With the strong development of e-commerce and digital platforms, tax management for these business activities has become increasingly urgent. To enhance management efficiency and ensure tax obligation fairness, Law No. 56/2024/QH15 has amended and supplemented certain provisions of the 2019 Law on Tax Administration. Notably, new regulations concerning e-commerce and digital platform business activities have been introduced, particularly regarding the responsibilities of domestic and foreign suppliers, as well as households and individuals conducting business on these platforms, in terms of tax registration, declaration, and payment.

1. Tax Obligations of Foreign Suppliers

Under the new regulations, foreign suppliers engaging in e-commerce, digital platform-based business, or providing other services in Vietnam are obligated to directly or authorize a representative to:

• Tax registration in Vietnam.
• Tax declaration in accordance with regulations of the Ministry of Finance.
• Complete payment of tax to the state budget.

This regulation increases tax management for foreign enterprises operating in Vietnam without a permanent establishment, ensuring fairness for domestic suppliers.

2. Obligations of E-commerce Platform and Digital Platform Management Organizations

The new legal regulation emphasizes the role of e-commerce platform and digital platform management organizations. Accordingly, these organizations (both domestic and foreign) that facilitate payments or engage in other digital economic activities are required to: withhold, declare, and pay taxes on behalf of business households and individual businesses operating on e-commerce platforms. With this management approach, competent authorities can control income at its source, similar to how income from foreign contractors generating revenue in Vietnam is managed.

What challenges do e-commerce platform management organizations face, primarily, they will need involve expanding their operational workforce to oversee and fulfill financial obligations to tax authorities on behalf of businesses operating on the platform. This inevitably leads to increased overall operating costs for both the enterprise and the platform, internal processes must develop regulations and workflows for managing transactions with platform businesses. Current business contracts will also need to include provisions for withholding tax obligations before disbursing any revenue to businesses operating on the platform.

In the upcoming timeline, guiding documents will be issued, which we believe will help businesses better understand the obligations they must fulfill on behalf of individuals and organizations conducting business on e-commerce platforms, digital channels, and applications. This will also enable businesses to clearly define the scope of responsibilities for each party involved.

3. Tax Obligations for Business Households and Individuals

If business households and individuals operating on digital platforms are not subject to tax withholding and payment on their behalf, they are responsible for: (i) Registering for tax with the tax authority (ii) Declaring and paying taxes in accordance with legal regulations. This regulation establishes a clear legal framework for business households and individuals to fulfill their tax obligations while reducing tax evasion in e-commerce activities.

The updates to regulations, particularly in the 2019 Law on Tax Administration, concerning e-commerce and digital platform business activities, mark a significant step forward in adapting Vietnam’s legal framework to the rapid development of the digital economy. These changes bring many positive impacts, contributing to an improved business environment while promoting transparency and fairness in the e-commerce sector.

First, one of the most notable impacts of the new regulations is strengthening tax management, thereby reducing state budget revenue losses. In the context of rapidly growing e-commerce with many cross-border transactions that are difficult to control, the new measures are expected to enhance monitoring efficiency and ensure that financial obligations are fully met. At the same time, these regulations aim to create a level playing field between foreign and domestic suppliers. This helps reduce competitive imbalances, as foreign suppliers were previously subject to less strict oversight than domestic businesses.

Another important aspect is that these regulations will raise tax compliance awareness among organizations, business households, and individuals operating on e-commerce platforms. Strict compliance with tax regulations not only ensures transparency and legality in business operations but also helps businesses build credibility and develop sustainably in an increasingly competitive environment.

However, alongside these positive impacts, related organizations and individuals must proactively understand and adapt to the new regulations. Delays or non-compliance could lead to unnecessary legal risks, affecting business operations. Foreign suppliers, platform management organizations, and individual businesses need to ensure a clear understanding and proper implementation of the new regulations to maintain legal compliance and operational stability.

Overall, these amendments affirm Vietnam’s efforts to adjust its policies in line with the evolving digital economy while creating opportunities to improve management quality and promote fair and transparent development in the e-commerce sector. Collaboration between regulatory authorities and stakeholders in providing guidance and support will be crucial to ensuring the effective implementation of these new policies in practice.

Time of writing: 18/12/2024

The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer  at  info@cdlaf.vn

You can refer for more information:

• Summary of the latest legal regulations for News websites
• Conditions and procedures for obtaining a business license for online video games
• Transfer of executive rights, legal notes for new legal representatives