The new tax requirements for e-commerce platforms in VN - unpredictable impacts on international players

VN Taxes

18 Mar 2025 — 10 min read

When Global E-commerce Giants Get "Tagged" in Vietnam's New Tax Decree: A Humorous Take

Hello, my dear "tax-perts"!

This morning, while sipping my cà phê sữa đá (Vietnamese iced coffee – gotta stay authentic, you know!) and browsing the latest tax updates, I stumbled upon a draft Decree on tax management for e-commerce activities. And I knew immediately I had to write about it. My inner tax nerd did a little jig.

Especially when I thought about how "big hands" like Amazon, eBay, or Alibaba would react to these new regulations.

Will they say "Jeez!" or "Game on!"? Will they throw in the towel, or double down?

Let's dissect this draft Decree together and see how it will impact international e-commerce platforms – especially the world's largest – when they want to access the vibrant Vietnamese market. This is going to be a wild ride, folks!

The Big Picture: The Draft Decree "Calls Out" Foreign E-commerce Platforms

First, let's be clear: This draft Decree aims to manage taxes on transactions occurring on e-commerce platforms, especially transactions by business households and individuals. Think of it as the taxman saying, "Hey, we see you, online sellers!"

The noteworthy point is that this Decree clearly targets both domestic and foreign platforms. The phrase "domestic and foreign e-commerce platform managing organizations" pops up repeatedly in the text. They're not playing favorites here.

The draft is expected to take effect from April 1, 2025, meaning the e-commerce "giants" have an extremely short time to prepare for these changes.

Tick-tock, Tick-tock!

Withholding and Remitting Taxes: When e-com platforms becomes Tax Collectors

The most prominent feature of the draft is the requirement for e-commerce platform managing organizations (including foreign platforms like Amazon, eBay, etc.) with payment functions to withhold and remit taxes on behalf of business households and individuals selling on their platforms.

Sounds simple, right? Not really! In reality, this is probably a task that's far from easy – if not downright complex and unpredictable. Imagine the logistical nightmare!

Specifically, both domestic and foreign e-commerce platforms with payment capabilities will have to:

Withhold and remit VAT on behalf of both resident and non-resident household/individual sellers for transactions generating revenue within Vietnam.
Withhold and remit personal income tax (PIT) on behalf of both resident and non-resident household/individual sellers for transactions generating revenue.
That does not even include the need to register (if they haven't already done so), declare and pay tax on the platform's own income. They will directly declare and submit the tax to Vietnamese tax authorities.

But here's the kicker: for resident individuals, the scope of responsibility is both domestic and international transactions; for non-resident individuals, it's limited to transactions generating revenue within Vietnam.

Complicated yet? We're just getting started!

The 10-Digit Tax Code: The new "visa" to do business in Vietnam

Another crucial requirement for foreign e-commerce platforms is to register and obtain a 10-digit tax code to fulfill their tax obligations arising in Vietnam. This is a prerequisite for platforms to declare and remit taxes on behalf of the households and individuals selling on their platform, especially those who haven't already registered and pay taxes directly in accordance with Circular 80/2021/TT-BTC (the section for the foreign supplier who generates income from digital platform), or Law No. 56/2024/QH-15, effective from January 1, 2025.

According to Article 5 of the draft, foreign e-commerce platform managing organizations will be issued a 10-digit tax code similar to the regulations for foreign suppliers in Circular No. 80/2021/TT-BTC.

In other words, foreign e-commerce platforms will need a new "visa" to "travel" within the Vietnamese tax system. Think of it as their tax passport.

Don't underestimate this. For international platforms with multinational operations, each tax code means a whole new set of declaration, compliance, and management processes. It's like adding another layer of bureaucracy to an already complex cake. The requirements for these "travel documents," such as how to categorize each seller, and what information is needed, also trigger a whole set of new system process, like data capturing, validation, and monitoring, which is likely very costly and difficult, as those requirements are unique not only to Vietnam, but other countries too.

C2B and C2C Scenarios on the Platform: Who Owes What, and How Much?

Now, let's dive into the nitty-gritty of specific scenarios that can occur on international e-commerce platforms. We'll consider the common C2B (Consumer to Business) and C2C (Consumer to Consumer) cases:

Scenario 1: A Vietnamese Individual Sells to a Vietnamese Business

In this case, the e-commerce platform will have to:

Withhold VAT at a rate of 1% for goods, 5% for services, and 3% for transportation/services related to goods.
Withhold PIT at a rate of 0.5% for goods, 2% for services, and 1.5% for transportation/services related to goods.

This tax will be deducted directly by the e-commerce platform from the payment made by the Vietnamese business before it's transferred to the Vietnamese individual seller.

Example: Mr. Tuan (a Vietnamese individual) sells a batch of electronics worth 10,000,000 VND to Company ABC in Vietnam through Platform A. The platform will have to withhold and remit taxes on behalf of Mr. Tuan:

*   VAT: 10,000,000 × 1% = 100,000 VND
*   PIT: 10,000,000 × 0.5% = 50,000 VND
*   Total: 150,000 VND

Mr. Tuan will only receive 9,850,000 VND after the platform has deducted the taxes. In addition, if the platform charges a 3% transaction fee, the platform must also self-declare and pay 10,000,000 x 3% x 5% = 15,000 VND in VAT and approximately (300,000 - 15,000) x 5% = 14,250 VND of CIT on the transaction fee that the platform collects (these two VAT and CIT taxes are called contractor tax of the platform).

Scenario 2: A Vietnamese Individual Sells to a Foreign Business

This is where it gets interesting!

When a Vietnamese individual sells to a foreign business (e.g., a US company), Platform A:

May not have to withhold VAT because this is considered an export.
Will still have to withhold PIT at the same rates as above (0.5% for goods, 2% for services, 1.5% for transportation).

Why? Because the draft Decree stipulates that e-commerce platforms must withhold PIT on all transactions generating revenue "domestically and internationally" for resident households and individuals. It's like the taxman saying, "We've got our eye on you, even if you're selling to someone on the other side of the world!"

One thing to note is that the platform will have difficulty in determining if the transaction constitutes as an export or not, especially for digital services.

Scenario 3: A Foreign Individual Sells to a Vietnamese Buyer

When the seller is a non-resident individual and the buyer is in Vietnam, the platform will have to:

Withhold VAT at a rate of 5% for services, 3% for transportation/services related to goods (note: not applicable to goods).
Withhold PIT at a rate of 1% for goods, 5% for services, and 2% for transportation.

Example: John (a US individual) sells a service worth $200 to Company XYZ in Vietnam through international e-commerce Platform A. Platform A will withhold:

*   VAT: $200 × 5% = $10
*   PIT: $200 × 5% = $10
*   Total: $20

John will only receive $180 after the platform has deducted the taxes.

Scenario 4: A Vietnamese Individual Sells to a Foreign Individual

When the seller is a Vietnamese individual and the buyer is a foreign individual, the international e-commerce platform:

May not have to withhold VAT (because it's an export).
Will still have to withhold PIT at similar rates to other cases.

This could potentially make Vietnamese goods/services less competitive in the international market due to the added tax costs – though it is important to assert that is the goal to which all the countries try to aim for, for fair and sufficient tax collection.

The "Unimaginable" Challenge for E-commerce Platforms: Identifying Sellers and Buyers

Just distinguishing between "resident individuals" and "non-resident individuals" is a major challenge for international e-commerce platforms operating in multiple countries. It's like trying to herd cats, but with tax implications!

The draft requires business households and individuals to provide their "identification number" (for Vietnamese citizens) or "passport number" (for foreigners) to the e-commerce platforms.

But how can an international platform verify this information? How can they be sure that someone registering to sell with a Vietnamese ID card is actually Vietnamese? It's a logistical and security nightmare.

This is a big question for all foreign e-commerce platforms (and even Vietnamese ones). And they also need to design how for Vietnamese seller to register all the required info on their platform - especially those which likely cannot set up different info fields for the clients in different countries, for various reasons.

And that's not all...

The Headache of Classifying Goods and Services

International e-commerce platforms will face another challenge: accurately classifying products as "goods," "services," or "transportation/services related to goods."

This is not easy, especially in the digital age when the line between goods and services is increasingly blurred.

Is an ebook on Amazon a good or a service? What about a tutorial video sold on Udemy? What about software downloaded directly from Apple's marketplace?

Each classification has different VAT and PIT rates. Incorrect classification can lead to incorrect tax withholding and compliance issues. This is not only a headache for the platforms but also potentially a hassle for tax officers during inspections.

The draft Decree mentions the case of "not being able to determine whether the transaction is goods or services," in which case the "highest rate" will be applied. This seems like a safe solution, but it's not fair to the sellers. It's like a tax penalty for ambiguity.

The Obligation to Issue "Electronic Tax Withholding Certificates": A spicy top-up

Another requirement of the draft is that platforms may have to issue "electronic tax withholding certificates" to all business households and individuals from whom they have withheld taxes.

This certificate must contain complete information about: the certificate name, symbol, serial number, payer information, revenue, amount of tax withheld, date of issuance, and must have the digital signature of the platform.

This is a significant requirement in terms of systems. Platforms will have to build or modify their existing software to meet this requirement, while storing data in accordance with Vietnam's Law on Tax Administration.

It's a paperwork mountain, even in the digital age!

Monthly Tax Declaration and Payment Responsibilities: the New Reporting Cycle

E-commerce platforms will have to declare taxes monthly for all taxes withheld. This means:

Preparing a Tax Withholding Declaration form (to be specified in the Decree).
Preparing an Appendix to the Detailed List of Withheld Taxes form (to be specified in the Decree).
Preparing a Detailed List of Tax Payments form (to be specified in the Decree).

All of these reports must be submitted electronically to the Vietnamese tax authorities.

I wonder, how on earth, within that short time frame, the platforms can manage to classify the clients, set up all the reports etc. to comply. It's already late March 2025, and per the draft decree and the Law, the effective date will start on April 1, 2025. This requires platforms to urgently establish new processes, train staff, and possibly hire additional personnel specializing in Vietnamese tax.

The Resources Required?

All of these changes require platforms to invest significantly in both effort and money in upgrading their systems, including at least:

Seller identity verification systems
Goods/services classification systems
Tax calculation and withholding systems with multiple rates
Electronic tax withholding certificate issuance systems
Periodic tax reporting systems, etc.

That's no small investment (easily reaching at least a few million USD), especially when the Vietnamese market, while promising, is not yet the main market for these e-commerce platforms. And it's quite possible that the revenue earned will not be commensurate, at least in the short term, with this investment.

What Options Are There?

So, what choices do platforms have in the face of this draft Decree?

Option 1: Full Compliance

Platforms can decide to invest in upgrading their systems to fully comply with the requirements of the draft. This is the safest option, but also the most expensive.

Option 2: Change the Business Model

Some platforms may choose to restructure their business model in Vietnam. For example, they could switch from a marketplace model to a direct sales model (selling only the platform's goods), or limit sellers to businesses only (instead of individuals).

However, this will reduce the diversity of products on the platform and could affect the user experience. This is a disadvantage for both the platform and the sellers, and could also be a disadvantage for the Vietnamese market.

Option 3: Withdraw (or Temporarily Withdraw) from the Vietnamese Market

This is the most extreme option, but not impossible. If the cost of compliance is too high compared to the expected profit, some platforms may decide to withdraw from the Vietnamese market.

This would be a loss for both the platforms and Vietnamese consumers. Definitely!

Option 4: Policy Advocacy

Although it might be a bit late, platforms could participate in the consultation process for the draft, proposing changes to make implementation easier while still ensuring the tax management goals of the Vietnamese Government.

They could propose a phased implementation roadmap or suggest alternative, less complex solutions. This is also the most considerable option (but how to avoid affecting the regulation of Law No. 56/2024 which requires tax collection from the individual sellers via e-commerce to be implemented on April 1, 2025?)

What Future for Cross-Border E-commerce in Vietnam?

This draft Decree not only affects individual business sellers but also all foreign e-commerce platforms wishing to operate in Vietnam.

A big question arises: will this draft create excessive barriers to cross-border e-commerce?

While the goal of tax management is legitimate, imposing too many obligations on e-commerce platforms could make them reluctant to enter the Vietnamese market or shift compliance costs to sellers and buyers.

This could reduce the competitiveness of Vietnamese products in the international market, while also increasing the price of imported products for domestic consumers.

Conclusion: how about a Balanced Solution...

The draft Decree on tax management for e-commerce activities will certainly have a major impact on e-commerce platforms, both domestic and foreign.

On the one hand, it helps Vietnam strengthen tax management for e-commerce transactions, ensuring fairness between business forms. On the other hand, it poses major technical and operational challenges for e-commerce platforms.

The important thing is to find a balanced solution:

Strong enough to ensure tax compliance.
Flexible enough not to hinder the development of cross-border e-commerce.
Practical enough for platforms to implement.

Perhaps, instead of requiring foreign e-commerce platforms to fulfill all obligations from the outset, the Government could consider a step-by-step roadmap, starting with the most basic requirements and gradually expanding as the system stabilizes.

It is also necessary to consider simplifying tax rates, reducing the complexity of classifying goods/services, and providing more specific guidance on how to determine the residency status of sellers.

Finally, this is an important step in the effort to modernize Vietnam's tax system to fit the digital economy. But like all first steps, it needs to be taken carefully, with full consultation from all stakeholders.

What do you think about this draft Decree? Are you a seller on international e-commerce platforms? Leave a comment below!