Issue of April, 2025 -Draft Decree on tax administration for business activities conducted via e-commerce platforms and digital platforms by household businesses and individual businesspersons

 

Dear Valued Clients,

In the era of the rapid growth and widespread adoption of e-commerce and digital economic platforms, the administration of tax obligations for household businesses and individual businesspersons operating on such platforms presents numerous practical challenges. In an effort to gradually improve the legal framework and ensure transparency and fairness in tax compliance, the Ministry of Finance has released a Draft Decree on tax administration for business activities conducted via e-commerce platforms and digital platforms by household businesses and individual businesspersons (the “Draft Decree”). This Draft Decree is regarded as a significant step forward in the reform of tax policies, aiming to align with the ongoing digital transformation and the continued expansion of online commercial activities.

Accordingly, in this Legal Update, we will analyze the key new provisions introduced under the Draft Decree, with particular focus on the proposed withholding tax rates applicable to business entities operating on e-commerce platforms, as well as the associated legal implications.

1. Expansion of the scope of application

The Draft Decree is designed with a comprehensive regulatory scope, targeting both domestic and foreign individuals and household businesses engaging in e-commerce or providing digital products and services in the Vietnamese market. Specifically, the applicable subjects include [1]:

(i)   Household businesses, resident individuals, and non-resident individuals conducting business activities on e-commerce platforms, digital platforms, or other digital economic activities (hereinafter referred to as “e-commerce platforms”)

(ii)   Organizations managing e-commerce trading platforms or digital platforms with payment functions, and other organizations engaged in digital economic activities [2] (hereinafter referred to as “e-commerce platform operators subject to tax withholding and payment on behalf”)

(iii)  E-commerce platforms and digital platforms without payment functions (hereinafter referred to as “e-commerce platforms not subject to tax withholding and payment on behalf”);

(iv)   Tax authorities and other organizations or individuals involved in the implementation, administration, supervision, and enforcement of tax policies applicable to e-commerce and the digital economy.

The clear specification of these subject groups aims to ensure a sound legal basis for tax administration over business activities on digital platforms, thereby enhancing the effectiveness and efficiency of state governance and promoting the sustainable development of the digital economy in Vietnam.

2. Tax withholding and payment mechanism by e-commerce platform operators subject to tax withholding and payment on behalf

Pursuant to Article 3 of the Draft Decree, the legal responsibilities of e-commerce platform operators in withholding and paying taxes on behalf of household businesses and resident/non-resident individuals are clearly defined as follows:

a. For household businesses and resident individuals:

E-commerce platform operators, whether domestic or foreign (including direct owners of the platforms or authorized managers), who are subject to tax withholding and payment on behalf, are responsible for:

(i)   Withholding and remitting value-added tax (“VAT”) in accordance with the laws on VAT for each transaction involving the provision of goods or services generating domestic revenue by household businesses or resident individuals conducting business on e-commerce platforms;

(ii)   Withholding and remitting personal income tax (“PIT”) for each transaction involving the provision of goods or services generating domestic or international revenue by household businesses or resident individuals operating on e-commerce platforms.

b. For non-resident individuals:

E-commerce platform operators, whether domestic or foreign (including direct owners of the platforms or authorized managers), who are subject to tax withholding and payment on behalf, are responsible for:

(i)   Withholding and remitting VAT in accordance with the laws on VAT for each service transaction generating domestic revenue by non-resident individuals conducting business on e-commerce platforms;

(ii)   Withholding and remitting PIT in accordance with the laws on PIT for each transaction involving the provision of goods or services generating domestic revenue by non-resident individuals operating on e-commerce platforms.

This withholding and payment mechanism is aimed at enhancing the responsibility of platform operators in supporting tax compliance, while also simplifying administrative procedures for household businesses and individuals, especially in the context of increasingly diverse digital transactions.

3. Timing of withholding and determination of withholding tax rates by business type

The Draft Decree specifies that, prior to transferring payment from buyers of goods or services on e-commerce platforms to household businesses or individuals, the e-commerce platform operators subject to withholding and payment on behalf (as stipulated in Section 2 above) must withhold VAT and PIT applicable to each revenue-generating transaction involving goods or services conducted on the e-commerce platform under their management. The determination of the amount of tax to be withheld shall follow the provisions set forth below [3]:

The amount of VAT and PIT subject to withholding shall be determined as a percentage (%) of the revenue generated from each completed transaction. Specifically, the applicable VAT rates shall be determined in accordance with the Law on VAT as follows:

Business type	VAT rate (%)	Applicable Entities
Goods	1%	Resident individuals
Services	5%	Resident and Non – resident individuals
Transportation and services associated with goods	3%	Resident and Non – resident individuals

For PIT, the applicable tax rates shall be determined in accordance with the Law on PIT as follows:

Applicable Entities	PIT rate on goods (%)	PIT rate on services (%)	PIT rate on transportation and related services (%)
Resident individuals	0,5%	2%	1,5%
Non – resident individuals	1%	5%	2%

In cases where the e-commerce platform operators subject to tax withholding obligations cannot determine whether a transaction involves goods or services, the highest applicable withholding rate as stipulated above shall apply.

The revenue of each completed transaction refers to the total amount collected by the e-commerce platform operator from the buyer for the sale of goods or provision of services.

4. Method of tax declaration and payment for withheld taxes

Pursuant to Article 5 of the Draft Decree, e-commerce platform operators shall be responsible for filing monthly tax declarations for the amount of taxes withheld in accordance with tax administration laws.

Domestic e-commerce platform operators shall be assigned a unique 10-digit tax identification number (TIN) for the purpose of declaring and paying withheld taxes on behalf of household businesses and individual businesspersons. The TIN registration dossier shall be prepared in accordance with the regulations issued by the Minister of Finance on tax registration.

Foreign e-commerce platform operators shall be assigned a 10-digit TIN for fulfilling tax obligations incurred in Vietnam (if any), in accordance with regulations applicable to foreign suppliers under Circular No. 80/2021/TT-BTC dated 29 September 2021 of the Ministry of Finance, and may use this TIN to declare and pay withheld taxes on behalf of resident individuals conducting business on foreign e-commerce platforms.

The tax declaration dossier shall include the tax withholding return for household and individual businesses and a detailed tax withholding statement.

Submission of Tax Declaration Dossier and Payment of Withheld Taxes: Tax declaration dossiers shall be submitted electronically to the directly managing tax authority (i.e., the tax authority responsible for managing e-commerce activities). Taxes withheld shall be paid in accordance with the applicable laws on tax administration and the state budget. Additionally, entities mentioned in Section 3 above must also prepare a Detailed Tax Payment Statement (Form No. 01/BKNT-TMĐT) enclosed with this Decree and submit it to the tax authority at the same time as submitting the payment slip to the state budget.

The deadlines for payment of withheld taxes and for submission of the tax declaration dossier shall comply with Articles 44 and 55 of the Law on Tax Administration No. 38/2019/QH14.

5. Cases in which household businesses and individuals operating on e-commerce platforms are not subject to tax withholding

Pursuant to Article 7.1 of the Draft Decree, household businesses and resident individuals operating on e-commerce platforms that are not subject to tax withholding must directly fulfill their tax obligations in relation to applicable taxes, including VAT, PIT, special consumption tax, environmental protection tax, natural resources tax, and other payables to the state budget as administered by the tax authorities in accordance with relevant tax laws and other applicable legislation.

These household businesses and individuals must file and pay taxes directly via the Electronic Portal of the General Department of Taxation, which is designated specifically for household and individual businesses operating in the e-commerce and digital platform sector.

Conversely, non-resident individuals operating on e-commerce platforms that are not subject to tax withholding shall declare and pay VAT on digital services and PIT on the sale of goods and services on a per-transaction basis using fixed percentage rates on revenue, as prescribed by the Law on VAT and the Law on PIT [4]. 

Accordingly, the percentage rate for calculating VAT shall be applied in accordance with the provisions of the Law on VAT and PIT as follows:

Business type	VAT Rate (%)	PIT Rate (%)
Goods	–	1%
Services	5%	5%
Transportation	–	2%
Transportation and related services	3%	–

As usual, we hope you find this Legal Update helpful and look forward to working with you in the upcoming time.

Kind regards,

ENT Law LLC

The full version of this Legal Update can be found here.

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[1] Article 2 Draft Decree.

 

[2] Organizations engaged in other digital economic activities refer to entities that participate in business cooperation involving the trading of goods or the provision of services with household businesses or individual businesspersons, or that assist such household businesses or individuals in executing transactions for the supply of goods and services through digital means. These include intermediary platform operators facilitating service connection; digital content platform providers; online advertising service providers; providers of storage and cloud computing services; social media platform operators conducting business activities; providers of online education services; online gaming and digital entertainment platform operators; entities in Vietnam acting as local partners of foreign digital platform providers and making income payments to individuals from digital content products or services pursuant to agreements with such foreign platform providers; and entities providing intermediary payment services.

 

[3] Article 4.2 Draft Decree.

 

[4] Article 8 Draft Decree.