Skip to main content

Decree 126 on tax administration law.

Written on . Posted in .
Decree 126 on tax administration law

The Vietnamese Government released Decree 126/2020/ND-CP (“Decree 126”) on 19 October 2020, to implement elements of the Law on Tax Administration 2019. The Decree is a comprehensive document, spanning 266 pages (including appendices), a covering broad range of tax administration and compliance in Vietnam.

Of changes implemented by Decree 126, some of the more significant relate to:

  • Taxation of cross-border e-commerce activities
  • Tax administration during suspension of a business
  • New Anti-avoidance provisions and increased penalties for taxation enforcement, and
  • Changes to taxation lodgements and general administration

Discussion of these key matters follows:

Taxation of cross-border e-commerce activities

Decree 126 details the tax compliance obligations for sales transactions by foreign suppliers via e-commerce and digital platforms, who do not have a permanent establishment or existing tax registrations in Vietnam.


  • A primary obligation rests with banks or payment service providers to withhold taxes from payments to foreign suppliers in respect to e-commerce and digital sales.
    The General Department of Taxation (“GDT”) is responsible for maintaining and publishing a list of the names and websites of suppliers for which banks and payment service providers are to withhold payments for.
  • Where payments occur via credit card or other payments forms which cannot have tax deductions withheld, banks and payment service providers are required to report these to the GDT on a monthly basis.
  • Banks and payment service providers are required to remit withheld taxes to the State Treasury on a monthly basis.

The Decree also confirms the availability of 10-digit tax codes to foreign organisations which incur tax liabilities in Vietnam, providing a structure for foreign e-commerce providers to manage local tax compliance/remittance under Decree 126 for local sales.

Tax administration during suspension of business operations

The Decree clarifies the responsibilities for companies that suspend business operations in Vietnam, specifically:

  • Taxpayers are not required to submit tax declaration dossiers whilst suspended, provided they have completed submission for the period (or part period) during which they suspended operations.
  • Taxpayers paying presumptive taxes (ie, individuals or household businesses) will have their tax obligations re-determined by the tax authorities.
  • Suspended taxpayers cannot use invoices whilst suspended, and are not required to submit reports on invoice usage.
  • Suspension must be notified to tax authorities, along with the authority that registered the suspension.

New anti-avoidance provisions and increased penalties for taxation enforcement

Under Decree 126, the tax authorities have expanded ability to determine or deem additional taxes in a range of circumstances.

A key element detailed Decree 126 is that transactions must have an appropriate business purpose and not simply an intention to avoid taxes. This is consistent with the “substance over form” concept in the Law.

Additional matters covered in the Decree include penalties for using illegal invoices regardless of the actual transaction behind the invoice, failing to declare related party transactions in annual taxation finalisation lodgements, and failure to comply with valid tax inspections and/or audits.
The tax authorities now have the ability under the Law to prohibit the Legal Representative from leaving Vietnam where the company has not finalised payment of tax liabilities, and have expanded powers to publish taxpayer details to the media if the taxpayer is more than 90 behind lodgement or payment obligations.

Changes to taxation lodgements and general administration

The Decree comprehensively covers timing and lodgement responsibilities for taxpayers.

Taxpayers will now be required to remit at least 75% of the full year Corporate Income Tax (“CIT”) liability by the Quarter 3 provisional CIT payment. This is a significant change from the previous requirements for 80% of CIT to be provisionally by the end of Quarter 4 payments. In addition, interest penalties for not meeting the 75% threshold upon the end of the year determination of full year taxable income will be backdated to the Quarter 3 lodgement/payment due date.

There is a broader application of the concept for taxpayers with branches in multiple provinces, in that taxes can be declared at the head office level, but payments (including CIT and VAT) are to be apportioned and paid directly to each relevant province.

Clarity is provided in Decree 126 on the responsibility for organisations to withhold Personal Income Tax (“PIT”) on cash payments to individuals (including dividends, stock bonuses, etc) and to remit PIT on non-cash benefits provided to individuals.

Effective date

Decree 126 is effective from 5 December 2020, and provides a consolidation of many prior regulations/processes, along with new requirements introduced by the Tax Administration Law 2019.

Taxpayers are encouraged to familiarise themselves with the contents of the Decree, along with the appendices and guidance provided.

Updated on January 25, 2021
Don’t have time to read the whole insight right now?

Get exclusive content and expert advice to your inbox.

Subscribe to our newsletter and stay up to date with the latest information regarding advancing your business in Vietnam.

Newsletter subscription