This was the conclusion of the Binh Thuan Department of Taxation, answering the proposal of Saigon Mui Ne Resort asking its partner Booking.com to either pay tax or the tax department to refund Saigon Mui Ne’s taxes paid instead of Booking.com, according to newswire Vnexpress.
According to Le Thi Ai Lien, representative of Saigon Mui Ne, the company signed a co-operation contract with the Booking.com international booking site. According to regulations, Booking.com will have to deduct a part of its benefits (including profit from business activities in Vietnam) for Saigon Mui Ne so that Saigon Mui Ne can pay corporate income tax (CIT). However, Booking.com refused, claiming it was exempt, based on the Double Taxation Avoidance Agreement between Vietnam and the Netherlands.
Regarding Saigon Mui Ne, Booking.com’s refusal to deduct a part of its benefits for CIT to Saigon Mui Ne will impact the company’s revenue. Due to the available listed prices, the company cannot increase the price of its tours to offset this loss. On the other hand, if the company remains insistent that Booking.com pay for CIT, the partner will cancel their contract, creating a larger loss in revenue for the company.
Lien said that according to regulations, international booking sites are exempted from CIT and value-added tax (VAT) in case they do not have representative offices or permanent establishments in Vietnam. However, Booking.com currently has permanent establishments in Vietnam, thus, it has to pay CIT instead of Saigon Mui Ne.
Saigon Mui Ne submitted the file, including the contract and the permanent establishment certificate of Booking.com in Vietnam, to the Binh Thuan Department of Taxation to ask the department to refund the CIT that Saigon Mui Ne paid.
After receiving and then reviewing the file, the tax department concluded that Booking.com is not exempt from tax because it has two permanent establishments in Hanoi and Ho Chi Minh City.
Cao Anh Tuan, deputy general director of the General Department of Taxation, agreed with the conclusion. Tuan stated that online booking sites, including Booking, Agoda, and Hotels.com, among others, have been popping up left and right in recent years through co-operation with domestic tourism and hotel enterprises. These booking sites acquire massive benefits but have yet to pay taxes, vexing domestic enterprises.
Previously, in late January 2017, the Ministry of Finance (MoF) asked booking sites that allow tourists to book hotel rooms in Vietnam to calculate and pay VAT and CIT.
Targeted websites include Agoda, Traveloka, Booking, and Expedia. Specifically, the CIT rate is 5 per cent of the total revenue. VAT is calculated on the added value that the companies, called “the foreign contractor” by the ministry, make.
MoF directed Vietnamese hotels to sign contracts with the foreign booking sites, specifying that they will declare and pay tax on behalf of foreign contractors and deduct the amount from subsequent payments they make to the foreign contractors.
In case the guest pays for the room directly to the Vietnamese hotels and hostels, then the Vietnamese sides pay commission to the foreign contractor and will have to declare and pay this tax.
In case the guest pays the foreign contractor, then the foreign contractor pays the hotels, keeping the commission, and the Vietnamese side will have to notify the foreign contractor of their tax obligation and declare and pay tax on behalf of the foreign contractor.
The ministry asked that local tax departments push accommodation providers in their localities to pay the tax on the foreign contractor’s commission. If they encounter any difficulties in the process, they should notify the ministry to receive guidance.
By Ha Vy
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