Enhancing E-commerce Tax Management

10:42:43 AM | 8/2/2023

Acting General Director Mai Xuan Thanh of the General Department of Taxation (GDT) urged all tax agencies to intensify the effectiveness of e-commerce tax management at a recent workshop on “E-commerce tax management” held by the GDT.

Foreign suppliers declared and paid a total of VND3.944 billion in taxes to the state budget in the first half of 2023

Sharp rise in e-commerce revenue

To support foreign suppliers in registering, declaring and paying taxes in Vietnam, the General Department of Taxation officially launched an electronic information portal for foreign suppliers on March 21, 2022. To date, 57 foreign suppliers have registered, declared and paid taxes through the portal, including Google, Apple, Facebook, Netflix, TikTok and Microsoft. At the same time, to support e-commerce exchanges in providing information, the GDT officially launched the e-commerce portal to receive information from traders on e-commerce exchanges on December 15, 2022. After two periods of information (fourth quarter of 2022 and first quarter of 2023), 333 e-commerce exchanges provided information, including major exchanges like Shopee, Lazada, Sendo, Voso and Tiki. Accordingly, e-commerce revenue grew very strongly. The tax revenue from e-commerce was VND261 billion in 2021 and jumped to VND716 billion in 2022 - an increase of 274% compared to that in 2021. In the first six months of 2023, the total tax declared and paid to the state budget by foreign suppliers was VND3.944 billion.

Many issues in tax collection

Despite having very encouraging initial results, e-commerce tax management has faced many difficulties and shortcomings such as data connectivity and data sharing. For example, the GDT’s data connectivity and sharing with the Ministry of Industry and Trade did not work because the database system of the Ministry of Industry and Trade (Vietnam E-commerce and Digital Economy Agency - IDEA) does not have a tool to export information about traders and owners of e-commerce websites and applications. The information collection about individual traders who have revenue from advertising on digital information content services on cross-border platforms and the scannet system of the Ministry of Information and Communications (Authority of Broadcasting, Television and Electronic Information) is not effective, and there is no professional scanning tool. The information collection about individuals doing e-commerce business through cross-border advertising firms is also difficult due to customer privacy policy. The GDT coordinated with banks in providing transaction information through accounts, account balances, transaction data as well as responsibility of declaring, withholding and paying taxes and monitoring the amount of taxes transferred to foreign suppliers which do not have a permanent presence in Vietnam but conduct e-commerce and digital-based business with organizations and individuals in Vietnam.

According to banks, the declaration and payment of tax obligations on behalf of unregistered foreign suppliers is a very difficult subject to implement because of policy matters such as the exchange rate applicable to payment to foreign suppliers in foreign currencies, tax rates applied to goods and services, and sanctions on insufficient tax withholding. These should be guided by the Ministry of Finance and the General Department of Taxation for consistent and uniform implementation and committed to being closely coordinated with tax authorities in tax administration for e-commerce business in general and cross-border in particular.

Speaking at the event, Acting General Director Mai Xuan Thanh said that e-commerce is a new issue and emerging problems in implementing regulations cannot be avoided. However, to manage this field well, it is necessary to classify organizations and individuals doing e-commerce business into two groups: Doing business on e-commerce floors and doing business via social networks.

In the long term, policies and regulations should be amended to assign the responsibility of tax declaration and payment to owners of e-commerce exchanges that withhold taxes for individuals doing business on e-commerce exchange. Foreign suppliers without a fixed business establishment in Vietnam must withhold and declare tax directly with tax authorities via the electronic tax portal before they pay Vietnamese individuals (cash flows into Vietnam). At the same time, regulations should be supplemented for commercial banks and payment intermediaries to calculate overseas payments into personal accounts to withhold, declare and pay tax for domestic individuals when they receive overseas money, thus ensuring fairness among business organizations and ensuring budgetary revenue for the State.

By Hien Kien, Vietnam Business Forum