Technology

Decree 126 does not increase Grab drivers’ tax obligations


12/09/2020 20:24 GMT + 7

The tax authorities said that Decree 126 does not increase drivers’ tax obligations. Enterprises are entitled to input tax deduction. Grab has to adjust the taxable price structure so that it doesn’t affect consumers and drivers’ income.

Hundreds of Grab drivers shut down the application and protest for the new tax deduction. Photo: Duy Vu

This afternoon, December 9, the General Department of Taxation also had a meeting with Grab around the issues of value added tax (VAT) declaration and deduction under the new regulations.

Decree 126/2020 / ND-CP, which comes into effect on December 5, clearly states that organizations doing business with individuals must declare value-added tax and issue invoices on all revenue. Calling platforms will have to declare and collect VAT on total revenue with individuals. The collection tax rate is 10% of total revenue generated.

At the meeting, the General Department of Taxation explained to Grab that Decree 126/2020 / ND-CP had no change in value added tax (VAT) policy. Accordingly, Decree 126 specifies that the obligation to declare VAT on business cooperation is performed by enterprises. Enterprises must declare tax on all turnover of business cooperation activities.

The tax authority said that for Grab, which is a transport business, the company declares VAT under the deduction method, the VAT rate is 10%. Previously, in many tax response meetings with both businesses and press agencies, the tax agency said that Decree 126 is a guiding document on tax administration, so it only specifies more about tax declaration. For business cooperation model with individuals, there is no new regulation on this tax. The tax rate for transport business is still applied at 10%.

Grab as well as other ride-hailing platforms are defined as the transport business, because the business plays a decisive role in transportation prices and policies with drivers and customers. Therefore, there must be responsibility to fulfill the same obligations as businesses doing business in this area.

Responding to ICTnews, a representative of the General Department of Taxation said: “Grab determines the entire price. Therefore, Grab is responsible for declaring and issuing a one-time invoice for these transport activities. VAT on transport activities is 10%. Grab will declare output and input tax will be deducted.

The new regulations in Decree 126 do not increase the obligations of individual drivers. The partner will only be subject to 1.5% personal income tax.

The representative of the General Department of Taxation also said that “Grab will have to restructure its production and business activities in order to have input costs and input VAT to be deductible”.

A source from the tax agency said that at the meeting, the Grab representative did not clearly inform the tax authorities about the increase in prices and increase discounts for drivers, due to the influence of Decree 126.

Duy Vu

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