In the rapidly evolving landscape of global commerce, e-commerce has emerged as a pivotal force in Vietnam, enabling businesses to transcend geographical boundaries and reach customers worldwide. However, with this expansion comes the critical need to understand and comply with tax regulations, particularly for import and export activities. This article delves into the essential aspects of tax regulations for e-commerce businesses in Vietnam, highlighting compliance requirements and the importance of staying informed.
Introduction to E-commerce and Its Global Reach
E-commerce encompasses various business models, including Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to-Consumer (C2C), and Consumer-to-Business (C2B). Each model offers unique opportunities and challenges, but all share the benefits of market expansion. Businesses can now access a global customer base without the constraints of physical locations, leading to significant cost savings and enhanced customer experiences through 24/7 service and personalized shopping.
Definition of in-scope e-commerce and digital-based business activities
E-commerce activity is the conduct of part or the whole process of commercial activity by electronic means connected to the internet, mobile telecommunications networks or other open networks, as prescribed in Decree No. 52/2013/ND-CP (amended by Decree No.85/2021/NĐ-CP).
Digital-based business activities are represented by the provision of services through an intermediary digital system. All connection activities with customers take place in a digital environment using information technology. The nature of such a service is based on an automated system with little to no human intervention.
Statutory and compliance responsibilities
The following entities are responsible for tax registration, declaration, and payment for e-commerce activities and digital-based business:
- An overseas supplier without a permanent establishment in Vietnam conducting e-commerce, digital-based business and other services with organizations and individuals in Vietnam (called ‘overseas suppliers’).
- An overseas supplier provides e-commerce service in Vietnam via website that either has a Vietnamese domain or website that has Vietnamese as displaying language or website with 100,000 transactions from Vietnam in 1 year. Overseas suppliers also must establish a representative office in accordance with Vietnam’s regulation or appoint an authorized representative in Vietnam.
- An overseas supplier providing goods on Vietnam’s e-commerce platforms.
- Organizations and individuals in Vietnam which purchase goods and services from overseas suppliers.
- Tax organizations and agents operating under Vietnamese law and authorized by overseas suppliers to perform tax registration, tax declaration and tax payment in Vietnam.
- Commercial banks, payment intermediary service providers and organizations and individuals which have rights and obligations related to e-commerce business activities, businesses based on digital platforms and other related services, or services from overseas suppliers.
Tax registration, declaration and payment provisions for overseas suppliers
Overseas suppliers are required to register for an electronic tax transaction through the website of the General Department of Taxation, ensuring that the following conditions are met:
- the entity has the ability to access and use the Internet
- the entity has an email address assigned to deal directly with the tax authority
Overseas suppliers can either a) directly register with Tax authority for their declaration and payments or b) authorize organizations or tax agents in Vietnam to conduct tax registrations, declarations and payments on their behalf. In case the overseas supplier authorizes an organization or tax agent to operate under Vietnamese law (hereinafter referred to as ‘authorized party’), the authorized party is responsible for carrying out the following procedures: tax registration, tax declaration, tax payment according to the contract signed with the overseas supplier.
After receiving the identification code of the tax payable amount to the state budget as notified by the relevant tax authority, the overseas supplier shall pay tax in a freely convertible foreign currency to the state budget revenue account. According to the notice on the website of the Taxation Department, the correct identification code must be recorded in the state budget payable directly sent by the tax authority.
Registered non-resident suppliers will pay the tax on a quarterly basis, while banks and intermediary payment service providers will deduct and remit tax on a monthly basis.
Overseas suppliers will need to declare and make payments for Value added tax (VAT), corporate income tax (CIT) and import/export taxes (if any).
After declaring and paying taxes, overseas suppliers can amend their declaration if they notice any incorrect details in their previous declaration.
In case the overseas supplier pays more than the payable tax amount according to the declaration (or declaration amendment), the overseas supplier may offset the payable tax amount in the next tax period.
Tax calculation and responsibilities of overseas suppliers
After the initial registration, overseas suppliers will start declaring and paying VAT and CIT on a quarterly basis at the deemed rates on the revenues they receive:
- Taxable revenue refers to the amount received by the non-resident supplier from its clients in Vietnam, determined based on payment information (credit card or bank account information), residency information (billing, delivery, or home address), and access information (mobile phone country code, IP address, and landline address)
- Deemed rates for calculating VAT follow Decree No. 209/2013/ND-CP dated December 18, 2013 of the Government on detailing and guiding implementation of several articles of the Law on Value-Added Tax.
- Deemed rates for calculating CIT follow Decree No. 218/2013/ND-CP dated December 26, 2013 detailing and guiding the implementation of the Law on Enterprise Income Tax.
When determining if the transaction is subjected to taxes in Vietnam, overseas suppliers can use two non-conflicted information including one payment information and one residency information (or one access information). If it’s not possible to collect payment information or payment information conflicts with other information, overseas suppliers can use two consistent information including one residency information and one access information.
When amending submitted declarations, overseas suppliers will need to use an authentication code issued by Tax authorities.
Overseas suppliers can authorize organizations or tax agents in Vietnam to conduct tax registration, declaration and payment on their behalf.
In case overseas suppliers do not register, declare and pay taxes in Vietnam, the Vietnamese organizations that purchase goods or services from overseas suppliers or distribute goods or provide services on behalf of overseas suppliers will be responsible for declaring, withholding and paying VAT and CIT (following Circular No. 103/2014/TT-BTC dated August 06, 2014 of the Ministry of Finance guiding the performance of tax obligations of foreign organizations and individuals doing business in Vietnam or earning income in Vietnam). If VAT for goods sold in Vietnam was declared and paid for during the import process, then it will not be declared again when the Vietnamese organizations declare taxes on behalf of the overseas suppliers.
Overseas suppliers must archive all documents related to e-commerce in Vietnam in accordance with current regulation.
Conclusion
Staying updated with tax regulations is vital for e-commerce businesses to avoid administrative and tax penalties. Transparent product and service offerings, timely tax declarations, and accurate documentation are key to maintaining compliance. Regularly reviewing and understanding changes in tax laws can help businesses navigate the complexities of e-commerce taxation effectively.
If you need any assistance with these or any other matters relevant for international investors in Vietnam, our experts are ready to work with your company to ensure you understand how the above will apply to your specific situation in Vietnam.
Disclaimer: The information provided in this article is for general guidance and does not substitute for professional tax advice. Always seek advice from qualified tax professionals for specific tax-related queries.
Contact our teams for expert support and further information on managing corporate compliance in Vietnam.
Thao Do – Partner – thao.do@Vieter.com