Vietnam Management Channel

Grab refuses to cooperate with Vietnamese tax authorities

In the latest example of Grab refusing to be a good corporate citizen, the Vietnam Express has reported that tax authorities in Ho Chi Minh City have had to send multiple requests to Grab in Vietnam asking the company to provide details concerning its recent acquisition of rival Uber's Southeast Asia business.

The reason for the request is due to the fact that Grab is legally obligated to pay tax on the transfer of capital and business market share following the deal including more than $2.3 million USD in taxes that Uber owes to the HCMC government for back taxes.
Vietnam’s tax laws states that all income generated by foreign companies operating in the country should be subject to tax. Uber has refused to pay the money to HCMC’s tax authorities, claiming that the figure is “inflated” and that Uber does not have to pay taxes based upon an agreement between Vietnam and the Netherlands related to double taxation.
Organizations and individuals that receive capital from foreign organizations are required to declare and pay tax on behalf of those foreign organization, tax authorities cited the law as saying.
With details of the Uber- Grab deal remaining undisclosed, authorities are still unsure how to calculate how much the latter owes in tax and Grab has stated that the $2.3 million is an issue between HCMC and Uber and refuses to pay the firm's outstanding debt.

According to Doan Van Hau, Chairman of the Vietnam Lawyers' Commercial Arbitration Center, Grab's decision violates Vietnamese law and international practices. Hau said that according to Vietnamese law, Grab is responsible for paying all of Uber's back taxes.

Previous to the Grab-Uber deal, Ho Chi Minh’s tax department asked five local banks to help it collect the outstanding taxes from Uber, but failed to do so when it found out that the company did not have a bank accounts in Vietnam. In response to the tax dispute, Uber has since filed two lawsuits against Ho Chi Minh’s tax department.

While Grab might have thought that its acquisition of Uber’s Southeast Asia operations would be simple, Vietnam’s Ministry of Industry and Trade is now investigating the company for violating Vietnam’s Competition Law in its acquisition of Uber.

Governments across the region, including those in Malaysia, the Philippines and Singapore are also investigating the Grab-Uber deal and looking at how the deal impacts competition laws and whether the company has been a “good corporate citizen” that obeys laws and pays taxes.

Consumers across Southeast Asia who are impacted by the Grab-Uber deal have complained to local authorities that Grab is putting less cars on the road than before the deal took effect and that it is raising its rates, especially during “peak times.”

Many of the drivers who had been employed by Uber have said that they have had difficulty registering with Grab and that they are afraid of Grab raising the commission amounts that it charges drivers. In Vietnam, Grab originally charged a 15% rate but that was raised to 20% and then 25%, which lead to protests by drivers in both Hanoi and HCMC.

Grab maintains that it is a “technology” company that supplies ridesharing “software solution” and logistics services that benefit consumers. However authorities across the region have been debating whether or not the company should be viewed as a tech company or as a “logistics and transportation company” and should be regulated as such.

Last year authorities in Vietnam were criticized that Uber was not registered in Vietnam or held local bank accounts and operated for years as an offshore entity with very little oversight and regulation. While this may have been true in the past, legislators and tax authorities are now committed to making sure that Grab operates in Vietnam as a legal company and that it becomes a “good corporate citizen” that operates under the principle of the law and pays all taxes that are due in a timely manner.