Modernizing tax collection methods is important to streamline administrative procedures and reduce compliance burdens

The Vietnam Chamber of Commerce and Industry (VCCI), in its comments on the Draft Decree on tax management for e-commerce and digital platform business activities of business households and individuals, said the draft is establishing a new tax collection method for individuals operating on digital platforms, effectively replacing the outdated approach currently in use.

While tax collection is necessary, modernizing collection methods is important to streamline administrative procedures and reduce compliance burdens for businesses and individual operators. Moreover, with many entities involved in the new approach, regulations must clearly define the responsibilities and obligations of each party, ensuring a legal foundation for effective implementation.

Simplifying tax procedures for individual operators

Specifically, Article 7.2.a of the draft stipulates that individual operators who are not registered under the tax declaration method and regularly conduct business on e-commerce or digital platforms must submit monthly tax declarations. These households and individuals are required to report their revenue, payable taxes and business expenses accordingly.

VCCI believed this regulation requires consideration of several points:

First, the draft prohibits individual operators on e-commerce platforms from paying taxes using the fixed-amount method. This suggests an assumption that all e-commerce business activities utilize software capable of efficiently extracting revenue data, thereby justifying the application of the declaration method.

However, VCCI's analysis indicated that this regulation may be impractical for new or small-scale individual operators. With limited capital, these individuals often do not invest in business support software, making it difficult for them to comply with the required tax declaration process.

Therefore, VCCI recommended that the drafting body consider revising the regulation to allow individual operators with a number of orders below a specified threshold to pay taxes using the fixed-amount method. This threshold could be determined based on order data obtained from delivery service providers.

Second, the draft stipulates that individual operators on e-commerce platforms declare business expenses. However, VCCI argued that this requirement is unnecessary for small-scale operators. Since taxes are calculated based on revenue, requiring expense declarations adds an unnecessary burden without significantly impacting tax calculations.

Moreover, requiring detailed declarations on costs such as goods, labor, electricity, water, transportation and marketing would impose a significant burden on individual operators. Given their simple management models, accurately separating and identifying these expenses would be challenging and impractical.

Therefore, VCCI recommended that the drafting body remove the requirement for individuals not using the declaration method to submit Form 02-1/BK-CNKD-TMDT, as it may impose unnecessary administrative burdens.

A new tax collection method is under consideration for individuals conducting business on digital platforms

Eliminating platform mandates for tax withholding certificate transfers

Article 6.3 of the draft decree requires e-commerce platforms to transfer tax withholding certificates to tax authorities. However, businesses argue that this requirement is unnecessary, as e-commerce platforms already submit detailed monthly tax withholding reports. Tax authorities already possess comprehensive taxpayer information and data, making this additional requirement redundant.

Meanwhile, transferring large volumes of tax withholding certificate data (millions of certificates annually) will increase costs for businesses. Therefore, VCCI suggested that the drafting body remove this regulation.

Additionally, Article 4.2.d of the draft stipulates that taxable revenue is the amount of money for goods and services that e-commerce platforms collect from buyers. This regulation implies that the seller's revenue is the total amount that buyers pay.

However, VCCI's analysis found this regulation inappropriate, as each e-commerce transaction often involves multiple products and services simultaneously. For example, a single transaction may include the seller’s products or services, transportation by independent carriers, platform service fees, and payment processing charges. The total amount paid by the buyer covers all these components, not just the seller’s revenue, making it difficult to isolate and report tax liabilities accurately.

Therefore, to ensure fairness and practicality, VCCI recommended that the drafting body amend the regulation to define taxable revenue as the amount e-commerce platforms are expected to pay to individual operators, rather than the total transaction value, which includes multiple service components.

Proposal to postpone draft implementation to July 1, 2025

Article 4.2 of the draft decree sets different tax rates for resident and non-resident individuals, requiring a classification method for individual operators. Currently, Circular 111/2013/TT-BTC defines residency based on criteria such as being present in Vietnam for at least 183 days or having a permanent residence. While these criteria are straightforward under traditional tax collection methods, VCCI argued that they are challenging to verify in a digital environment, making enforcement difficult.

According to businesses, determining resident or non-resident status for tax rate purposes is complex, requiring additional data such as immigration records, temporary and permanent residence registrations, and place of residence. Businesses lack the ability to verify this information, exposing them to risks in applying the correct tax rates.

Therefore, VCCI recommended that the drafting body establish a mechanism where individual operators self-declare their residency status (resident/non-resident), while e-commerce platforms cross-check relevant information, such as nationality and sales location. For example, resident individuals typically have Vietnamese nationality and conduct sales or services within Vietnam, providing a practical basis for classification.

In cases of discrepancies (such as foreign nationals declaring as resident individuals or Vietnamese individuals selling imported goods) e-commerce platforms would be responsible for notifying sellers to provide supporting documents, while tax authorities would review and make the final determination. VCCI suggested that such a mechanism would streamline administrative procedures for taxpayers while ensuring relative accuracy of information.

Additionally, the draft is set to take effect on April 1, 2025. However, businesses consider this timeline urgent, as the document remains in the drafting stage. Companies require sufficient time to develop IT systems, allocate personnel, and educate sellers on compliance. Therefore, business representatives recommended postponing the effective date to July 1, 2025, to allow for a smoother transition.