Concerns emerge over online sales tax implementation

Growing concerns have emerged over a draft decree on tax management for business activities conducted via e-commerce and digital platforms.

The regulation, which will apply to individual sellers and household businesses, is set to take effect on April 1.

According to the Vietnam Chamber of Commerce and Industry (VCCI), businesses have raised concerns about the draft decree's timeline.

VCCI said businesses need additional time to develop IT systems, allocate human resources and educate sellers on compliance requirements. As the decree remains in its draft stage, the chamber has proposed postponing its enforcement to July 1, to allow adequate preparation.

While acknowledging the necessity of tax collection, VCCI emphasised the importance of a well-structured tax framework that minimises administrative burdens and compliance costs for both businesses and individual sellers.

Additionally, the chamber stressed the need for clear definitions of responsibilities among stakeholders to ensure a smooth and efficient implementation of the new tax system.

Meanwhile, under the draft decree, individuals conducting regular business on e-commerce and digital platforms will be required to declare taxes monthly, while household businesses must report their revenue, tax payable and business expenses.

This effectively removes the option of lump-sum tax payments for individual sellers, according to VCCI.

Vice Secretary-General cum Director of the Legal Department of VCCI Dau Anh Tuan, said that this approach would be impractical for small-scale sellers, as many lack the capital to invest in business management software and may struggle with complex tax declarations.

To address this, he proposed allowing lump-sum tax payments for individuals with a limited number of transactions, making compliance more feasible.

Additionally, the draft decree mandates that online sellers declare business expenses, a requirement Tuan deemed unnecessary, since taxes are already calculated based on revenue.

He further argued that requiring detailed reporting on costs such as inventory, labour, utilities, shipping and marketing would be unrealistic.
Simplifying residency classification

Dao Kim Loan, a distributor of Riman Incellderm pharmaceutical and cosmetic products, has voiced concerns over the proposed tax decree’s differentiation between residents and non-residents in Vietnam for e-commerce taxation.

Under the draft decree, tax rates for business activities on e-commerce platforms will vary depending on whether an individual is classified as a resident or non-resident. However, Loan pointed out that accurately determining residency status in the digital environment poses significant challenges.

Currently, Circular 111/2013/TT-BTC outlines residency criteria, including being present in Vietnam for at least 183 days per year or having a permanent residence.

While these criteria are easier to verify using traditional tax collection methods, applying them to online sellers requires additional data, such as immigration records, temporary and permanent residence registrations and declared places of residence.

Loan suggested that individual sellers would self-declare their residency status, with e-commerce platforms cross-checking key information such as nationality and place of sale or service provision. For instance, a resident individual would typically have Vietnamese nationality and conduct business within Vietnam.

In cases where discrepancies arise, such as a foreign seller declaring as a resident or a Vietnamese seller dealing in imported goods the e-commerce platform would be responsible for notifying the seller to provide supporting documents. The final decision would rest with the tax authorities after review.

This mechanism, Loan argued, would strike a balance between easing administrative procedures for taxpayers and ensuring accurate tax classification.

Adjustment in taxable revenue calculation

Meanwhile, concerns have been also raised over the proposed tax decree’s definition of taxable revenue.

As per the draft regulation, taxable revenue is defined as the total amount paid by the buyer, which e-commerce platforms collect during transactions. This means that a seller’s revenue would be calculated based on the full payment made by the buyer.

Nguyen Thanh Son from Winco Group JSC in Hanoi said this approach is problematic, as each transaction often includes multiple service components beyond the seller’s products or services. These may include transportation fees paid to independent shipping providers, platform service fees and payment processing costs.

To ensure fairness and accuracy, Son suggested that the taxable revenue should instead be based on the amount the e-commerce platform intends to pay to the individual seller, rather than the total transaction value./.