Is online electronic game service subject to VAT?

Is the provision of online video games subject to VAT in Vietnam?

Pursuant to Article 3 of the 2008 Value Added Tax Law, which regulates the objects subject to value-added tax, as follows:

Taxable Objects

Goods and services used for production, business, and consumption in Vietnam are subject to value-added tax, except for the objects specified in Article 5 of this Law.

At the same time, referring to the provisions in Article 5 of the 2008 Value Added Tax Law, as supplemented by Clause 1, Article 3 of the 2014 Law on Amendments to Tax Laws and amended by Clause 1, Article 1 of Law No. 106/2016/QH13 and Clause 1, Article 1 of the 2013 Value Added Tax Amendment Law, which regulates the objects not subject to value-added tax.

Thus, the provision of online video games is subject to value-added tax.

Is the provision of online video games subject to VAT in Vietnam? (Image from the Internet)

What is the tax rate for the provision of online video games from Vietnam abroad?

Based on Section 8 of Official Dispatch 2270/TCT-CS in 2020, which regulates tax policies for the provision of online video games, as follows:

8. Official Dispatch No. 775/BTTTT-CNTT on March 9, 2020, from the Ministry of Information and Communications responding to VNG Corporation guiding the classification of software products.

...

- For the provision of online video games through Google and Apple: If the service provides online games in Vietnam, this service does not apply the 0% VAT rate stipulated in Clause 3, Article 9 of Circular No. 219/2013/TT-BTC but applies the 10% VAT rate stipulated in Article 11 of Circular No. 219/2013/TT-BTC dated December 31, 2013, of the Ministry of Finance.

Thus, the provision of online video games from Vietnam abroad will apply a tax rate of 10%.

Where is the place to pay value-added tax in Vietnam?

Pursuant to Article 20 of Circular 219/2013/TT-BTC, which regulates the place to pay value-added tax, as follows:

Place to pay tax

1. Taxpayers declare and pay VAT at the localities where the production, business takes place.

2. Taxpayers who declare and pay VAT by the deduction method, with a dependent production establishment located in a province, centrally-run city different from that of the headquarters, must pay VAT at the localities where the production establishment is located and where the headquarters is located.

3. In the case of enterprises and cooperatives applying the direct method with a production establishment in a province, centrally-run city different from the location of their headquarters or with out-of-province sales activities, the enterprises and cooperatives shall declare and pay VAT based on a percentage of turnover for revenue generated out-of-province at the locality where the production establishment or sales activities take place. Enterprises and cooperatives do not have to pay VAT based on a percentage of turnover at the headquarters for revenue generated out-of-province and already declared, paid.

4. In the case of telecommunications service businesses with after-paid telecommunications services in a province, centrally-run city different from where the headquarters is located and establishing dependent accounting branches to pay VAT by the deduction method together to conduct after-paid telecommunications services business in that locality, the telecommunications service business shall declare and pay VAT for after-paid telecommunications services as follows:

- Declare VAT for after-paid telecommunications service revenue of the entire business with the tax authority directly managing the headquarters.

- Pay VAT at the locality where the headquarters is located and at the locality where the dependent accounting branch is located.

The VAT to be paid at the locality where the dependent accounting branch is located is determined by a rate of 2% (for after-paid telecommunications services subject to 10% VAT) on the revenue (excluding VAT) of after-paid telecommunications services at the locality where the dependent accounting branch is located.

5. Tax declaration and VAT payment are implemented according to the Law on Tax Administration and guiding documents implementing the Law on Tax Administration.

Thus, the place to pay value-added tax is regulated as follows:

- The locality where the production, business takes place.

- The locality where the production establishment is located and the locality of the headquarters if the taxpayer applies the deduction method with a dependent production establishment located in a different province, centrally-run city than that of the headquarters.

- The locality where the production establishment or sales activities take place if enterprises and cooperatives apply the direct method with a production establishment in a different province, centrally-run city than that of the headquarters or have out-of-province sales activities.

- The locality where the headquarters is located and at the locality where the dependent accounting branch is located if a telecommunications service business has after-paid telecommunications services in a different province, centrally-run city than that of the headquarters and establishes dependent accounting branches to pay VAT by the deduction method together in conducting the after-paid telecommunications services business in that locality.