Value-added tax applicable for digital transactions in Vietnam
By David Truong Lang, Viettonkin Consulting
The Vietnamese government recently issued several regulations to support tax collection on digital transactions conducted by non-resident foreign contractors without a permanent establishment (“PE”) in Vietnam. Moreover, according to the Ministry of Finance (MOF), effective on 01 February 2022, the value-added tax (“VAT”) on goods and services will be reduced from 10% to 8% to support businesses recovery from the Covid-19 pandemic. This regulation only applies to goods and services with a tax rate of 10%, regardless of the tax calculation method, so digital transactions initiated by foreign contractors as mentioned above are entitled to the same VAT rate reduction.
- Foreign contractors without a PE in Vietnam who conduct e-commerce, digital-based business, or other services with entities in Vietnam; or tax agents authorised by overseas suppliers.
- Vietnamese organisations that purchase goods and services from overseas suppliers, in cases where the overseas suppliers have no tax registration, declaration, and payment.
- Commercial banks or intermediary payment service providers (IPSPs) in cases of local purchasers and overseas suppliers without tax registration, declaration, and payment.
Tax liability and implications:
Circular 80/2021/TT-BTC provides a clear definition of in-scope e-commerce (both business-tobusiness-“ B2B” and business-tocustomers-“ B2C” shall apply) and digital based business activities, as the activities of business entities via an intermediary digital system to connect with customers.
The Circular also stipulates the implementation of this tax liability on foreign suppliers without a PE in Vietnam, which are conducting such e-commerce and/or digitalbased transactions with Vietnam and thus have income in Vietnam.
The government shall apply the tax registration, declaration and payment as follows. First, in a B2B-based digital transaction for overseas contractors that don’t register to self-declare and pay tax in Vietnam, the Vietnamese corporate customers are subject to fulfilling the withholding, filing and VAT remittance requirements as set forth by the Vietnamese authority. Second, in B2C based digital transactions for overseas suppliers that don’t register to self-declare and pay tax in Vietnam, either Vietnamese banks or local payment intermediaries are subject to this withholding, filing and VAT remitting on a monthly basis.
As a result of the new regulation on the VAT rate change, this is also applicable for such digital transactions, so overseas suppliers should be aware of this and take appropriate action for the sake of their own business and customers.
David Truong LangGGI member firm
Auditing & Accounting, Tax, Corporate Finance, Advisory
Ha Noi and Ho Chi Minh City, Vietnam
T: + 84 918 866 858
Founded in 2009, Viettonkin is a multidisciplinary group of consulting firms specialising in accounting, legal, and a one-stop solution to FDI enterprises worldwide. The FDI consulting company aims to facilitate and connect investors in Southeast Asia with the rest of the world.
David Truong Lang is the Founder and CEO of Viettonkin. He has over 10 years of experience, focused on FDI investment and supporting worldwide enterprises.
Published: Indirect Taxes Newsletter, No. 13 Spring 2022 l Photo: Art_Photo - stock.adobe.com