Going to the Netherlands to claim Uber's tax debt

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Attorney Ha Huy Phong.

It is difficult for the Tax office to claim and recover the tax debt. By the way, the Customs reporter had a talk with Attorney Ha Huy Phong, Director of Inteco Law Firm, Hanoi Association on this issue.

According to legal regulations, after the merger, shall Uber or Grab be responsible for Uber tax debt at the Ho Chi Minh City Taxation Department?

Until now, information on the merger between Uber and Grab has been very vague, not only for the market but for the State. This means that no one really knows what happened between the two transport business units. And when the information is unclear, it is difficult to give a precise explanation of Uber's obligations, including tax obligations to the State of Vietnam.

In light of Uber's accountability and tax obligations, we need to know about the merger and acquisition (M & A) deal that Uber and Grab has conducted. In the merger and acquisition operation, the parties may agree on the acquisition of a business or entire business, acquisition of the entirety of the company or acquisition of a portion of the assets or technology or customer section.

With the information that I know, Uber is actually accepting the transfer of its whole business in Southeast Asia in exchange for Uber's 25%-30% stake in the new company after the merger.

Thus, not all of the Uber Company will merge into Grab, but just a business segment in South East Asia market. Uber still exists and operates independently in other markets. Because there is no legal merger, the inheritance of Grab against the rights and obligations that Uber has owed to organizations and individuals in Vietnam will need to be clearly defined in the merger contract between Uber and Grab.

In my opinion, the possibility that tax authorities in Vietnam have to go to the Netherlands to claim debts is very high for many reasons. Firstly, the legal status of Uber still exists, so if the contract between Uber and Grab does not regulate the transfer of the obligation to pay taxes, then it is understood that the Netherlands Uber is still the unit responsible for implementation of tax obligations.

Secondly, under the provisions of the Vietnamese Civil Code, the obligor may transfer the obligation if agreed upon by the obligee (Article 370). That is, if Uber wants to transfer the obligation to Grab, it needs the approval of the tax authorities in Vietnam. In fact, both of them have not mentioned about this.

At present, the information is quite controversial. In my view, the purpose of the merger transaction that Grab made with Uber is the acquisition not for that business, but to eliminate the competition.

As a result, they are less likely to be interested in the rights and obligations of the acquirer, only interested in how to remove the acquired party in the market as soon as possible.

In my M & A advisory experience, Grab will not be able to take over the Uber tax obligations. Thus, it is likely that Uber will still be obliged to pay taxes.

According to information from the Ho Chi Minh City Taxation Department, despite documents about "debt collection", Uber does still not respond, so what should the Tax office do to handle this debt?

Because Uber entered Vietnam in the context of the unclear legal document system in Vietnam about this type of transport services, it took quite some time to come to the conclusion of its legal status to solve the related issues.

The revenues that Uber gets from the driver are transferred directly to the Netherlands, so the tax debt belongs to Uber in Netherlands. Tax administration, including measures to enforce tax administrative decisions, is an administrative-state activity that is effective only within the territory and jurisdiction in which Vietnam has the right. Administrative measures of the Government of Vietnam will not be valid in the territory of another country.

Currently, under Article 26 of the Agreement on the avoidance of double taxation and the prevention of tax evasion between Vietnam and the Netherlands, the two sides may exchange information with each other about tax administration, enforcement and prosecution but neither party has the right to force the other party to take "administrative measures" or administrative practice of that Contracting State or of the other Contracting State".

It can be understood that if the Government of Vietnam has a coercive measure of tax collection with the Uber in Netherlands, it does not have the right to request the Dutch authorities to implement that enforcement decision in the Netherlands for Uber.

Thus, it can be argued that if the Dutch Uber is determined not to pay taxes, the collection of such taxes will be out of the reach of the Vietnamese tax authorities and even will be lost.

If the merger or acquisition of a company operates in the territory of Vietnam, but the sale contract occurs overseas, will Vietnam be able to collect corporate income tax on Uber's profit after selling its market share in Vietnam?

Article 7 of Circular No. 103/2014 / TT-BTC guiding the performance of tax obligations applicable to foreign organizations and individuals doing business in Vietnam or earning incomes in Vietnam stipulates: "Taxable incomes of Foreigners entering into Vietnam from foreign contractors and subcontractors are incomes in any form on the basis of contracts or sub-contracts (except for the cases prescribed in Article 2, Chapter I), regardless of the place of conducting business activities of foreign contractors and subcontractors.

Taxable incomes of foreign contractors and subcontractors in some specific cases are as follows: Incomes from the transfer of ownership or use right to property; transferring the right to participate in economic contracts / projects in Vietnam, the transfer of property rights in Vietnam; income from transfer, liquidation of assets.

It can be understood that, even though the Merger and Acquisition Contract between Uber in Neitherlands and Grab is carried out overseas, such income originates from Vietnam, the income-earner must still be obliged to pay taxes. Of course, the story of tax declaration, tax payment, and tax collection will be a long and arduous story with the tax authorities of Vietnam.

Vietnam to review Uber, Grab legal status Transport regulations will be reviewed to ensure a fair business environment for firms

Thank you Sir!