On September 29th 2021, the Ministry of Finance issued Circular 80/2021/TT-BTC to provide implementation guidelines on the Law on Tax Administration and Government Decree No. 126/2020/ND-CP. One of the important provisions under Circular 80 is tax administration provisions concerning e-commerce, digital-based businesses and other services of overseas suppliers without having a permanent establishment in Vietnam.
In the following article we cover important E-commerce provisions under Circular 80, which is effective from 1 January 2022, delineating practical regulatory issues which e-commerce business owners need to be aware of.
Definition of in-scope e-commerce and digital-based business activities
E-commerce activity is the conduct of part or the whole process of commercial activity by electronic means connected to the internet, mobile telecommunications networks or other open networks, as prescribed in Decree No. 52/2013/ND-CP.
Digital-based business activities are represented by the provision of services through an intermediary digital system. All connection activities with customers take place in a digital environment using information technology. The nature of such service is based on an automated system with little to no human intervention.
Statutory and compliance responsibilities
The following entities are responsible for tax registration, declaration, and payment for e-commerce activities and digital-based business:
- An overseas supplier without a permanent establishment in Vietnam conducting e-commerce, digital-based business and other services with organizations and individuals in Vietnam (called ‘overseas suppliers’).
- Organizations and individuals in Vietnam which purchase goods and services from overseas suppliers.
- Tax organizations and agents operating under Vietnamese law and authorized by overseas suppliers to perform tax registration, tax declaration and tax payment in Vietnam.
- Commercial banks, payment intermediary service providers and organizations and individuals which have rights and obligations related to e-commerce business activities, businesses based on digital platforms and other related services, or services from overseas suppliers.
Tax registration, declaration and payment provisions for overseas suppliers
Overseas suppliers are required to register for an electronic tax transaction through the website of the General Department of Taxation, ensuring that the following conditions are met:
- the entity has the ability to access and use the Internet
- the entity has an email address assigned to deal directly with the tax authority
Overseas suppliers can authorize organizations or tax agents in Vietnam to conduct tax registrations, declarations and payments on their behalf. In case the overseas supplier authorizes an organization or tax agent to operate under Vietnamese law (hereinafter referred to as ‘authorized party’), the authorized party is responsible for carrying out the following procedures: tax registration, tax declaration, tax payment according to the contract signed with the overseas supplier.
After receiving the identification code of the tax payable amount to the state budget as notified by the relevant tax authority, the overseas supplier shall pay tax in a freely convertible foreign currency to the state budget revenue account. According to the notice on the website of the Taxation Department, the correct identification code must be recorded in the state budget payable directly sent by the tax authority.
Registered non-resident suppliers will pay the tax on a quarterly basis, while banks and intermediary payment service providers will deduct and remit tax on a monthly basis.
In case the overseas supplier pays more than the payable tax amount according to the declaration, the overseas supplier may offset the payable tax amount in the next tax period.
Tax calculation and responsibilities of overseas suppliers
After the initial registration, overseas suppliers will start declaring and paying value-added tax (VAT) and corporate income tax (CIT) on a quarterly basis at the deemed rates on the revenues they receive:
- Taxable revenue refers to the amount received by the non-resident supplier from its clients in Vietnam, determined based on payment information (credit card or bank account information), residency information (billing, delivery, or home address), and access information (mobile phone country code, IP address, and landline address)
- Deemed rates for calculating VAT follow Decree No. 209/2013/ND-CP dated December 18, 2013 of the Government on detailing and guiding implementation of several articles of the Law on Value-Added Tax
- Deemed rates for calculating CIT follow Decree No. 218/2013/ND-CP dated December 26, 2013 detailing and guiding the implementation of the Law on Enterprise Income Tax
Overseas suppliers can authorize organizations or tax agents in Vietnam to conduct tax registration, declaration and payment on their behalf.
In case overseas suppliers do not register, declare and pay taxes in Vietnam, the Vietnamese organizations that purchase goods or services from overseas suppliers or distribute goods or provide services on behalf of overseas suppliers will be responsible for declaring, withholding and paying VAT and CIT (following Circular No. 103/2014/TT-BTC dated August 06, 2014 of the Ministry of Finance guiding the performance of tax obligations of foreign organizations and individuals doing business in Vietnam or earning income in Vietnam).
If you need any assistance with these or any other matters relevant for international investors in Vietnam, our experts are ready to work with your company to ensure you understand how the above will apply to your specific situation in Vietnam.
Contact our teams for expert support and further information on managing corporate compliance in Vietnam.
Thao Do – Accounting Director – thao.do@acclime.com
Matthew Lourey – Managing Partner – m.lourey@acclime.com
