The passing of the amended Law on Tax Management by the National Assembly is expected to improve the taxation on e-commerce activities.

Worries remain over how tax agencies will collect tax from overseas
companies that do not have a base in Vietnam. (Photo: baocongthuong.vn)

The amended law, which was passed on June 13 at the 14th National Assembly’s seventh meeting, will come into effect on July 1, 2020.

Under the new rule, the Ministry of Industry and Trade is required to work with the Ministry of Finance to provide data and relevant information on organisations and individuals partaking in e-commerce activities.

The State Bank of Vietnam (SBV) is obliged to develop a nationwide e-payment system for e-commerce platforms while strengthening its supervision over electronic cross-border trade.

Commercial banks are bound to deduce tax for overseas organisations and individuals that make incomes from conducting e-commerce activities in Vietnam.

According to Ta Thi Phuong Lan, the General Tax Department’s deputy director of tax management for households and small- and medium-sized enterprises, the implementation of the new rule requires tight co-operation between banks, ministries, businesses and organisations.

The implementation process would become more complicated for some of the stakeholders, she said, adding banks would have to change their data management to provide required information for tax agencies.

One way to avoid the tax levy for e-commerce organisations and individuals was to use cash, which often makes it difficult for tax agencies because sellers don’t need to issue bills, Lan said.

But those subjects were not invisible to the market regulators as they still had something else that’s “physical” such as locations and warehouses, she said.

The use of electronic bills would be the way to enhance the tax management system, the official said.

Regarding the operation of some foreign organisations and individuals in Vietnam, Lan said tax agencies would work with those subjects’ representative offices in the country.

Some foreign organisations have brought huge profits to Vietnamese individuals but they have not set up offices in the country.

Tax agencies would work with local businesses, through which those organisations cooperate to do business in Vietnam, and commercial banks to keep track on those organisations’ earnings, she said.

According to Pham Dat, general director of the electronic cross-border trade platform Vietnam Fado JSC, tax-paying procedures should be simplified for e-commerce businesses so they can cut costs.

“It is very important because a strict tax policy and high tax rates will tackle the development of the digital economy, create wrongdoings among both businesses and market regulators such as corruption and bribery, and encourage businesses to seek easier solutions like tax evasion,” Dat told local media.

Foreign firms without a local office are willing to pay tax, Dat said. But complicated procedures had forced buyers to seek other sources of supply that are easier and even illegal to buy products from overseas sellers.

Another problem was that foreign businesses were not allowed to receive payments directly from Vietnamese individual buyers so Fado had to collect cash payments for those firms and transfer the money to sellers, he said.

As Vietnam has signed and committed to many multilateral trade agreements, simplifying taxation procedures for the e-commerce sector may help the State collect a large amount of money, Dat added.

“We should build a cross-border e-commerce data centre and ask all e-commerce platforms to settle payments via that centre so the market regulators are able to check the cashflow and increase tax collection,” he said.