Korean businesses expect answers over VAT impasse

August 23, 2023 | 13:00
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Major delays in tax refunds are hindering major South Korean companies that would be otherwise keen to invest large sums in Vietnam.
Korean businesses expect answers over VAT impasse
Korean businesses expect answers over VAT impasse intech.vietnamworks.com

The issue was discussed at a conference between leaders of Ho Chi Minh City and South Korean businesses last week.

Youn Chel Woon, general director of Samsung Electronics HCMC CE Complex (SEHC), disclosed that despite having accumulated a VAT amount of over $42 million over the past two years, no resolution has been attained thus far.

Woon highlighted that the SEHC factory boasts an export proportion of up to 90 per cent. In 2020, the factory applied for a shift from regular business operations to an export processing enterprise.

“Both before and after this transition, issues pertaining to VAT refunds have arisen. Specifically, we are still awaiting a refund of $24 million for the period prior to the shift. Additionally, an amount of $20 million within the 18 months spanning from June 2021 to December 2022 remains unreimbursed,” Won said.

Woon noted that in July 2022, Ho Chi Minh City Tax Department conducted a two-month assessment to evaluate the viability of VAT refunds. Subsequently, two correspondences were sent to the General Department of Taxation, followed by a meeting to address this matter, yet a definitive decision has yet to be reached.

Woon proposed that Ho Chi Minh City People’s Committee take a proactive approach, not solely relying on central government intervention. “Some of our material suppliers are also grappling with VAT refund challenges,” he added.

Several other South Korean businesses also raised concerns regarding tax refund processes. Roh Woong Ho, general director of CJ Foods Vietnam, highlighted that although the company signed a contract to initiate production at Hiep Phuoc Industrial Park (IP) six years ago, they are yet to receive their land use right certificate.

“This hinders us from applying for a VAT refund,” he explained.

Choi Bundo, chairman of the Korean Chamber of Commerce (KoCham) for central and southern Vietnam, expressed that VAT refunds constitute a pivotal challenge faced by enterprises. “The extended timelines for resolving VAT refund issues prompt us to earnestly request relevant authorities to expedite solutions,” Bundo said.

In response to SEHC’s predicament, Nguyen Tien Dung, deputy director of Ho Chi Minh City Tax Department, noted that the agency is consulting the Ministry of Finance to determine whether the responsibility for such refunds to enterprises lies with the tax departments or customs department.

“Regarding CJ Foods, the tax department will review the company’s refund records once the land use right certificate is granted,” he said, followed by Ho Chi Minh City Department of Natural Resources and Environment clarifying that the sluggish progression was attributed to the transformation of IP’s land leasing model from an annual payment scheme to a one-time payment format.

Ultimately, Chairman of Ho Chi Minh City People’s Committee Phan Van Mai has set a deadline in September for the department to finalise land procedures to facilitate timely tax refund documentation.

Mai stated that issues pertaining to VAT refunds, on-the-spot import-export policy changes, and any other pertinent matters will be duly absorbed by the city and subsequently relayed to central ministries for deliberation. He advocated for collaborative engagement by Samsung and other businesses in organising a forum to facilitate in-depth discussions, foster mutual understanding of needs, capacities, standards, and regulations, and alleviate bottlenecks within the supporting industry.

“The city will establish a task force to address the concerns of the investor community. This month, we will present a detailed proposal to the Korean Consulate in Ho Chi Minh City and KoCham,” he said.

South Korea stands as a prominent trading partner for Ho Chi Minh City, ranking 4th among 120 countries and territories in terms of foreign direct investment. In 2022, South Korean investors initiated 125 ventures, funnelling in over $60.6 million. Cumulatively, South Korea has embarked on over 2,130 projects with capital exceeding $5.5 billion.

Last week’s dialogue marked the third iteration of such interactions between the two sides. Following a similar dialogue in June last year, Ho Chi Minh City People’s Committee said it had resolved 13 out of 21 issues raised by South Korean businesses.

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By Le Luu

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