Vietnam struggles to tax e-commerce and digital platforms

As e-commerce and online services continue to grow in popularity, Vietnam is struggling to keep up with the taxation of these activities. As Minister of Finance Ho Duc Phoc stated: “taxing e-commerce and digital platforms is a new and difficult task”.

This is partly because many tech giants operating in the country have their servers located abroad, making it difficult to tax them appropriately. Furthermore, e-commerce sellers often take advantage of Vietnam’s lack of regulations by not declaring their sales or paying taxes.

In response to concerns from lawmakers about this growing problem, Minister of Finance Ho Duc Phoc stated that “taxing e-commerce and digital platforms is a new and difficult challenge.” He went on to say that there is a “huge loss of tax in this area” due to these servers being located outside of the country.

The ministry is considering the best method to tax e-commerce trade to resolve this issue. The long-term goal is to establish an online automatic taxing system that would be easier to enforce.

Around 85% of tax revenue from digital giants like Facebook and Google is lost annually, according to Nguyen Thi Le Thuy, a lawmaker from the southern province of Ben Tre, in a conversation with Vietnamese media.

Furthermore, other lawmakers have stated that the amount of tax collected from these tech firms in recent years is inappropriate compared to their revenues in the country.

In response to these concerns, the government issued Circular 80 in late 2020, which states that from January 1, 2022, business-to-consumer (B2C) transactions will also be subjected to withholding taxes.

This means that foreign e-commerce businesses and digital platforms (such as Netflix, Steam, eBay, or Amazon) that earn a Vietnam-sourced income from Vietnamese individuals will also have to pay taxes in Vietnam.

Early this year, the Hanoi Tax Authority also reported that e-commerce businesses and individuals had only paid around VND14 trillion ($618.2 million) in taxes. This number is small compared to the scale of e-commerce in the country, with over 32,800 online sellers in the city. Of these, only 3,388 reported sales of over VND100 million ($4,412) per year.