Online Tax Portal for Non-residents Conducting Cross-border E-commerce and Digital-based Business Activities in Vietnam Is Now OpenMarch 23, 2022
The Vietnam tax authorities have been enhancing the tax management mechanism to collect tax from non-residents who generate income from Vietnam through cross-border ecommerce and digital-based business activities. One of the most common methods is via the withholding mechanism, whereby the resident buyer is required to withhold, declare, and file the tax on behalf of the non-resident. However, this can only work when the buyer is an organization that is under strict obligation to comply with the tax, accounting, and forex control regimes. It is more difficult for the tax authorities to manage the income flow of non-residents if the buyers are individuals, who account for a larger portion of revenue. This has become even more challenging when individuals can pay for services via various payment solutions.
In this regard, the Ministry of Finance issued Circular 80/2021/TT-BTC dated 29 September 2021 (the “Circular”) providing guidance on Decree 126, which elaborates on some articles of the Law on Tax Administration. Among others, the Circular provides details on the rights and obligations of the relevant parties to ensure the tax compliance of non-residents deriving income from Vietnam through e-commerce and digital platform-based activities in Vietnam.
It also includes a list of the organizations and individuals relevant to the tax administration of these activities:
- Overseas suppliers without permanent establishments in Vietnam carrying out e-commerce and digital platform-based activities and providing other [such] services for organizations and individuals in Vietnam (hereinafter referred to as “overseas suppliers”).
- Vietnam customers of overseas suppliers.
- Tax agents and organizations that are operating under Vietnam’s law and are authorized by overseas suppliers to apply for taxpayer registration, and declare and pay tax [on their behalf] in Vietnam.
- Commercial banks, payment service providers, organizations, and individuals whose rights and obligations are relevant to e-commerce, digital platform-based activities and other [such] services provided by overseas suppliers without permanent establishments in Vietnam.
The Circular establishes a direct and simplified online portal through which overseas suppliers can register with and declare tax directly to the Vietnam tax authorities, eliminating burdensome paperwork. Alternatively, overseas suppliers can authorize a Vietnam tax agent to process their tax registration and declarations on their behalf.
Overseas suppliers who fail to either register to declare and pay tax directly with the tax authorities or authorize a qualified tax agent to do so will be subject to paying tax through a withholding mechanism. The Circular provides specifics for this depending on the type of buyer:
- Buyers that are organizations subject to the tax regime in Vietnam will withhold tax and remit it to the tax authorities as done prior to the issuance of this Circular.
- For transactions with buyers that are individuals:
- In most cases, the commercial bank or payment service provider will be tasked with withholding and remitting the tax when it processes the transaction.
- If it is not possible for the commercial bank or payment service provider to withhold the tax, they must monitor the amounts transferred to the overseas supplier and report it to the General Department of Taxation on the 10th of every month.
To implement this, the General Department of Taxation will be responsible for maintaining a list of such overseas suppliers and providing their names and websites to the headquarters of banks and payment service providers in order for their branches to withhold tax when processing payments for transactions with these overseas suppliers.
Under relevant double taxation agreements (“DTAs”), the Vietnamese tax authorities have the right to coordinate with the tax authorities of other countries with regard to overseas suppliers required to declare and pay taxes in Vietnam, including collecting taxes in arrears and enforcing measures against non-compliance.
Online platform for direct tax reporting
On 21 March 2022, the General Department of Taxation announced the opening of the online portal for overseas suppliers at https://etaxvn.gdt.gov.vn (see a screenshot of the portal below).
Overseas suppliers with income from Vietnam will now be able to register, declare, and pay tax through this portal without having to submit hard copies of documents to the Vietnamese tax authorities.
Overseas suppliers will have to go through an initial registration procedure the first time they enter the portal, and will need the ability to access and use the internet and a working email address to communicate directly with the tax authorities. After successfully completing the tax registration procedure, information about their electronic transaction account and tax identification number will be sent to the email address used for registration.
Overseas suppliers will need to make quarterly tax declarations by completing Form No. 02/NCCNN on the portal (a sample of which was issued with the Circular). They will declare and pay tax in a freely convertible foreign currency into the state budget revenue account, instructions for which are on the portal.
Revenue subject to value added tax and corporate income tax is calculated as a percentage of the business revenue generated from Vietnam. Overseas suppliers may carry out procedures for tax exemption or reduction under an applicable DTA.
The Circular sets out the approach for the determination of revenue subject to tax in Vietnam:
“a) Information used for identification of transactions of organizations and individuals purchasing goods and services in Vietnam:
a.1) Information relevant to payments made by the organization or individual in Vietnam, such as information about the credit card based on Bank Identification Number (BIN), bank account or similar information used by the buyer to pay the overseas supplier.
a.2) Information about residence of the organization or individual in Vietnam (payment address, delivery address, home address or similar information provided by the buyer for the overseas supplier).
a.3) Information about access of the organization or individual in Vietnam such as country code of the SIM card, IP address, landline location or similar information about the buyer.
b) When a transaction is found to be located in Vietnam, the overseas supplier shall:
b.1) Use two consistent pieces of information, including information about payment made by the organization or individual in Vietnam and information about residence or access of the organization or individual in Vietnam.
b.2) In case information about the payment made by the organization or individual cannot be collected or contradicts the other information, the overseas supplier may use two consistent pieces of information, including information about residence and information about access of the organization or individual in Vietnam.”
Overseas suppliers should retain the information used to identify transactions with buyers in Vietnam as mentioned above in order to facilitate tax inspection by the Vietnamese tax authorities.