Vietnam tax authorities contradict Grab view over tax policies

Representative of Vietnam’s General Department of Taxation (GDT) stressed Decree No.126/2020/ND-CP, which Grab said is the reason for its hiking fees, only provides guidance on tax declaration and payment, with tax rates staying unchanged.

Grab's drivers express their frustration as the ride-hailing firm raises commission fee. Photo: Pham Hung.

After a meeting with Grab on December 9, Deputy Director of the Department of Tax Administration for small and medium enterprises and individuals Ta Thi Phuong Lan said the Decree that became effective on December 5 does not amend any tax policy, therefore, tax obligation of Grab’s drivers remains the same.

“Ride hailing firms such as Grab, Gojek or Be are responsible for declaring the value-added tax (VAT) for all revenue from the transportation business with a tax rate of 10%, which is applicable to all transport operators,” she added.

“In addition to paying a 10% VAT tax, Grab or others would have to collect and pay a personal income tax of 1.5% for their drivers with income in exceed of VND100 million (US$4,333) per year,” Ms. Lan said, adding individuals are not subject to VAT.

Grab also released a statement on the same day and expressed its frustration as the two side could not agree on who should bear the VAT amount.

Overview of the meeting between representatives of Grab and the General Department of Taxation on December 9.

Lawyer Ha Huy Phong from Inteco law firm told Hanoitimes clarifying Decree No.126 only changes the subject that requires to declare and pay taxes, which would not result in a higher tax obligation for drivers or transportation fares.

This, however, contradicts to Grab’s policy that requires drivers to pay a 20% of commission fee plus 3% tax on revenue and 1.5% of personal income tax before Decree No.126, and now a 10% VAT instead of 3% tax on revenue after the decree coming into force.

Two days after the  the decree came into force, Grab announced a 5 – 6% increase in transportation fares for both Grabcar and Grabbike services, saying that the move is aimed to keep drivers’ income unchanged. To add more controversy to the move, the firm then raised its commission fees against their driver-partners to 27.27% of the fare from the previous 20%.

A Grab representative told local media the commission they charged driver-partners actually remains the same at 20%, while the additional amount is what drivers are supposed to pay for VAT and Grab is responsible for collecting and paying tax authorities on behalf of the former.

Mr. Phong from Inteco law firm said the reason behind Grab’s decision may come from the fact that it is under pressure to generate profit after years of investing to expand market shares.

On December 10, CEO of Grab Vietnam Nguyen Thai Hai Van held a meeting with their driver-partners to find a solution for this issue, as the latter expects to maintain a 20% commission rate.

The meeting, however, came to a stalemate as Grab refused to backdown its decision.