Vietnam plans to tax 1.5 percent of annual e-commerce revenues of VND100 million ($4,297) and higher as part of leveling the field between traditional and online retail merchants.
A decree with new regulations is set to take effect on August 1, but authorities have said they might give e-commerce platforms more time to prepare for taxation regime.
According to an article from GBS, a legal services firm in Vietnam, the authorities have delayed the implementation of a new tax regime for e-commerce platforms, giving firms like Chinese giant Alibaba’s Lazada, Singaporean group SEA’s Shopee and home-grown Tiki more time to comply with the regulation.
As one of the world’s fastest-growing digital markets, Vietnam has long tried to tighten taxation of e-commerce platforms. On June 1, the Ministry of Finance issued Circular No 40/2021 providing guidelines on value-added tax, personal income tax and tax management for individual sellers on e-commerce platforms.
The implementation of the rules, originally scheduled to take effect from August 1 2021, was moved to January 1 2022, following discussion between the General Department of Taxation and relevant parties.
The circular states that e-commerce sites shall be responsible for their sellers’ tax declarations and payments. It has raised questions of enforcement and privacy because the platforms are required to provide information on sellers, including revenue, banking accounts and products, to tax offices.
The Vietnam E-Commerce Association, a group of both local and foreign companies in the sector, is of the view that online platforms just provide technology infrastructure to connect sellers and buyers, thus making transactions happen. They do not pay the sellers, therefore not responsible for declaring and paying taxes on behalf of the sellers.
On the other hand, there is a need to tax companies that benefit from the fast-expanding digital market but manage to avoid taxation by booking their profits in lower-tax jurisdictions.
The General Department of Taxation, after listening to complaints against the circular, has mapped out an enforcement roadmap, which, among other things, resulted in moving back the start of implementation. It plans to complete a standard data format for information connectivity between August 1 to October 1, followed by the period from October 1 2021 to January 1 2022 for the governing body and e-commerce platforms to work on necessary upgrades to ensure smooth connection.
Tax authorities have so far collected roughly 3,082 billion dong (more than US$134 million) from Vietnamese enterprises that have advertising contracts with foreign technology firms like Google, YouTube and Facebook, official data show. The breakdown is as follows: 771 billion dong in 2018; 1,168 billion dong in 2019; and 1,144 billion dong last year.
While still unable to force foreign tech giants like Google and Facebook to pay taxes, authorities are taxing Vietnamese for their online revenues in a market of almost 100 million people.