On the 16 May 2017 in Hanoi – the European Chamber of Commerce in Vietnam (EuroCham) organised an event that gathered Vietnamese authorities and experts to discuss Vietnam’s new customs and taxation framework and its connection to the entry into force of the EVFTA.
At this event, experts and business leaders exchanged ideas on how to improve the business environment in regards to customs, trade facilitation measures, and tax regime, taking the opportunities of the EVFTA. Specifically, businesses expressed their concerns about customs audit and penalties applicable to administrative inconsistencies in tax declarations.
Participating company representatives said that setting the rules to levy taxes and apply penalties to administrative mistakes will worsen the already challenging investment environment in Vietnam and may undermine the trust of foreign businesses, forcing them to reconsider their investments and operations in the Vietnamese market.
Challenges for relevant businesses on legal documents concerning customs values were referred to during the event. For example, the customs authorities’ ability to reject the declared value of a business; or their competence in handling the businesses’ administrative faults in customs declarations. Many businesses have been audited by the Customs authorities, have seen their Customs declarations rejected, and have been applied penalties (in some cases in the tens of billion dong); due to administrative errors found in previous declaration, some from several years ago (1)
Shivam Misra, Co-chairman of EuroCham’s Wine & Spirits Sector Committee, said: “The European business community is very concerned about the customs framework and its manner of execution. Especially if administrative errors are used to open up valuation methods or impose non-merit based heavy penalties. This undermines the confidence that businesses have in Vietnam and its investment environment. Companies might be forced to reconsider investing and also downsize operations if the environment is not conducive to business operations. We want to cooperate and support the Government but it becomes difficult if businesses are not given a fair chance of conducting their operations smoothly.”
Thomas McClelland, Chairman - EuroCham Tax and Transfer Pricing Sector Committee: “Vietnam’s Tax Framework is increasing focusing on substance over form as indicated in recently issued tax regulations, for example the recent Decree 20 on Transfer Pricing. However, in practice, our members have experienced that administrative breaches (i.e. form) seem to increasingly be the focus of many tax and customs audits in recent times. The nature of the administrative breaches, such as inconsistencies in a customs declaration or what is considered a failure to follow a non-tax procedure is simply an administrative mistake which should not be used as the legal basis for the customs or tax authorities to apply tax arrears and penalties or deny a tax refund. We see more reasonable and positive treatment when the matter is considered at the higher level of the authorities e.g. Ministry of Finance/GDT level. However, by this time taxpayer have often incurred significant time to try to resolve the issue”
(1) Relevant legal documents about tax and customs declaration as follows:
-Decree No. 83/2013/ND-CP dated July 22, 2013 by the Government specifying the implementation of several articles of the Law on Tax Management and the Law on Amendments to several articles of the Law on Tax Management;
-Decree No.08/2015/ND-CP dated Jan. 21, 2015 by the Government providing specific provisions and guidance on enforcement of the customs law on customs procedures, examination, supervision and control procedures;
-Circular No.38/2015/TT-BTC dated Mar. 25, 2015 by the Ministry of Finance on customs procedures, customs supervision and inspection, export tax, import tax, and tax administration applied to exported and imported goods;
-Circular No. 39/2015/TT-BTC dated Mar. 25, 2015 on customs value of imported goods and exported goods.
SHIVAM MISRA, Chairman - EuroCham Wine & Spirits Sector Committee
Shivam Misra is Co-Chairman of Wine and Spirits Sector Committee of EuroCham. Having over 18 years of experience across various sectors and countries, he has been the General Director of Diageo Vietnam Limited since April 2015. Shivam has held key positons across business units in emerging markets within Diageo Asia Pacific in the last 10 years before moving to Vietnam.
THOMAS McCLELLAND, Chairman - EuroCham Tax. And Transfer Pricing Sector Committee
Thomas has over 25 years of international tax experience, having advised a wide range of businesses, both international and domestic, on all areas of Vietnamese taxation since 1998. He has participated closely in the tax reform process in Vietnam over the past decade, through sector groups as well as working directly with the Government authorities.