POSITION PAPER - Eurocham

provide any market access restriction to cross-border supply of computer and related services(CPC 841-845, CPC 849) and on-line information data processing (including transactionprocessing) services under CPC 843**. Web search portal service, data center service, cloudcomputing service and service of maintaining, recreating and newly creating hardware andelectronic products in large scale are included, partly or entirely, in these CPC subclasses.For example, cloud-computing service and search portal service can be classified undersubclasses CPC 84390 and 849 while data center service can be classified under subclassCPC 844. Article XVI (1) of the General Agreement on Trade in Services requires eachmember to accord services and service suppliers of any other WTO member treatment noless favorable than that provided for under the terms, limitations and conditions agreed andspecified in its Schedule. As a result, by prohibiting companies of WTO members to carry outthese services on a cross-border basis, Article 20.1 is likely to commit a serious violation ofVietnam’s WTO Service Commitments and Article XVI (1) of the General Agreement onTrade in Services.Thus, Article 20.1 should therefore be deleted.Article 20.2 states that the use of other foreign IT-services is allowed only if (a) such servicesare purchased through a Vietnamese agent, or (b) the user pays 10% VAT and a specialconsumption tax.We note that the requirements as well as the specifications of the process with regard to theVietnamese agent are not yet defined. Therefore, it is not clear whether (i) only the purchaseprice for the services has to flow through the agency (which results in in additional andunnecessary costs as the agent will keep a margin), or (ii) also data has to be funneledthrough the agent (which results, in addition to the costs, in a security risk). Furthermore, it isimpossible to ensure that all IT-services for which the Draft Decree requires an agency canbe resold through a Vietnamese agent. For some niche services catering to a veryspecialized community only, it would be very challenging to find an agent willing to distribute aservice with a limited audience.If a user does not obtain foreign IT services through a Vietnamese agent, he has to pay VATof 10% and a special consumption tax. Many of the services for which the Draft Decreerequires an agent usually enjoy a VAT rate of 0%. The Draft Decree does not stipulate the taxrate of the special consumption tax which is very worrying. Further, the Law on SpecialConsumption Tax No. 27/2008/QH12 dated 14 November 2008 only provides a limitednumber of services subject to special consumption tax and IT services are not in this list. Ifthis provision is adopted, it will contradict to the Law on Special Consumption Tax.Many of the products and services covered by Article 20.2 cannot be purchased in Vietnamas they do not exist here (e.g. specific software or irregular training services), or it can be asecurity risk to purchase them in Vietnam or through an agent (e.g. design of informationsafety systems, supply or distribution of software copyrights, digitization of copyrighted works,service for handling user’s information or e-commerce services). Article 20.2 will make theHO CHI MINH CITYinfo-hcm@eurochamvn.orgHA NOIinfo-hn@eurochamvn.orgEuroCenter, 5 th Floor, 49 Mac Dinh Chi StreetDaKao Ward, District 1, Ho Chi Minh City.Tel: + 848-3827 2715 Fax: + 848-3827 2743Sofitel Plaza Hanoi, Ground Floor,1 Thanh Nien Road, Ba Dinh District, Ha Noi.Tel: + 844-3715 2228 Fax: + 844-3715 2218

purchase of many products and services which are necessary for the operation of companiesmuch more bureaucratic and expensive.Article 20.2 can also be considered violations of Vietnam’s WTO Service Commitments.Article 20.2 requires the cross-border supply of a number of IT services of offshorecompanies to be made via a Vietnamese agent. However, many of these services can beclassified under CPC subclasses from 841-845 and CPC 849, of which there is no restrictionon cross-border service supply. Examples include consultancy services in informationtechnology, service of storing and assisting with software download from the internet,information security services, etc.Thus, Article 20.2 should therefore be deleted.Article 29.3 stipulates that organizations and companies involved in conditional businessesof information technology services before the effective date of the Draft Decree are allowed tocontinue operations, yet they shall ensure compliance with the Draft Decree within 270 (twohundred seventy) days as of the effective date of the Draft Decree. We recommend moredetailed information be provided on how companies should ensure compliance, such as howto obtain license amendments.HO CHI MINH CITYinfo-hcm@eurochamvn.orgHA NOIinfo-hn@eurochamvn.orgEuroCenter, 5 th Floor, 49 Mac Dinh Chi StreetDaKao Ward, District 1, Ho Chi Minh City.Tel: + 848-3827 2715 Fax: + 848-3827 2743Sofitel Plaza Hanoi, Ground Floor,1 Thanh Nien Road, Ba Dinh District, Ha Noi.Tel: + 844-3715 2228 Fax: + 844-3715 2218