Because of its popularity and prosperity, it is understandable that cross border e-commerce has become the “target” of tax authorities. Accordingly, the Law on Tax Administration 2019 and Decree No. 126/2020/ND-CP, which took effect recently, set out for the first time many tax obligations on parties involved in the online supply and sale of goods and services between Vietnam and other countries.
To further clarify the above orientation, the Ministry of Finance has drafted and is collecting opinions from the people and businesses on a draft Circular guiding the Law on Tax Administration 2019 which comprises many noteworthy proposals regarding tax obligations in cross border e-commerce prior to its official issuance.
Tax can be declared and paid in freely convertible foreign currency
In addition to oil and gas extraction, import-export, and fees collected by Vietnam’s diplomatic missions overseas, the draft proposes to add cross-border e-commerce to the list of circumstances in which taxpayers are allowed to fulfill their tax obligations in freely convertible foreign currency. This paves the way for overseas suppliers to choose the most suitable and convenient currency for their tax declaration and payment.
However, the currency diversity also requires a common formula to calculate the tax value. Therefore, for the conversion, the draft suggests using the buying exchange rate announced by the bank where the transaction is made or the tax is paid; if such rate is not announced, Vietcombank’s buying rate would be applied.
Clarification of tax procedures for offshore suppliers
According to the draft, the offshore suppliers would register for electronic tax transactions and first tax registration completely online on the portal of the General Department of Taxation to receive a 10-digit tax code. Among other things, bank account and email are information that need to be registered for tax payment as well as contact with State authorities.
On the other hand, the suppliers may authorize a tax agent in Vietnam to perform tax procedures on their behalf. Due to the fact that taxpayers are not present in Vietnam, the suppliers are facilitated by the State authorities to fulfill their obligations in the most convenient and simple way.
Information to determine taxable revenue
Also according to the draft, (1) payment information (credit card, bank account or similar payment method), (2) residence information (delivery address, home address or similar address) and (3) access information (SIM card, IP code, telephone line or similar information) of buyers in Vietnam are 03 bases for determining revenue which is subject to tax declaration and calculation. Accordingly, any transaction satisfying at least two of the above information is a subject to Vietnam’s tax collection circle.
Therefore, if the buyer makes payment for the transaction and resides (or accesses the internet) in Vietnam, or the buyer resides and accesses the internet in Vietnam, the supplier must declare and pay tax on the revenue arises.
Enterprises shall withhold and pay taxes on behalf of suppliers
Regulatory agency also envisages in the draft remedies when suppliers completely evade tax obligations. In this case, the tax withholding and payment responsibility shall be carried by the enterprise-buyer or the bank, the payment intermediary (if the buyer is an individual).
When the above provisions take effect, before taking part in the online transaction, it is necessary for enterprises to request the e-commerce suppliers to clarify whether they have registered, declared, and paid tax with Vietnam. This helps the companies determine their obligations and appropriate transaction value so that they can ensure their legitimate interests and legal compliance.