President Lee says summit diplomacy has delivered 'tangible results' for businesses

President Lee Jae Myung [Yonhap]
President Lee Jae Myung [Yonhap]

A long-standing grievance of Korean companies operating in Vietnam — delays in receiving local value-added tax refunds — has been resolved.

Vietnam's General Department of Taxation last month issued nationwide guidelines on VAT refunds for transactions conducted under the country's "domestic import-export" regime by foreign-invested companies, according to the National Tax Service, the Ministry of Trade, Industry and Energy and the Ministry of Foreign Affairs on Monday.

The domestic import-export system allows transactions between companies physically located within Vietnam to be recognized as import-export deals when the goods involved are destined for export. Companies can use the system to reclaim VAT paid in Vietnam during those transactions.

After introducing the system in 2015, Vietnam had routinely granted VAT refunds regardless of where a foreign company's representative office was registered.

From 2022, however, Vietnam began restricting the system's application to foreign companies that had representative offices in the country, leaving Korean firms unable to reclaim VAT and struggling with cash flow.

A survey by the Korean Chamber of Business in Vietnam found that delayed VAT refunds and related penalty surcharges at some responding companies totaled at least 40 billion won ($29.8 million).

The South Korean government repeatedly raised the issue, and as a result Vietnam amended its relevant laws in July last year, agreeing to restore refunds regardless of where a representative office is located — as had been the practice before the restriction.

A problem remained, however: transactions completed before the amendment were not recognized as eligible for retroactive application. A breakthrough came in April, when President Lee Jae Myung visited Vietnam on a state visit and asked General Secretary To Lam and other Vietnamese leaders to pay attention to the matter.

Following extensive contacts by related ministries including the National Tax Service and the Ministry of Trade, Industry and Energy, Vietnam's tax authorities agreed to apply the VAT refund rules retroactively.

President Lee said Monday on his X account that he had requested a resolution to the issue during his state visit to Vietnam in April, and that Chief of Staff Lim Gwang-hyeon, during his tenure as commissioner of the National Tax Service, had also urged active cooperation at a Korea-Vietnam tax commissioner meeting in June.

Lee said he expected the measure to ease the financial burden on Korean companies. "I will follow through to the end so that the results of summit diplomacy translate into tangible benefits that our people and businesses can feel," he said.


oskymoon@heraldcorp.com