International booking sites have to pay VAT, CIT in Vietnam

Targeted websites include Agoda, Traveloka, Booking and Expedia. Specifically, the CIT rate is 5 per cent over total revenue. The VAT amount is calculated on the added value that the companies, called “the foreign contractor” by the ministry, make.

The tax is declared every time there’s a transaction between the hotel and the foreign booking site and when the contract ends. In case the hotel in Vietnam pay the foreign company multiple times per month, it can declare the tax once a month instead of declaring each time it makes the payment.

The Ministry of Finance directed that the Vietnamese hotels sign a contract with the foreign booking sites which specify that they’re going to declare and pay the tax on behalf of the foreign contractor and deduct the amount from the payment they make to the foreign contractor.

In the case that the guest pays for the room directly to the Vietnamese hotels and hostels, then the Vietnamese sides pay the commission to the foreign contractor, the Vietnamese sides 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, the Vietnamese side will have to notify the foreign contractor of their tax obligation, and declare and pay the tax on behalf of the foreign contractor.

The ministry asked the local tax departments push the accommodation providers in their locality to pay the tax on the commission that the foreign contractor enjoys according to regulations. In the process, if they encounter any difficulty, they should notify the ministry to receive guidance.

Earlier, some Vietnamese companies, including Vntrip.vn, the Vietnamese startup that in July received a $3 million investment from former chief technology officer (CTO) of Alibaba John Wu, accused sites such as Agoda of evading tax.

In the US, on one ground or another, states have been trying to force online travel companies to pay tax, but to varying degree of success.

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