Lenders juggle with tax info obligations

The State Bank of Vietnam pm August 8 issued Official Letter No.5454/NHNN-TTGSNH to credit institutions, requesting information provision and coordination with tax authorities, making this policy applicable throughout the entire banking system.

Banks will only have to provide general account-related information to the tax authorities, Le Toan

In June last year, the General Department of Taxation (GDT) piloted the initiative with the commercial banks of VietinBank, Vietcombank, BIDV, Agribank, and MB Bank, which were requested to provide information about taxpayers’ payment accounts to tax authorities.

According to the GDT, the agency has completed the account authentication and connection process on its eTax Mobile platform with six commercial banks namely Vietcombank, BIDV, SCB, ACB, HDBank, and TPBank. A number of other lenders are in the process of completing the account credentials for users to activate eTax Mobile. The process in general has been regarded to be hassle-free and smooth, as the information that banks provide to tax authorities is for verification purposes only.

As of July 15, over 84,700 accounts have been downloaded, installed, and used on eTax Mobile. There were 52,800 transactions executed by commercial banks that embraced the system, with a total amount of approximately $11.4 million, cited the GDT.

Dinh Thuy Dung, head of legal at Duong Gia Law, noted that information disclosure should not be of concern, as banks themselves are obliged to confidentiality by the law. Moreover, other information such as deposit balance and payment history still remain confidential.

“According to Article 30 of Decree No.126/2020/ND-CP dated 2020 on the elaboration of the Law on Tax Administration, banks are only allowed to provide account-related information, including the account holder’s name, the account number based on the issued tax code, and the opening/closing date of the account,” Dung said. “The provision of transaction-related information, including account balances, only applies to cases where the customers are subjected to legal inspection or tax verification. In these, case requests must be submitted in written form and the related tax agency must be responsible for confidentiality.”

However, Dr. Nguyen Thi Kim Thoa of the Faculty of Economic Law at Ho Chi Minh City University of Banking assessed that there needs to be clearer regulation on the subjects and criteria in which banks are required to provide information to the tax authority, in order to harmonise the taxpayers’ right to confidentiality and banks’ legal obligation.

“The tax authority’s approval process in terms of information request and provision, and the tax authority’s approval process, need to be clearly defined,” Thoa noted. “So far, Decree No.117/2018/ND-CP dated 2018 specified several cases where tax agencies can request information from banks. However, the decree does not provide specific guidance on the level of authority and scope of matter where a written request can be issued and possible mechanisms to resolve conflicts. This can trigger concerns for both customers and credit institutions, thereby affecting banking operations,” she added.

Across the globe, in order to reduce offshore tax evasion, participating countries that follow the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standards have also required financial institutions to disclose customer information to tax authorities, including Vietnam. The Vietnamese government signed the Intergovernmental Agreement Model 1B with the United States on compliance with FATCA in 2016.

Upon implementation, Vietnamese financial institutions are deemed to be reporting financial institutions of Vietnam and must comply with the FATCA. It requires financial institutions worldwide to perform due diligence and report information to the US Internal Revenue Service about financial accounts held by US tax residents, to prevent tax evasion through investment accounts at non-US financial institutions.

Vietnamese lender Techcombank stated, “Under the FATCA provisions, we are required to collect documentation from our clients in order to establish their tax status. Techcombank will report annually on financial accounts held directly or indirectly by US tax residents. Furthermore, Techcombank will also perform due diligence to our current customer database to determine the client’s FATCA status for reporting purposes, and when necessary, we will contact the customers to obtain more information and documents.”

Weaker banks on radar of major lenders The prospect for bank mergers and acquisitions in Vietnam is accelerating, notably the purchase of struggling credit institutions for the sake of reorganisation.

Firm grasp of rules crucial in handling customer info The State Bank of Vietnam has issued a formal request to credit institutions and foreign bank branches for cooperation and information sharing with tax administration organisations. Le Khanh Lam, tax partner at RSM, discussed with VIR’s Le Luu how banks and tax agencies can harmonise the fresh legislation, and how barriers can be overcome without compromising customers’ rights.