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Ride-hailing business: Tax implications on income of drivers

Ride hailing services are services that use online-based platforms owned by ride-hailing companies to connect between passengers and tech-based drivers using their personal vehicles. In the past few years, the ride-hailing market in Vietnam has seen a substantial growth, which was approximately by 57% in the period 2015-2019, being the highest in South East Asia, according to a market research by Google and Temasek. As a result, such a substantial growth has drawn certain attention to Vietnamese tax authorities, who has been in efforts to develop their viewpoint on taxation mechanism in order to implement approaches to collect tax from tech-based drivers for their income generated from the ride-hailing business in Vietnam.

Despite that fact the income are earned by the drivers, are the ride-hailing business obliged to the withholding, declaring, and payment responsibility? In this article, we would like to draw your attention to the key considerations on tax implications on the income earned by tech-based drivers under partnership with ride-hailing companies.

Income earned by tech-based drivers under ride-hailing business partnership

Under our practical observation, tech-based drivers’ income commonly include the followings:

  1. Shared transportation fee: which is shared between tech-based drivers and ride-hailing companies.
  2. Revenue-tied payments: are daily incentive payments made by ride-hailing companies to tech-based drivers in direct association with transportation services such as pick-up service, door-to-door, user cancellation, etc.
  3. Other bonuses: are non-revenue-tied received by tech-based drivers, which are normally paid for the quality of service and may include sign-up, distance achievement, star bonus rewards, etc.

As the payments received by the individual drivers come in various forms, determination of payment substance and taxability should be carefully considered by the ride-hailing companies from a tax perspective in order to minimize tax risks.

Possible tax implications on income of individual drivers

Income earned by tech-based drivers can be subject to Personal Income Tax (PIT) and Value Added Tax (VAT), which depend on the nature of each kind of income.

Tax implication on business income: Under Vietnam tax regulations, local individuals who manufacture and/or trade in goods, services in any field and sector prescribed by law, are subject to tax. The business of individual may include both independently performing services and cooperating services with organizations. As a condition, individuals deriving revenue of above VND100 million annually are required to pay taxes. For each type of revenue of business individuals, different tax rates will be applied which would be as follows:



Tax rate


Type of revenue




Passenger transportation, cargo transportation




Other services not subject to VAT




Tax implication on employment income: According to the regulations on PIT, payments to individuals who do not have employment contract with the companies are subject to PIT treatment. Payment of VND2 million/time and above to individual that does not sign a labor contract or sign labor contract with less than 3 months duration shall withhold 10% tax on the payment. Of note, employment income is not subject to VAT.

Under regulation and some specific rulings, Vietnam tax authorities have distinguished (ii) Incentive payments from (iii) Bonuses and view (iii) Bonuses (non-revenue-tied payments) as a type of “employment-related income”, rather than “business income” of tech-based drivers. Though a rationale legal basis is not available, we are of opinion that it is because such types of bonuses are not directly linked with the transportation revenue

Responsibility of ride-hailing companies

According to regulations and some specific ruling letters by Vietnamese tax authorities, ride-hailing companies has the obligations to withhold, declare and pay taxes on behalf of the tech-based drivers under the business partnership agreement. Tax administrative works are conducted in accordance with the laws on tax administration.

Planning points

Given the complexity and diversity in partnership arrangement between ride-hailing companies and tech-based drivers, ride-hailing companies should well-equip themselves with Vietnam commercial, labor and tax laws at the same time and particularly pay attention to the following points:

  • Carefully review its business lines granted in their business license or investment certificate so as to connect with definitions under tax laws and correctly determine the applicable tax rates. In this case where classification and nature of business is not clear from a tax perspective, a ruling request letter for tax treatment to the tax authorities is recommended.
  • Terms in business partnership agreement should be clear and well documented in regards of: type of contract/agreement; tax withholding and payment responsibility; clear definition of: shared-revenue payment, incentives and bonus payments and associated payment terms; etc.
  • The availability of: business partnership agreement; records of service completion, documentation on payment of service revenue, incentive payment, bonuses, monthly cash flow reconciliation between the companies and drivers, etc. which are to support for the taxable base of payments.
  • Tax administration procedures, if being well-managed, can be a tool to reduce both tax administrative burden and minimize the risk of penalization and tax collection. Upon determination of type of income by tech-based drivers, ride-hailing companies may determine the declaration forms for each kind of income. Tax declaration is made on a payment basis. Of note, an authorization letter signed by tech-based drivers to withhold, declare and pay tax on behalf of them should also be in place.


This article provides general recommendations in accordance with current Vietnamese laws and regulations in effect as of the publication date. For specific circumstance, readers should seek proper advice with respect to the topic discussed herein.

Mr. Nguyen Hung Du, Partner of Tax and Corporate Service, Grant Thornton Vietnam

Mr. Nguyen Tan Tai, Manager of Tax and Corporate Service, Grant Thornton Vietnam

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