In 2024, Vietnam’s tax revenue from e-commerce activities totaled approximately $4.9 billion. However, the contribution from individual and household online businesses was just $105 million.

Many online sellers fail to declare and pay taxes

The Ministry of Finance is currently gathering public feedback on a draft decree regulating tax management for e-commerce activities. This proposed regulation will cover online transactions conducted by both businesses and individual sellers on digital platforms.

According to the ministry, Vietnam’s e-commerce market has seen rapid growth in recent years. The market expanded from $16.4 billion in 2022 to $20.5 billion in 2023 and is projected to reach $25 billion (around VND 630 trillion) in 2024.

Tax collection data from 2022 to 2024 shows an upward trend in overall tax revenue from e-commerce activities. In 2022, the total tax collected from e-commerce businesses was $3.5 billion, rising to $4.1 billion in 2023, and reaching $4.9 billion in 2024.

However, the portion of tax collected from individual and household online businesses remains significantly low. In 2022, these entities contributed just $7.7 million in taxes, decreasing to $2.8 million in 2023. For 2024, the expected contribution is approximately $105 million, collected from over 300,000 individuals operating on more than 400 e-commerce platforms.

Overall, tax revenue from domestic businesses, household businesses, and foreign suppliers without a permanent establishment in Vietnam accounts for only about 20% of the total revenue generated in the country’s e-commerce market. This proportion has declined from 20.1% in 2022 to 17.4% in 2024.

The Ministry of Finance noted that tax collection from individual online businesses remains ineffective and does not reflect the rapid expansion of e-commerce. Authorities acknowledge that many sellers have not registered or fulfilled their tax obligations as required by law.

A significant challenge is the inability to identify numerous online sellers. On five major e-commerce platforms- Shopee, Lazada, Tiki, Sendo, and Grab - there are over 300,000 seller accounts without verified identities. These unidentified sellers collectively generate an estimated $2.9 billion in revenue.

Reducing tax procedures for 300,000 individual and household businesses

The Ministry of Finance argues that a new tax management decree is necessary to regulate taxation on digital platforms. The draft decree outlines several key points, including:

Defining the responsibilities of e-commerce platforms and digital payment service providers, both domestic and international, in tax withholding and submission.

Establishing procedures for platforms to deduct and declare taxes on behalf of sellers who meet tax liability thresholds.

Specifying tax declaration, payment, and refund procedures for individuals and businesses engaged in e-commerce who do not qualify for automatic tax withholding.

The ministry believes these measures will help simplify administrative processes for over 300,000 online businesses while ensuring proper tax compliance. Under the proposed regulation, e-commerce platforms will be responsible for withholding and remitting taxes on behalf of individual sellers, whether they reside in Vietnam or operate from abroad.

Additionally, platforms will be required to provide verified seller information. This provision is expected to increase tax revenue significantly by ensuring that previously unidentified sellers contribute their fair share.

Based on preliminary estimates, if unverified sellers were taxed at a rate of 1.5% on their reported revenue of $2.9 billion, the government could collect an additional $42 million in tax revenue. This figure does not account for further gains from individuals who have underreported or failed to declare their income.

Tax rates for online transactions

Article 4, Clause 2 of the draft decree outlines the tax rates for value-added tax (VAT) and personal income tax (PIT) applicable to different types of online transactions.

VAT rates: 1% for goods, 5% for services, and 3% for transportation and service-related goods. These rates apply to both domestic and foreign sellers.

PIT rates:

For Vietnamese residents: 0.5% on goods, 2% on services, and 1.5% on transportation and service-related goods.

For non-residents: 1% on goods, 5% on services, and 2% on transportation and service-related goods.

If e-commerce platforms cannot determine whether a transaction involves goods or services, the highest applicable tax rate will be used.

The Ministry of Finance expects these measures to enhance tax compliance and increase government revenue while reducing administrative burdens for online businesses.

Binh Minh