Nowadays online shopping becomes more popular than in-store shopping
The new Law on Tax Administration which took effect in mid-2020 has added regulations on the responsibilities of relevant ministries including the Ministry of Industry and Trade, the Ministry of Information and Communications, the Ministry of Finance, and the State Bank of Vietnam in tax administration for e-commerce business activities. Plus, the Decree No. 126/2020 also details e-commerce business for individuals.
Accordingly, if an organization does business with an individual, the individual does not directly declare tax, but the organization is responsible for declaring VAT on the entire revenue of business cooperation activities, regardless of the form of business cooperation results. At the same time, the organization declares and pays personal income tax on behalf of the individual.
Accordingly, with this provision, local businesses which cooperate with a foreign party shall pay tax on behalf of the foreign supplier. E-commerce trading floors declare and pay taxes on behalf of individuals trading on the floor. If an owner of an e-commerce trading floor is not authorized to declare tax on behalf of individual trading on the floor, the e-commerce trading floor shall coordinate with the tax authority in sharing and providing information of individual businesses to manage tax collection in accordance with the law.
Thanks to these detailed regulations, the tax authorities have inspected, collected and sanctioned many individuals residing in Vietnam who provide cross-border services at foreign social networking sites such as Google, Facebook, and YouTube.
Specifically, by applying many solutions to collect taxes on cross-border business activities including revenues from organizations in Vietnam declaring and paying on behalf of contractors, from 2018 to now, the tax authority has collected about VND5,500 billion, equivalent to VND1,200 billion a year. Amongst them are many foreign suppliers which have declared and paid a large amount of tariffs such as Facebook with more than VND2,000 billion (US$85,8 million), Google with more than VND2,000 billion, and Microsoft with about VND700 billion.
Last but not least, in the middle of March 2022, the General Department of Taxation has put into operation of the portal for foreign suppliers.
Ms. Nguyen Thi Lan Anh, Director of the Tax Administration Department for small, medium-sized enterprises and business households and individuals said that the portal Etaxvn.gdt.gov.vn and software on mobile phones eTax Mobile have made it easy for overseas suppliers without a fixed business establishment in Vietnam to fulfill their tax obligations.
Currently, websites such as Facebook (Meta), Microsoft, TikTok, and Netflix have registered the application. Only in the first quarter of this year, Microsoft paid US$500,000, TikTok paid nearly VND35 billion, and Netflix paid nearly VND8 billion.
From 2018 up to now, tax authorities have handled violations and prevented revenue loss of about VND 782 billion by inspecting those who have been earning income from providing cross-border digital services and businesses. For instance, the Hanoi Tax Department collected VND 358 billion, the Ho Chi Minh City Tax Department collected VND 146 billion, and the Da Nang Tax Department collected VND 67 billion from those people.
According to a tax expert, the collected tax revenue from e-commerce activities which was announced by responsible agencies is only the first step as it does not fully reflect e-commerce data in recent years because in fact, individuals have netted a huge amount of income through e-commerce trading floors and social networking sites such as Zalo, Facebook, Instagram, Twitter but they declared the amount less than reality. While, according to the law, the e-commerce floor must receive civil authorization from business individuals to declare tax for them; worse, if individual businesses refuse to authorize, there is still no sanction for them.
Some experts in the financial sector also believe that there should be regulations on the responsibility of information security of relevant organizations and individuals to both prevent tax loss and ensure the legitimate interests of business individuals. Specifically, the responsibility for the security of websites and the responsibility to provide information to the tax authorities, helping to make tax management more effective.
According to Associate Professor Le Xuan Truong, Dean of the Academy of Finance’s Faculty of Taxation and Customs under the Ministry of Finance, the government should add a regulation that forces e-commerce trading floors to be responsible for withholding and paying taxes on behalf of individuals as well as perform payment intermediary services and participate in operating and controlling delivery activities and receiving money from buyers.
He added that more than 40 countries have so far regulated the responsibility of e-commerce exchanges in deducting taxes of individuals if the floor provides payment services, or directly participates in the delivery and receipt of goods of buyers and sellers.
To promote supervision and collection of e-commerce tax, the Tax Department has built a mechanism to provide information on enterprises providing logistics services and delivery services in e-commerce business on a digital basis for tax authorities as well as require owners of the e-commerce trading floor to provide information and mobilize the customers to sell goods on the e-commerce floor to fulfill their tax obligations.
The People's Committee of Ho Chi Minh City has also required commercial banks to provide transaction information of online sales accounts. The Department of Taxation also asked the intermediary payment enterprises to provide data on the amount of money transferred for online purchases to the tax authorities in addition to reviewing partner companies of foreign supplier Google in Vietnam on tax declaration and tax pay.
As a result, four commercial banks have provided tax authorities with organizations and individuals' income paid by Google with a total amount of more than US$51.2 million and VND 21.4 billion from abroad. 38 individuals earning income from Google have been ordered to pay tax arrears, fines, and late payment interest of VND 169 billion by responsible agencies while three other enterprises ought to pay tax arrears, fines and late payment interest of VND327 million. In addition, the Tax Department collected and fined a partner company of a foreign supplier Google in Vietnam the amount of VND 24.3 billion after inspecting the company.