E-commerce, digital platforms likely to pay taxes on behalf of their sellers in Vietnam

E-commerce and digital platforms will have to declare and pay taxes on behalf of their sellers starting January 1, 2025, according to a draft amendment to the Law on Tax Administration.

The draft amendment was tabled Tuesday by the Standing Committee of the National Assembly, the nation’s highest legislative body.

Under current regulations, sellers on e-commerce platforms are responsible for making declarations and paying their own taxes. E-commerce platforms are only required to provide information to tax authorities.

The draft amendment states that e-commerce and digital platforms would be required to withhold taxes on behalf of sellers – individuals or enterprises – and report the withheld amounts to tax authorities. Specific procedures and responsibilities for tax declarations and payment will be detailed by the government.

The draft amendment also mandates that foreign companies offering e-commerce or digital services in Vietnam, like Facebook, Apple and Netflix – must register, declare and pay taxes in the country.

These companies can either handle tax matters directly or designate an authorized representative to do so.

Le Quang Manh, chairman of the National Assembly’s Finance and Budget Committee, stated that during the bill revision process, some amendments proposed to the Law on Tax Administration were related to personal income tax regulations.

Therefore, the drafting and reviewing agencies have agreed to present an amendment to the Personal Income Tax Law to the National Assemnly Standing Committee.

Specifically, Article 33 will be added to the Personal Income Tax Law, requiring e-commerce platform managers to withhold and pay taxes on behalf of individual sellers and declare the withheld amounts on transactions conducted through these platforms.

This regulation is intended to prevent tax evasion and reduce administrative burdens by centralizing tax collection through platforms, rather than dealing with thousands of individual sellers.

According to the Ministry of Finance, the new rules may lead to additional costs for platforms in updating their systems to manage tax withholdings, but these costs will be minimal compared to the expenses of hiring additional staff for tax and customer service functions.

The ministry also confirmed that the new regulations would apply equally to both domestic and foreign platforms, ensuring a fair playing field for all market participants.

Speaking at a National Assembly session on November 5, Deputy Prime Minister Ho Duc Phoc had said that an artificial intelligence (AI)-based tool would be used to check revenues and trades on e-commerce platforms operating in Vietnam as part of a broader attempt to prevent tax losses.

He said tax authorities have deployed a wide range of measures to prevent tax losses in the e-commerce sector. As many as 102 foreign Internet-based service providers including Meta (the parent of Facebook), TikTok, Netflix, and Google have filed and paid taxes via the taxman’s e-portal, he added.

Since March 2022, when the e-portal was launched, the foreign service providers have paid VND18.6 trillion ($734.5 million) in taxes, the Deputy PM said.

Tax collection from domestic e-commerce platforms began earlier this year. In Hanoi, tax authorities had collected some VND35 trillion ($1.38 billion) as of early November.

The bill amending the laws related to tax and finance is scheduled to be voted on by the National Assembly on November 29.