Suggested solutions to e-commerce tax management

Data from the General Department of Taxation (GDT) at the Ministry of Finance (MoF) reveals that tax revenues from organizations and individuals engaged in e-commerce activities reached an impressive VND274.6 trillion ($10.98 billion) from the beginning of 2022 to the end of October 2024. Tax collections stood at around VND116 trillion ($4.64 billion) last year, marking a 20 per cent increase compared to 2023. This growth reflects the successful transition to a digitalized tax collection system, underpinned by the establishment of a robust inter-sectoral data repository.

Tax reform efficiency

Tax authorities have gone beyond merely urging tax declarations by ramping up inspections, audits, and enforcement actions. In 2024, a total of 120,333 businesses and individuals were reviewed, monitored, and supported in tax declarations and payments, resulting in tax revenues of VND51.563 trillion ($2.06 billion). Among these, violations were addressed in 30,668 cases, with recovered and taxes and penalties amounting to nearly VND1.36 trillion ($54.4 million).

However, the process of reviewing revenue proved time-consuming and resource-intensive, requiring repeated declarations and adjustments. From 2025, e-commerce platforms will take over the responsibility of withholding, declaring, and paying taxes on behalf of sellers. This reform has garnered strong support from store owners, as it spares them the complexity of tax procedures and bookkeeping.

According to a representative from the GDT, assigning e-commerce platforms to handle tax matters for hundreds of thousands of online sellers is expected to centralize tax management. Instead of individual sellers working directly with tax authorities, a smaller team of platform employees will handle the process. This shift aims to enhance transparency in online business activities and ensure compliance with legal obligations for all enterprises, individuals, and households involved in e-commerce.

Moreover, starting in 2026, small business households and individuals with annual revenues of VND200 million ($8,000) or less will be exempt from value added tax (VAT) under the Law on Value-Added Tax (VAT) 2024, effective from July 2025. This increase from the current threshold of VND100 million ($4,000) has been welcomed by many small-scale sellers, as it reduces the tax burden and encourages growth in the thriving online business sector.

Despite the positive outlook, some e-commerce sellers remain concerned about how taxes will be collected, seeking assurances against duplicate taxation and complications during year-end tax settlements. Additionally, they worry that product prices might rise due to the added taxes and fees imposed by platforms managing tax collections on their behalf.

Previously, foreign digital service providers such as Google, Facebook, and TikTok were taxed through the contractor tax mechanism under Circular No. 103/2014/TT-BTC, dated August 6, 2014, from the MoF, with domestic organizations purchasing goods or services from these providers becoming responsible for withholding and paying taxes on their behalf. However, this approach revealed numerous inefficiencies, prompting the need for reform.

Room for growth

Tax revenue from cross-border services has seen significant growth over recent years. Mr. Nguyen Bang Thang, Director of the Department of Taxation of Large Enterprises at the GDT, explained that the nature of e-commerce and digital platform businesses, which operate entirely online and directly reach consumers in Vietnam, has exposed shortcomings in the contractor tax mechanism. This system has not fully captured the potential State budget revenue from such activities.

To address these gaps, tax authorities have proactively adjusted by studying business models, analyzing revenue scales, and implementing comprehensive tax management solutions for cross-border e-commerce. These efforts have resulted in major milestones and increased contributions to the State budget.

In March 2022, the electronic tax portal for overseas suppliers (at Etaxvn.gdt.gov.vn) was launched, allowing international businesses to register, declare, and pay taxes online. The portal has streamlined procedures, reduced administrative burdens, and improved cost and time efficiency. Since its inception, 119 foreign suppliers have used the platform, generating approximately VND20.261 trillion ($810.4 million) in payments.

The GDT further expanded its efforts in December 2022, with the launch of the E-Commerce Information Portal, which collects data from enterprises and individuals conducting business on e-commerce platforms. This initiative attracted the participation of 439 e-commerce platforms, providing information on nearly 725,000 organizations and individuals engaged in e-commerce, with total transaction values exceeding VND75 trillion ($3 billion).

Another milestone came in December 2024 with the introduction of an e-portal for individuals and business households that run e-commerce business to facilitate their tax registration, declarations, and payments. The portal represents a significant leap forward in tax management while demonstrating the tax authority’s commitment to adapting to the rapidly-evolving digital economy.

There remains significant potential for revenue growth in Vietnam’s e-commerce tax landscape. According to Mr. Noguchi Daisuke, Chief Project Advisor at the Japan International Cooperation Agency (JICA) in Vietnam, the introduction of an online portal enabling foreign businesses engaged in e-commerce to register, declare, and pay taxes directly in Vietnam marks a groundbreaking step forward.

Starting in 2024, the Hanoi Tax Authority has implemented a virtual assistant leveraging AI and big data to assist taxpayers; a move similar to systems already in use in Japan. This electronic tax system has streamlined processes, offering taxpayers a faster and more user-friendly platform for meeting their tax obligations.

With cross-border e-commerce valued in the tens of billions of US dollars and Vietnam ranked among the top 10 fastest-growing e-commerce markets worldwide, tax authorities recognize that current achievements are just the beginning. There remains substantial untapped potential to enhance tax revenue from cross-border e-commerce activities.

Mr. Thang noted that efforts to refine tax policies, management strategies, and related laws will continue in 2025 and beyond. Proposals under review by the MoF include allowing foreign suppliers to register and utilize Vietnam’s electronic invoicing system. This initiative aims to resolve challenges related to input value added tax deductions for domestic organizations while tightening oversight of foreign suppliers’ business operations.

Another proposed measure would require foreign suppliers to provide periodic information on Vietnamese entities engaged in transactions through their platforms. Vietnamese organizations and individuals generating revenue via foreign suppliers’ systems would also need to report these activities to tax authorities, further ensuring transparency and compliance.