In recent years, Vietnam has emerged as one of the most promising markets for e-commerce, driven by a rapidly growing internet penetration rate and a tech-savvy population. However, amidst this digital boom, the Vietnamese government has been grappling with the complexities of taxing e-commerce transactions effectively. As online sales continue to soar, policymakers are faced with the challenge of balancing the need for revenue generation with fostering a conducive environment for digital innovation and entrepreneurship.
In this article, we take a closer look at the intricate landscape of the Vietnam e-commerce tax regime, exploring the evolving regulatory framework, its implications for businesses and consumers, and the potential avenues for achieving a fair and sustainable taxation system in the digital age.
Tax Responsibilities for Sellers on Vietnam’s E-Commerce Platforms
Overview
E-commerce platforms like Shopee, Lazada, and Sendo have flourished in Vietnam, acting as key conduits between sellers and buyers. Despite their popularity, concerns have arisen regarding tax compliance among high-earning individuals and organizations on these platforms. Suspicions of tax evasion have prompted the General Department of Taxation of Vietnam to take action.
As of February 6, 2023, the General Department of Taxation has identified over 53,000 individuals and 14,800 organizations engaged in selling on major platforms such as Shopee, Lazada, and Sendo. While these platforms have disclosed seller information to tax authorities, discrepancies persist between reported and actual transaction figures, indicating potential tax evasion practices.
Tax Obligations: Profits and Payment Responsibilities
As for the tax obligation itself, according to Circular 40/2021/TT-BTC, business individuals and households with an annual turnover of less than 100 million VND are exempt from Value-Added Tax (VAT) and Personal Income Tax (PIT). However, those surpassing this threshold are obligated to pay both taxes, with rates set at 1% for VAT and 0.5% for PIT. Regardless of turnover, all parties must ensure accurate and timely tax filings, bearing legal responsibility for the completeness and accuracy of their returns.
Furthermore, online sellers may also be subject to license fees, unless they are exempt. These fees are additional to VAT and PIT obligations, if applicable, outlined in Circular 40/2021/TT-BTC.
Lastly, Foreign Contractor Tax (FCT) is applicable and subject to withholding of Value-Added Tax (VAT) and Corporate Income Tax (CIT) by the contracting party, with rates ranging from 2% to 5% for VAT and from 0.1% to 10% for CIT. The VAT withheld is eligible for input credit in the contracting party’s VAT return.
Vietnam E-Commerce Tax: Streamlining Tax Registration, Declaration, and Payment Processes
Explore the evolving landscape of Vietnam’s e-commerce tax policies, highlighting strategies for simplifying tax registration, declaration, and payment procedures.
Vendors with a permanent establishment
Tax registration, declaration, and payment procedures for both local and foreign vendors with a permanent establishment (PE) in Vietnam engaged in digital commerce closely mirror those applicable to local vendors involved in conventional businesses. Thus, taxpayers are required to directly engage with the tax authorities for registration, declaration, and tax settlement processes. This ensures that all entities, regardless of their origin or nature of business, adhere to the regulatory framework established by the Vietnamese tax authorities.
Foreign vendors with a permanent establishment
Foreign vendors operating digital commerce in Vietnam without a permanent establishment (PE) are mandated to register for an electronic transaction verification code and acquire a tax code via the official website of the General Department of Taxation (GDT). Subsequently, these vendors are obligated to file tax declarations on a quarterly basis through the GDT website.
Upon completion of the tax declaration process, taxpayers will be issued a tax payment code by the tax authority. It is incumbent upon taxpayers to directly transfer the assessed tax amount in freely convertible currency to Vietnam’s state budget, adhering to the bank account information provided on the GDT website. Importantly, the payment particulars must accurately include the designated tax payment code as communicated.
Additional parties
Business-to-Business (B2B) or Consumer-to-Business (C2B)
Under the outlined regulations, institutional consumers in Vietnam engaging in cross-border transactions with overseas vendors must adhere to specific tax withholding procedures. For business-to-business (B2B) or consumer-to-business (C2B) transactions, Vietnamese institutions are mandated to withhold, file tax returns, and remit taxes to local authorities within 10 days of each payment to foreign counterparts. Alternatively, if multiple payments are made within a month, they have the option to handle tax obligations on a monthly basis.
Consumer-to-Consumer (C2C) or Business-to-Consumer (B2C)
In the case of consumer-to-consumer (C2C) or business-to-consumer (B2C) transactions involving local individuals, tax management falls upon commercial banks and intermediary payment service providers. These entities are tasked with withholding taxes on behalf of foreign vendors and remitting them to Vietnam’s state budget by the 20th of each month. Should individuals utilize payment methods not directly managed by these institutions, they are responsible for monitoring transactions and reporting them to tax authorities by the 10th day of every month.
Furthermore, to maintain tax transparency and accuracy, e-commerce platforms are obligated to furnish the operational data of merchants to tax authorities quarterly, ensuring compliance with regulatory requirements. This systematic approach aims to streamline tax collection processes and enhance oversight of cross-border transactions, safeguarding revenue streams while fostering fair and transparent commerce practices.
Premia TNC’s Industry-Leading Taxation Services
Premia TNC’s services offer numerous advantages over the traditional approach of managing tax and accounting in-house. Here’s a streamlined overview:
Experts who are up-to-date
Premia TNC stays in line with the rapidly evolving tax laws and regulations in Vietnam, ensuring compliance and avoiding costly penalties for your business.
On-demand access to a specialist
With Premia TNC, you gain immediate access to a dedicated team of tax and accounting experts, providing reliable advice whenever needed without the overhead of maintaining an in-house team.
Efficient allocation of your resources
By outsourcing tax and accounting tasks to Premia TNC, you free up valuable time and resources to focus on core business activities, fostering growth without getting pulled into administrative burdens.
In essence, partnering with Premia TNC enables your business to stay compliant, access expert guidance, and optimize resource allocation for sustained growth.
What is the Vietnam e-commerce tax, and who does it apply to?
The Vietnam e-commerce tax, part of the Law on Tax Administration, applies to both foreign and domestic businesses engaged in online sales, digital services, and online advertising within Vietnam.
How does the Vietnam e-commerce tax impact businesses operating in the country?
Businesses must collect and remit VAT and CIT for online transactions. Foreign e-commerce entities without a physical presence in Vietnam are also required to register, file tax returns, and pay taxes on income generated from Vietnamese customers.
