-xuat-ap-thue-0-cho-nhom-dich-vu-noi-dung-so.html