Uber and Grab drivers 'fall backwards' because of tax arrears

Many people who bought cars to drive for Grab and Uber were shocked when they sold their new cars because the tax authorities charged them tens of millions of dong in back taxes, and even fined them for late taxes.

Tens of millions of dong in tax arrears were collected.

Mr. Nguyen Van Xang (Ha Nam) said that after finding out information from friends, in June 2015 he decided to borrow money to buy a Kia K3 to drive for Uber. Because he wanted a car with a Hanoi license plate, the car salesman instructed him on how to register for a business household license (HKD) to register to drive for Uber. The fee for this "full service" is 5 million VND.

He drove Uber for several years without thinking about anything. Recently, his family was in trouble and needed money to cover living expenses. In May 2017, he decided to sell the car and a customer agreed to buy it for 500 million VND. However, when doing the car transfer procedure, the buyer asked him to provide an invoice because they discovered that this was a car registered under the HKD program.

When going to the tax office to complete the procedures for issuing invoices, Mr. Xang was charged many additional taxes and fees such as: Business license tax, personal income tax, etc. Not only that, Mr. Xang was also fined for late declaration and tax obligations more than 2 years ago. The total amount of money to be paid to be issued invoices was nearly 30 million VND. “At that time, I was shocked when I heard the tax office announce the amounts to be paid. I had never heard of all of these things before…”, Mr. Xang said.

Uber and Grab drivers are worried that they will be charged many taxes and fees when selling their cars because they registered their cars as individual business households.

Too shocked by the amount of tax arrears, Mr. Xang took the risk of taking his car to a used car showroom in Duong Dinh Nghe to sell. However, when they learned that his car was registered under the form of HKD, the dealers here were not interested. One showroom agreed to buy it but also asked him to provide an invoice for his car so that he could transfer the ownership to the customer.

“My family is in need of money, I had to sell the car at a loss, but now I can sell it for less than 500 million VND and have to pay many additional taxes and fees, it's too bitter,” Mr. Xang lamented.

After researching, Mr. Xang learned that not only he but many Uber drivers were in this situation. More than half of them bought cars and registered them as HKD drivers, and most of them did not know about these regulations.

Mr. Dao Viet Quan (Nam Dinh) who is driving a Grab car in Hanoi also said: “The Grand i10 I am driving is also registered under the form of HKD. When I bought the car, the salesperson asked me the purpose of use and advised me on this form of registration. Although I have no need to transfer it, I was very confused when I heard the above information…”.

According to Mr. Trinh Xuan Son, an officer of the Ba Dinh Tax Department (Hanoi): "According to regulations, individuals registering a vehicle under the HKD status must go to the tax department where the vehicle was registered after 10 days to declare and complete the necessary procedures. In the above case, it is likely that the individual used the service through a "broker", so without a clear explanation and notification from the tax officer, he did not know the regulations on paying taxes."

Mr. Son said that in Mr. Xang's case, according to regulations, he will be subject to additional taxes such as: Business License (paid annually), VAT (for individuals with annual revenue of over 100 million VND) and personal income tax. In addition, Mr. Xang will be fined for being late in paying taxes for more than 2 years.

Thousands of Uber and Grab drivers are in a dilemma

As someone who did the HKD vehicle registration procedures himself, Mr. Truong Minh Tuan, Uber driver with license plate 30E-546.xx in Hanoi, said: “When I joined Uber as a driver, I researched the information quite thoroughly and went through the registration procedures myself. Currently, in addition to the business license tax paid from the time of declaration at the beginning of the year of about 1 million VND, I still regularly go to the tax office every month to pay the remaining taxes and fees. However, since the regulation that Uber and Grab vehicles are required to have a legal entity as a transport unit, I suddenly found myself in a double bind when I had to pay both tax at the tax office and 500,000 VND/year for the transport unit.”

Mr. Nguyen Xuan Truong (Hai Ba Trung, Hanoi) said: “When I decided to buy a car to drive for Grab, I also researched the information quite carefully, but in the end, because I found it quite troublesome to register for a business household, I decided to register under my personal name and send the car to a transport cooperative in Ha Dong. If the driver registers with a legal entity that is a transport enterprise, they will not have to pay taxes because that is the obligation of the enterprise and all procedures related to the car.

Uber/Grab service is popular because of its flexibility and competitive fares.

According to the director of a cooperative operating contracted transport vehicles in Hanoi, out of nearly 4,000 vehicles under the management of the unit, up to 1/4 of the vehicles are registered with legal entities to ensure procedures for running Uber and Grab, most of which are registered as HKD. When they know clearly about tax regulations, many drivers are very confused.

According to this person, if only needing a Hanoi license plate to drive Grab, Uber, then out-of-town drivers can completely ask relatives in Hanoi to register. Thus, when the depreciation is over and the car is sold, they only need to go to a notary to do the transfer procedure between the two parties.

Another popular form today is that drivers can register their vehicles under the name of the transport company. In that case, drivers will not have to pay taxes or fulfill other obligations because the transport cooperative will fulfill these obligations, but drivers will have to pay a fee of about 10 million VND to the company plus an annual management fee ranging from 500 thousand to 1 million VND. Perhaps, because they saw that they had to pay 10 million VND to the company in advance and many drivers participating in Uber and Grab did not want to depend on transport cooperatives, they used services to register under the HKD status while not fully understanding the risks of this type.

Drivers who buy a car for business often take out a bank loan for 5 years (60 months). For example, if you buy a Hyundai i10 base version for 325 million VND, the on-road price will be around 400 million VND. If you register as a business household, within 5 years, this business household must pay a business license tax of 5 million VND (1 million VND/year), personal income tax of 22,980 million VND (383 thousand x 60 months), then when transferring the car's name, the total amount to be paid is up to 27,980 million VND. Not to mention that when selling a car, the business household owner must pay value added tax, income tax (calculated at the time of sale), not to mention that if he forgets to pay monthly tax, he may be fined...

According to Traffic Newspaper