Need to include commercial derivative services in VAT Law

Delegate Phan Duc Hieu (National Assembly Delegation of Thai Binh Province) said that, according to the provisions of Article 64 of the Commercial Law and current law enforcement practices, derivative services in the commercial sector including: Futures contracts and options contracts are services that are not subject to value added tax (VAT).

“In the amendment to the VAT law, we have a provision related to derivative services stipulated in point (g) clause 9 Article 5. According to the draft VAT Law, the content is basically unchanged from the current law,” the delegate stated.

However, the delegate also said that the provision is currently inadequate. According to the draft VAT Law, it seems that the Government is considering derivative services only in the fields of finance, banking and securities (according to Clause 9, Article 5).

Expert Phan Duc Hieu said that in reality, Article 64 of the Commercial Law clearly defines derivative services as options contracts and futures contracts, traded on the Vietnam Commodity Exchange as derivative services and are not subject to VAT.

However, that is not clearly stated in the current VAT Law as well as the draft VAT Law (amended).

Therefore, expert Phan Duc Hieu proposed to amend point (g), clause 9, Article 5 of the draft Law on VAT (amended) in the direction of adding the service "option contract" and replacing the term "Derivative financial services" with "Derivative services" (including the fields of finance, banking, securities and trade), to more accurately reflect derivative services in many fields, instead of the phrase "derivative financial services".

“This is to ensure compatibility with Article 64 of the Commercial Law, accurately reflect current reality and ensure the clarity of the law,” expert Phan Duc Hieu affirmed.

Sharing the same opinion, delegate Hoang Van Cuong - National Assembly Delegation of Hanoi city also expressed his agreement with the addition of regulations on derivative financial services that are not subject to value added tax in the draft law.

According to delegate Cuong, the reason is because the cost of derivative financial services does not increase the value of the product, so it cannot be included in the product's selling price.

Delegates said that current regulations on derivative financial services are not comprehensive, only limited to the banking sector, while the securities and commodity trading sectors also need to be fully mentioned in the draft law.

Sharing the same view, delegate Tran Van Tien (National Assembly Delegation of Vinh Phuc province) said that the draft law's content stated that derivative financial services include "interest rate swaps, forward contracts, futures contracts,... according to the provisions of law".

According to delegates, this regulation does not ensure transparency and clarity, and may cause inconsistent understanding in the application of VAT policies, because in addition to the banking sector, derivative products and transactions are also present in the fields of securities, trade, etc.