Vietnam temporarily exempts online gaming from special consumption tax

In a notable decision that will likely impact the burgeoning online gaming sector, the Vietnamese Government Office has announced that online games will, for now, remain outside the purview of the nation's special consumption tax,

The announcement came as part of the government's reassessment of current taxation law, designed to ensure legislative harmonisation and optimal resource mobilisation for the state budget.

While online gaming has been granted a reprieve, the government is requesting more detailed research into the implications of expanding the tax base to include sugary drinks. The regulatory authorities also advised meticulous consideration of taxing new types of tobacco products and related electronic devices, a measure seen as a step towards consistency with specialised laws and international commitments.

The issue of special consumption tax on online gaming has been a contentious one. The Ministry of Finance had previously suggested incorporating it into the tax sphere, aiming to curb the potential societal and health impacts associated with excessive gaming.

But this proposal sparked concern among industry experts and businesses, who worried about the possible repercussions on sector growth, and feared the emergence of reverse protectionism and a boom in unlicensed gaming activity.

Recent forums saw several industry stakeholders advising against the inclusion of online gaming services in the special consumption tax net. Deputy Minister of Information and Communications Phan Tam reinforced this viewpoint in a document submitted to the Ministry of Finance, arguing that the tax shouldn't be applied to online gaming services at this time.

The debate takes on additional complexity given the increasing presence of foreign online gaming services. Nearly 30 per cent of gaming revenues in 2021-2022 came from unlicensed foreign entities operating in Vietnam, which currently have no tax obligations.

If applied to online gaming, the special consumption tax could reduce the competitiveness of domestic enterprises compared to foreign entities, potentially leading to a shift of domestic companies to locations like Singapore to evade high taxes, potentially causing a significant dent in the state budget.

Industry insiders caution that the introduction of this tax could dissuade domestic gaming companies from ramping up their investment and development efforts. The Vietnam Chamber of Commerce and Industry also urged caution, suggesting that online gaming should not yet be included in the special consumption tax.

Special consumption tax needs supportive roadmap Experts and businesses have said that amid numerous woes and economic crises, the plan to raise the special consumption tax (SCT) is not suitable at this time.

Changes to special consumption tax must be studied carefully The impacts of the imposition or increases of special consumption tax on several products must be studied carefully to ensure State budget revenue and the development of production and business, experts said.

Global Minimum Tax: a call for strategic revisions in Vietnam's special zones Loc Huynh, a lawyer from Dentons LuatViet, a Vietnamese law firm, delves into the implications of the incoming Global Minimum Tax for Vietnam's special zone developers, suggesting strategic shifts towards infrastructure quality, investment costs, and human resources to maintain competitiveness.