Vietnam’s e-commerce market has experienced explosive growth in the past few years. According to statistics, the size of Vietnam’s e-commerce market will reach about US$20 billion in 2023, with an annual growth rate of more than 30%. This rapid development not only brings huge economic opportunities, but also poses challenges to the existing tax system.

In this context, the Vietnamese government is actively adjusting and improving e-commerce related tax policies. These policies are not only related to national fiscal revenue, but also directly affect the operating costs and competitiveness of e-commerce companies. For companies doing e-commerce business in Vietnam, whether they are local companies or multinational companies, it is crucial to understand and comply with these tax policies.

This guide aims to comprehensively analyze Vietnam’s e-commerce tax policy, including the application of major taxes, specific policy provisions, tax issues of cross-border e-commerce, etc. We will explore the policy framework, implementation details, and future development trends. At the same time, we will also answer common tax issues in cross-border e-commerce and provide practical guidance for enterprises.

Through this guide, we hope to help e-commerce companies better understand Vietnam’s tax environment, optimize tax strategies, ensure compliance, and seize opportunities in this rapidly developing market. At the same time, this guide also provides policymakers and researchers with a comprehensive perspective on Vietnam’s e-commerce tax policy.

In the following chapters, we will explore these important topics in depth one by one, providing you with detailed analysis and practical suggestions.

Vietnam’s e-commerce tax policy framework

Vietnam’s e-commerce tax policy framework is made up of a series of laws, regulations and regulatory bodies. This framework is constantly evolving to adapt to the rapidly changing e-commerce environment. Understanding this framework is essential to doing e-commerce business in Vietnam.

1. Relevant laws and regulations

Vietnam’s e-commerce tax policy is mainly based on the following laws and regulations:

The first is the Tax Administration Law (revised in 2019), which provides a basic legal framework for e-commerce taxation. The law clarifies basic principles such as taxpayer obligations and tax collection and management procedures, and also provides a legal basis for e-commerce tax management.

Secondly, the “E-Commerce Law” (promulgated in 2005 and revised in 2020) defines and regulates e-commerce activities, providing a basis for the formulation of relevant tax policies.

Third, although the Cybersecurity Law (2018) focuses mainly on cybersecurity, its requirements on data localization also have an impact on the tax administration of cross-border e-commerce.

In addition, multiple notices and guidelines issued by the Ministry of Finance also constitute an important part of the e-commerce tax policy. For example, Notice No. 80/2021/TT-BTC specifically regulates the tax management of e-commerce platforms.

2. Regulatory bodies

The main regulatory bodies for e-commerce taxation in Vietnam include:

The General Department of Taxation of Vietnam is the main tax management agency, responsible for formulating specific policies and implementing tax collection and management.

The Ministry of Finance is responsible for formulating overall fiscal and taxation policies, including taxation policies related to e-commerce.

Although the Ministry of Industry and Trade is primarily responsible for the overall regulation of e-commerce, it also plays an important role in the tax policy-making process.

The State Bank of Vietnam has a significant influence on tax policies related to cross-border payments and electronic payments.

It is worth noting that these agencies often collaborate across departments to address the complex tax challenges posed by e-commerce. For example, the State Administration of Taxation worked with the Ministry of Industry and Trade to develop an e-commerce transaction monitoring system to improve the efficiency of tax collection and administration.

In general, Vietnam’s e-commerce tax policy framework is constantly improving. The government is working hard to balance the relationship between promoting the development of e-commerce and ensuring tax fairness. For e-commerce companies, paying close attention to the trends of these regulations and regulators and adjusting compliance strategies in a timely manner will be the key to successful operations.

Main Taxes and Their Application in E-commerce

The taxation in Vietnam’s e-commerce sector mainly involves corporate income tax, value-added tax, personal income tax and foreign contractor tax. The application of these taxes in the e-commerce environment has its particularity and requires special attention from enterprises.

1. Corporate Income Tax

E-commerce companies are generally subject to the standard 20% corporate income tax rate. However, high-tech companies can enjoy a preferential tax rate of 10% for up to 15 years. Start-up e-commerce companies may enjoy tax exemptions, depending on the scale of investment and location. E-commerce activities related to software development may enjoy more favorable tax rates. It is worth noting that profit attribution and permanent establishment identification for cross-border e-commerce are the key and difficult points of corporate income tax collection and administration.

2. Value Added Tax

E-commerce transactions are generally subject to a standard VAT rate of 10%. However, the VAT treatment of digital products and services may be controversial and may be considered royalties in some cases. In cross-border e-commerce, services provided by overseas suppliers to Vietnamese consumers may be subject to VAT. Certain education-related e-services may enjoy a preferential rate of 5% or be exempt from tax. The promotion of electronic invoices has brought new challenges and opportunities to VAT management.

3. Personal income tax

The impact of e-commerce on personal income tax is mainly reflected in the taxation of income of emerging professions such as online anchors and self-media creators, as well as the declaration and collection of personal business income obtained through e-commerce platforms. The application of new types of remuneration such as equity incentives in e-commerce companies and their tax treatment are also the focus of attention. Personal income tax adopts a progressive tax rate of up to 35%. E-commerce platforms may be required to withhold taxes on certain types of personal income.

4. Foreign Contractor Tax

Foreign contractor tax is particularly important for cross-border e-commerce. Foreign e-commerce businesses that do not have a physical presence in Vietnam may be subject to foreign contractor tax. The tax rate varies depending on the type of transaction and generally includes two components: corporate income tax and value-added tax. Fees paid to overseas digital advertising platforms are generally subject to foreign contractor tax. Vietnam is strengthening its management of foreign contractor tax for cross-border e-commerce, including requiring large multinational platforms to register and pay taxes directly in Vietnam.

In general, the characteristics of e-commerce have brought new challenges to the application of these traditional taxes. Enterprises need to pay close attention to policy changes and arrange transaction structures reasonably to ensure tax compliance and optimize tax burden.

Specific tax policies for e-commerce

The Vietnamese government recognizes the uniqueness of e-commerce and has formulated a series of specific policies to address the new challenges brought by the digital economy, ensure fair taxation, and promote the healthy development of the industry.

1. Digital platform taxation regulations

Digital platforms are at the core of e-commerce, and Vietnam has formulated special tax regulations for them. Platform operators need to bear certain tax responsibilities for transactions conducted on their platforms. Specifically, large platforms are required to provide seller information and transaction data to tax authorities. In some cases, platforms may need to withhold taxes from sellers. Vietnam is considering requiring cross-border platforms such as Amazon and Shopee to register locally and pay taxes directly. These regulations are aimed at reducing tax leakage while simplifying the tax burden of small and medium-sized sellers.

2. Tax treatment related to electronic payments

The popularity of electronic payments brings opportunities and challenges to tax collection and management. Vietnam is promoting an electronic invoice system, requiring e-commerce transactions to issue electronic invoices for tax supervision. For cross-border payments, Vietnam has strengthened supervision of payment institutions, requiring them to report large and suspicious transactions. Certain electronic wallets and cryptocurrency transactions have also begun to be included in the scope of tax supervision. These measures are aimed at improving transaction transparency and preventing tax evasion.

3. Digital Advertising Tax Policy

Digital advertising is an important part of the e-commerce ecosystem. Vietnam imposes a foreign contractor tax on cross-border digital advertising service providers (such as Google and Facebook). Local businesses are required to withhold taxes when purchasing these services. At the same time, Vietnam is considering introducing a digital service tax, which may directly tax the revenue of large multinational digital advertising platforms. For local digital advertising service providers, their revenue is generally taxed according to general services, but they may enjoy certain tax benefits related to technological innovation.

These specific policies reflect the Vietnamese government’s efforts to adapt to the new situation of the digital economy. The formulation and implementation of policies are still being improved, and enterprises need to pay close attention to policy trends and adjust their business strategies and tax arrangements in a timely manner. At the same time, these policies also provide enterprises with opportunities to gain competitive advantages in an increasingly regulated market through compliant operations and innovative development.

Taxation issues of cross-border e-commerce

Cross-border e-commerce is developing rapidly in Vietnam, but it also brings complex tax issues. This section will explore key issues such as permanent establishment recognition, tax treatment of cross-border payments, VAT treatment of cross-border digital services, and transfer pricing considerations.

1. Identification of Permanent Institutions

In Vietnam, the determination of a permanent establishment has a significant impact on the tax obligations of cross-border e-commerce companies. Traditionally, a permanent establishment usually requires a physical presence, but the characteristics of e-commerce make this concept complicated. The Vietnamese tax authorities are gradually adjusting the determination criteria to adapt to the characteristics of the digital economy. For example, factors such as continuously providing digital services in Vietnam, maintaining a localized website, or continuously conducting business in Vietnam through a server may lead to the determination of a permanent establishment. Companies need to carefully evaluate their activities in Vietnam to determine whether they constitute a permanent establishment.

2. Tax treatment of cross-border payments

Cross-border payment is the core link of cross-border e-commerce, and its tax treatment directly affects the tax costs of enterprises. Vietnam has strict control and tax policies on cross-border payments. Generally, the fees paid to overseas may be subject to withholding corporate income tax and value-added tax. For example, the fees paid to overseas digital advertising platforms are usually subject to 5% corporate income tax and 5% value-added tax. Enterprises need to be aware that even if the payer is a Vietnamese enterprise, they may still need to fulfill the withholding obligation.

3. VAT treatment of cross-border digital services

VAT treatment of cross-border digital services is a key area of ​​Vietnam’s tax policy. According to the latest regulations, cross-border digital services provided to Vietnamese consumers are subject to VAT. Foreign suppliers can register and declare VAT directly in Vietnam, or fulfill their tax obligations through a Vietnamese agent. For B2C transactions, Vietnam is considering introducing a simplified VAT registration and declaration mechanism. Companies need to pay close attention to policy changes in this area to ensure compliance.

4. Transfer pricing considerations

Transfer pricing is a complex and important issue in cross-border e-commerce. The Vietnamese tax authorities are strengthening scrutiny on related-party transactions of multinational companies, especially those involving intangible assets and service fees. E-commerce companies need to pay special attention to the following points:

• Ensure that related-party transactions comply with the arm’s length principle.
• Adequate transfer pricing documentation is prepared, including local files, master files and country-by-country reports (where applicable).
• For payments related to intangible assets, such as royalties and service fees, their rationality and necessity need to be demonstrated.
• Consider adopting an advance pricing arrangement (APA) to mitigate transfer pricing risks.

In general, the tax issues of cross-border e-commerce are complex and changeable. Enterprises need to establish a sound tax risk management system and maintain close communication with tax advisors to cope with these challenges. At the same time, as Vietnam’s tax policies continue to improve, enterprises also need to remain highly vigilant and adjust their strategies in a timely manner to adapt to the new policy environment.

Tax issues in cross-border e-commerce

1. Identification of Permanent Institutions

In cross-border e-commerce, the identification of permanent establishments is an important tax issue. A permanent establishment usually refers to a fixed place of business established by an enterprise in a country, such as an office, warehouse or agency. Once it is identified as a permanent establishment, the enterprise may need to pay corporate income tax in that country. Cross-border sellers should carefully evaluate their business activities in different countries to determine whether they constitute a permanent establishment. If a company is identified as a permanent establishment by the tax authorities without a clear permanent establishment, it may face additional tax burdens. Therefore, sellers should understand the specific identification standards of permanent establishments in various countries and take corresponding measures to optimize their tax structure.

2. Tax treatment of cross-border payments

The tax treatment of cross-border payments involves international capital flows and their related tax issues. Cross-border payments usually include payments for goods and services, royalties, interest, and dividends. Different countries have different tax treatments for cross-border payments, which may involve withholding taxes, value-added taxes, or other indirect taxes. Sellers should pay special attention to the tax compliance of cross-border payments and ensure that relevant tax withholding obligations are taken into account when making payments. Proper planning of cross-border payments can help companies reduce unnecessary tax expenses and ensure compliance with tax regulations in various countries.

3. VAT treatment of cross-border digital services

With the rapid development of the global digital economy, the VAT treatment of cross-border digital services has become a focus of tax supervision in various countries. For sellers providing cross-border digital services, different countries have different regulations on the VAT treatment of digital services. Some countries require cross-border digital service providers to register and pay VAT in the country where the service is consumed, while other countries may adopt different tax mechanisms. Sellers should understand the VAT regulations of the country where their services are sold and take appropriate measures to ensure accurate calculation and payment of VAT to avoid potential tax risks.

4. Transfer pricing considerations

Transfer pricing involves the pricing of cross-border transactions between related companies and is a key tax issue in cross-border e-commerce. Tax authorities in various countries usually conduct strict reviews of cross-border transactions between related companies to ensure that the pricing of these transactions complies with the “arm’s length principle”, that is, the transaction price is consistent with the market price. Cross-border e-commerce companies need to ensure that their internal transfer pricing policies comply with international transfer pricing rules and be fully prepared for tax audits. Companies that fail to comply with transfer pricing regulations may face significant tax adjustments and penalties. Therefore, sellers should refer to international standards when formulating and implementing transfer pricing policies and conduct regular price assessments to ensure compliance.

FAQ

1. Tax obligations of cross-border sellers

It is very important for cross-border sellers to understand and fulfill their tax obligations. In most countries and regions, cross-border sellers need to register as taxpayers and declare sales tax or VAT. This includes tax registration requirements for different countries, declaration frequency, and rules for calculating and paying taxes. Sellers must ensure compliance with local tax laws to avoid potential fines and legal issues. In addition, different countries have different tax regulations for e-commerce and cross-border sales, and sellers need to adjust their tax strategies according to the tax laws of the sales destination.

2. Tax classification of digital products and services

The tax classification of digital products and services varies significantly around the world. In some countries, digital products such as software, e-books, music downloads, etc. are considered taxable goods, while in other countries they may enjoy tax-free treatment. For digital services such as online courses, consulting services, and streaming subscriptions, some countries also require the collection of VAT or consumption tax. Understanding these classifications and tax policies is crucial for cross-border sellers, as incorrect classification may result in high tax penalties or compliance risks. Therefore, sellers need to carefully study and adapt to the tax requirements of different markets to ensure that their products and services comply with local regulations.

3. Tax Refund and Dispute Resolution Procedures

Tax refund and dispute resolution procedures are important aspects of cross-border e-commerce tax management. In some cases, cross-border sellers may encounter tax errors or overpayment of taxes, and they can recover their losses by applying for tax refunds. In addition, sellers may encounter disputes with tax authorities, such as tax calculation errors or unreasonable tax penalties. Sellers should understand how to handle these disputes effectively and be familiar with the tax refund application process and deadlines in various countries. For complex tax issues, sellers are advised to consult professional tax advisors or lawyers to ensure that the issues can be resolved in a timely and effective manner.

Tax Benefits and Incentives

1.E-commerce Startup Offers

In recent years, the Vietnamese government has introduced a series of tax incentives specifically for start-ups in order to encourage the development of the e-commerce industry. These policies are designed to help e-commerce start-ups reduce their tax burden and increase their market competitiveness in the initial stage. Specifically, eligible e-commerce start-ups can enjoy corporate income tax exemptions, usually at a lower rate in the first five years. In addition, these companies can also enjoy the deferred payment of value-added tax, as well as rental subsidies and infrastructure support provided by some local governments. These measures have effectively promoted the rapid development of e-commerce start-ups and injected new vitality into Vietnam’s digital economy.

2. Tax incentives related to technological innovation

The Vietnamese government attaches great importance to the role of technological innovation in promoting economic development, and has introduced a number of tax incentives to encourage enterprises to invest in R&D and technological innovation. Enterprises can enjoy pre-tax deductions from corporate income tax for their expenditures on R&D projects, which greatly reduces the R&D costs of enterprises. In addition, enterprises can also enjoy VAT exemptions or tax refunds for their investments in technology transfer, technology application and high-tech fields, especially in priority technology fields identified by the Vietnamese government. In order to further promote technological innovation, the government also encourages enterprises to cooperate with scientific research institutions and universities, and related expenditures can also enjoy tax incentives. These incentives provide strong support for enterprises to enhance their competitiveness and achieve sustainable development.

Future trends and policy outlook

1. Direction of Tax Reform in the Digital Economy

With the rapid development of the global digital economy, the Vietnamese government is also actively exploring and promoting the reform of the tax system to adapt to the special needs of the digital economy. In the future, Vietnam may introduce new tax policies specifically targeting digital platforms and online services to ensure that these companies can pay taxes fairly. This may include adjustments to the value-added tax for cross-border e-commerce to ensure that online and offline transactions are treated the same. In addition, Vietnam may also promote the optimization of tax collection and management methods for digital products and services, and use technological means to improve the efficiency of tax collection and management. This reform direction will not only help regulate the development of the digital economy, but will also bring a stable source of tax revenue to the government and support the continued growth of the national economy.

2. Impact of international tax cooperation

In the context of globalization, the importance of international tax cooperation has become increasingly prominent, and Vietnam has also actively participated in it. With the signing of more and more international tax agreements, Vietnam will be more closely integrated into the global tax governance system. These cooperations will not only help avoid double taxation, but also help combat cross-border tax evasion and ensure a fair international tax environment. In the future, Vietnam may sign tax cooperation agreements with more countries and regions to further improve its international tax framework. This will provide greater certainty and transparency for foreign-funded enterprises’ investments in Vietnam, while also promoting Vietnam’s deep integration with the global economy. The deepening of international tax cooperation will have a profound impact on Vietnam’s tax policies and economic development.

Conclusions and recommendations

Through the analysis of Vietnam’s tax policies and incentives, it can be seen that the Vietnamese government is actively promoting the development of key areas such as e-commerce and technological innovation through tax incentives and incentives. These policies not only reduce the tax burden of enterprises, but also provide strong support for the development of emerging industries, which will help promote the diversification and modernization of Vietnam’s economy.

However, with the changes in the global economic environment, Vietnam’s tax policy is also facing new challenges and opportunities. In the context of the digital economy, Vietnam needs to further promote tax reform to ensure that the tax system can adapt to the new economic form while maintaining fairness and efficiency. In terms of international tax cooperation, Vietnam should continue to strengthen cooperation with other countries and actively participate in global tax governance to safeguard national interests and economic development.

Based on the above analysis, it is recommended that the Vietnamese government continue to pay attention to the development needs of emerging industries in future tax policy formulation, especially in the fields of digital economy and technological innovation. At the same time, it should strengthen the modernization of tax collection and management, and use technological means to improve the efficiency of tax collection and management. In addition, Vietnam should continue to promote international tax cooperation, ensure policy consistency and international competitiveness, so as to better support the sustained growth of the national economy and the process of globalization.