The General Department of Taxation of Vietnam issued the Circular No 40/2021/TT-BTC on June 1^st, 2021, regarding the taxation of e-commerce sellers. Essentially, all e-commerce platforms must be connected electronically to the State tax agencies and disclose various data on the sellers registered on such platforms. The areas covered in the Circular include value-added tax, personal income tax, and general tax processes and collection management. The new regulation was initially scheduled to take place on August 1^st, 2021, however, it was later postponed to the beginning of 2022 to ensure a smoother transition and better practices of tax collection from sellers.

The new regulations oblige the e-commerce platforms to disclose to the tax authorities data such as bank accounts, type of products sold, and revenue earned during the year. Additionally, from the effective date of the new regulation, e-commerce platforms will bear responsibility for tax declarations and tax payments, as well as any queries that may be raised during the tax collection process.

Individual sellers and businesses which are registered and use e-commerce platforms in Vietnam must be aware of these potential changes. Firstly, the effects of the new regulation will most certainly increase the costs for e-commerce platforms which are likely to be passed onto the sellers. Secondly, as e-commerce platforms are currently not responsible for the tax declaration of the registered sellers, new technological infrastructure must be established to electronically connect e-commerce platforms with the relevant tax agencies, resulting in both higher costs and potential interruptions in the work of e-commerce platforms. As a result, this may negatively affect the booming e-commerce sector in the country.

On the other hand, the Circular is a responsive measure to the rapidly increasing e-commerce sales in Vietnam. As currently, individuals and businesses are responsible for their own tax filing and payments, it is likely that many inconsistent or false amounts of revenue have been made. As a result of the pandemic, the e-commerce market saw a massive increase of 15% in 2020 alone, of approximately USD 3.2 billion. As the effective date of the new regulation has been postponed to the beginning of 2022, the tax authorities are expected to work closely with the major e-commerce platforms in Vietnam to establish a practical way for the new rules to take places and to ensure a better transition for both sellers and users of the platforms.

At PHC Advisory, we continuously monitor the recent updates of the tax policy and other regulations in Vietnam. Please, feel free to contact us at info@phcadvisory.com for more information.