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Tax authorities puzzled over Airbnb tax obligations

Despite Airbnb being present in Vietnam since 2015 and operating with profit, it is difficulty for tax authorities to tax the company as it does not yet have a business registration licence or a representative office and legal representation in Vietnam.

A new trend

Airbnb has been available in Vietnam since 2015, connecting people seeking accommodation with those looking to rent via a technology platform, taking a fee after transactions.

The number of rooms for rent increased from the initial 1,000 to 10,000 by the end of last year, primarily in Hanoi and Ho Chi Minh City, according to the latest research from Grant Thornton Vietnam.

Meanwhile, thousands of apartments and villas in Halong, Sapa, and Danang are for rent on the platform, with prices 30 per cent cheaper than comparable hotels.

Hanoi has been ranked sixth among the 10 destinations with the highest increase in bookings in 2017, according to Airbnb.

Airbnb joined Uber and Grab as the most recognisable new “sharing” business models that have changed the way people around the world access and use services.

It not only has a large-scale business network with reasonable fees, it also creates a connection between hosts and customers. Notably, hosts are willing to help and take care of customers in case they have a health problem.

Beside, comment threads between hosts and customers are published on the Airbnb website and only the company has the right to delete these comments. It makes it easy for customers to select the best accommodation and help the host avoid bad customers.

Regarding the fees, customers will have to pay between 10-15 per cent of the booking price to Airbnb and the host 3 per cent. For example, the listed price at accomodations for rent is $50 per night, however, customers who book accomodation via Airbnb will have to pay between $60-75. Payments can only be made via credit card.

Difficult to ask Airbnb to pay tax

Despite Airbnb’s operating in Vietnam since 2015, the Ho Chi Minh City Department of Taxation and the Ho Chi Minh City Department of Tourism have yet to extend supervision over Airbnb’s operations. Even a number of tourism companies were unaware of Airbnb's services in Vietnam, despite its fast growth.

Le Thi Thu Huong, deputy director of the Ho Chi Minh City Department of Taxation, told VIR that since May 2017, the department had been trying to bring the company’s operations under management and requesting the company to pay tax, with no effect.

Huong stated that in Ho Chi Minh City alone, there are 2,074 hosts looking to rent out space via Airbnb, which is a large number, thus tax collected from Airbnb would contribute a part to the city’s budget.

According to lawyer Nguyen Huu Phuoc, founder of Phuoc & Partners Law Company, Airbnb has yet to register its business in Vietnam, however, Circular No.103/2014/TT-BTC dated August 6, 2014, shows that foreign business organisations, regardless of having permanent establishments in Vietnam or not, as well as foreign business individuals, regardless of their place of residence, (foreign contractors and foreign sub-contractors) who do business in Vietnam or earn income in Vietnam from contracts, agreements or commitments with a Vietnamese entity, are subject to tax.

Thus, regarding the law, there is ample legal basis to identify tax obligations for Airbnb. However, Phuoc added that in reality, it is still difficult to manage and ask Airbnb to pay tax because the payments are only made via credit card without any bills.

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Tax authorities puzzled over Airbnb tax obligations

Despite Airbnb being present in Vietnam since 2015 and operating with profit, it is difficulty for tax authorities to tax the company as it does not yet have a business registration licence or a representative office and legal representation in Vietnam.

A new trend

Airbnb has been available in Vietnam since 2015, connecting people seeking accommodation with those looking to rent via a technology platform, taking a fee after transactions.

The number of rooms for rent increased from the initial 1,000 to 10,000 by the end of last year, primarily in Hanoi and Ho Chi Minh City, according to the latest research from Grant Thornton Vietnam.

Meanwhile, thousands of apartments and villas in Halong, Sapa, and Danang are for rent on the platform, with prices 30 per cent cheaper than comparable hotels.

Hanoi has been ranked sixth among the 10 destinations with the highest increase in bookings in 2017, according to Airbnb.

Airbnb joined Uber and Grab as the most recognisable new “sharing” business models that have changed the way people around the world access and use services.

It not only has a large-scale business network with reasonable fees, it also creates a connection between hosts and customers. Notably, hosts are willing to help and take care of customers in case they have a health problem.

Beside, comment threads between hosts and customers are published on the Airbnb website and only the company has the right to delete these comments. It makes it easy for customers to select the best accommodation and help the host avoid bad customers.

Regarding the fees, customers will have to pay between 10-15 per cent of the booking price to Airbnb and the host 3 per cent. For example, the listed price at accomodations for rent is $50 per night, however, customers who book accomodation via Airbnb will have to pay between $60-75. Payments can only be made via credit card.

Difficult to ask Airbnb to pay tax

Despite Airbnb’s operating in Vietnam since 2015, the Ho Chi Minh City Department of Taxation and the Ho Chi Minh City Department of Tourism have yet to extend supervision over Airbnb’s operations. Even a number of tourism companies were unaware of Airbnb's services in Vietnam, despite its fast growth.

Le Thi Thu Huong, deputy director of the Ho Chi Minh City Department of Taxation, told VIR that since May 2017, the department had been trying to bring the company’s operations under management and requesting the company to pay tax, with no effect.

Huong stated that in Ho Chi Minh City alone, there are 2,074 hosts looking to rent out space via Airbnb, which is a large number, thus tax collected from Airbnb would contribute a part to the city’s budget.

According to lawyer Nguyen Huu Phuoc, founder of Phuoc & Partners Law Company, Airbnb has yet to register its business in Vietnam, however, Circular No.103/2014/TT-BTC dated August 6, 2014, shows that foreign business organisations, regardless of having permanent establishments in Vietnam or not, as well as foreign business individuals, regardless of their place of residence, (foreign contractors and foreign sub-contractors) who do business in Vietnam or earn income in Vietnam from contracts, agreements or commitments with a Vietnamese entity, are subject to tax.

Thus, regarding the law, there is ample legal basis to identify tax obligations for Airbnb. However, Phuoc added that in reality, it is still difficult to manage and ask Airbnb to pay tax because the payments are only made via credit card without any bills.

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