As Vietnam’s digital economy accelerates, Vietnam seeks to boost revenues from both domestic and cross-border e-transactions. In this context, the National Assembly has recently amended two key pieces of legislation: the Law on Tax Administration (the “Amended LTA”) and the Law on Personal Income Tax (the “Amended LPIT”). These amendments introduce clearer rules on the payment obligations of taxpayers and the tax collection responsibilities of domestic operators managing e-commerce and digital platforms.
Key Obligations for Taxpayers and Operators
The Amended LTA and the Amended LPIT require taxpayers and platform operators involved in e-commerce and digital transactions to register and pay Vietnamese taxes. These provisions come into effect in stages:
- With effect from 1 January 2025: Offshore suppliers and service providers engaging in cross-border e-transactions or offering goods and services through digital platforms in Vietnam (“Offshore Suppliers”) (whether or not they have a presence in the country) must:
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- Register tax information with the General Department of Taxation of Vietnam (“GDT”).
- File Vietnamese tax returns in line with regulations of the Ministry of Finance (“MOF”).
- Pay taxes on Vietnam-sourced income.
- With effect from 1 April 2025: Operators of domestic e-commerce platforms and managers of digital platforms that provide intermediate payment services (both foreign and domestic providers) must withhold and pay income tax on behalf of households and individuals conducting business via these platforms.
Tax Registration Process
To streamline the registration and payment process, the MOF has set up an online portal whereby Offshore Suppliers can directly register, obtain Vietnamese tax ID, and pay taxes. Alternatively, Offshore Suppliers can authorize tax agents in Vietnam to handle registration and tax payments on their behalf.
For registration, Offshore Suppliers must submit the following documents (translated into English or Vietnamese):
- A certificate of incorporation (or equivalent).
- A certificate of tax ID (or equivalent) from the Offshore Supplier’s home country.
Compliance Status as of June 2024
Up to June 2024, only 53 Offshore Suppliers had obtained a Vietnam tax ID and were paying Vietnamese taxes. Notable companies on the GDT’s list include Microsoft, Netflix, TikTok, Samsung, Google, Facebook, and LinkedIn. Offshore Suppliers that fail to comply with the Amended LTA will face penalties, including fines for late payment and late filing. It is crucial for these suppliers to review their operations in Vietnam to ensure proper tax planning and compliance.
Withholding Obligations
Many Offshore Suppliers have not yet registered nor do they pay taxes in Vietnam. To cover loss of tax revenues, the MOF has shifted the responsibility of tax collection to:
- Commercial banks and intermediate payment service providers in B2C transactions in which buyers are individuals.
- Vietnamese entities in B2B transactions in which buyers are business entities.
Under Decree 126[1], commercial banks and payment service providers are required to withhold taxes on goods, products, and services purchased by Vietnamese individual buyers from Offshore Suppliers who have not registered for a Vietnamese tax ID and have not paid taxes. These withholding obligations apply only if the Offshore Supplier is not listed as having registered with the GDT.
Filing and Reporting Requirements
Offshore Suppliers must file quarterly tax returns (Form 02 under Circular 80[2]), and submit them via the GDT’s portal. Commercial banks and payment service providers that withhold taxes must file monthly returns (Form 03 under Circular 80).
The Amended LTA does not provide a specific filing requirement for domestic e-commerce and digital platforms nor does it specify which form can be used. This matter will probably be elaborated upon in the MOF’s implementing regulations.
Tax Benefits under Bilateral Tax Treaties
Vietnam has signed tax treaties with approximately 80 countries, offering tax benefits to Offshore Suppliers. These treaties provide income tax exemptions or reductions, subject to certain conditions. For example, an Offshore Supplier can apply for a tax exemption if it does not have a permanent establishment (“PE”) in Vietnam. The definition of “PE” varies by treaty, but, for instance, a Singaporean entity is considered to have a PE in Vietnam if:
- It has an agent in Vietnam with authority to sign contracts habitually on its behalf, or
- The contract with a Vietnamese counterparty exceeds 183 days over any 12-month period.
Qualified Offshore Suppliers can apply for a tax exemption by submitting several documents, including:
- A certificate of residency issued by the tax authorities in the supplier’s home country; confirming their tax residency for the relevant fiscal year;
- A contract between the Offshore Supplier and its Vietnamese counterparty;
- An application form (Form 01/HTQT under Circular 80).
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Domestic e-commerce and digital platforms have two months to prepare and to withhold under the Amended LTA. Difficulties may arise since the mode of payment under most domestic e-transactions is “cash on delivery”. Commercial banks and intermediate payment service providers must now pay attention to cross-border e-transactions involving Vietnamese individual buyers and Offshore Suppliers.
[1] Decree 126/2020/ND-CP of the Government dated October 19, 2020 (“Decree 126”).
[2] Circular 80/2021/TT-BTC of the Ministry of Finance dated September 29, 2021 (“Circular 80”).
