The City People's Committee of Hanoi has just released the Official Letter No. 1633/UBND-KTTH dated 30 May, 2022, about strengthening tax management for business households and individuals, which mentioned tax management for online businesses. This article informs online business vendors of some instructions on comprehending and fulfilling their tax-paying obligations.

Subject of paying taxes for of online businesses

According to Clause 1, Article 1, Circular 92/2015/TT-BTC, residents doing business in Vietnam including individuals, groups of individuals, and households who manufacture and/or trade in goods, services in any field and sector prescribed by law  must pay tax.

At the same time, it can be understood from Article 4 of Clause 2 of Circular 40/2021/TT-BTC, that when the revenue from business operation of a household or individual in the calendar years is over VND 100 million, the owners of business must perform VAT and PIT tax obligations. This  is also applied to online businesses. 

Methods of paying tax for online businesses 

There are two main ways of paying  taxes for online businesses, depending on the circumstances.

In case the businesses are run through online sales, excluding sales from e-commerce exchanges, online vendors pay taxes directly to the in-charge authority. 

Meanwhile, according to Clause 2, Article 1, Circular 100/2021/TT-BTC, e-commerce platforms namely Shopee, Tiki, Sendo, on the basis of authorization, are allowed to declare and pay taxes on behalf of individuals who are classified as their online sellers. 

Based on Appendix I of  Circular 40/2021/TT-BTC, the taxable rate for wholesaling, retailing of goods in general and online business is 1% with the VAT and 0.5% with the PIT.

Tax payment notes for online foreign vendors

For foreign online business vendors, the Ministry of Finance (MoF) announced the opening of an electronic portal for foreign suppliers on March 21, 2022. Therefore, foreign sellers with an income source from Vietnam can register, declare, and pay taxes through this portal. The portal creates an easy-to-use online interface for foreign suppliers to easily perform administrative tasks and tax payment liability to  the Vietnamese tax authorities. 

Foreign vendors doing online business have to declare tax on a quarterly basis. After making tax declaration and adjustment, the vendors shall receive 01 identification code for the payable amount and be notified through the email. 

Upon the receipt of the identification code, the taxpayers must pay the tax in a freely convertible foreign currency to the state account in accordance with the notice on the General Department of Taxation’s website. Additionally, the vendors must make sure to enlist the correct identification code.  

In terms of the payment amount, it includes VAT and CIT as a percentage of the revenue and profit of the online foreign business according to Decree No. 209/2013/ND-CP on VAT and  Decree No. 218/ 2013/ND-CP on CIT for each product and service applicable to foreign organizations and individuals doing business or earning income in Vietnam. 

In case the taxpayers belong to a country or territory with a tax agreement with Vietnam, they may carry out procedures for tax exemption or reduction under the Agreement on avoidance of double taxation as prescribed.

Meanwhile, if the vendor authorizes a Vietnamese commercial bank or tax agent to register, declare and pay tax, the authorized party is responsible for implementing those obligations. In addition, commercial banks or payment intermediary service providers implement the declaration, deduction, payment, and monitor the transfer on behalf of online foreign business at the time the General Department of Taxation notifies them.  

In conclusion …

Tax obligations related to online business can be quite sophisticated, hence creating confusion for foreign investors. In this case, advice should be sought from top-notch experts with the right local expertise. Viettonkin is one of the leading professional firms with more than 12-year experience in diverse industries and sectors. Our team of well-informed professionals in Vietnamese markets and legal systems are capable of assisting you navigate through the legal process of doing business in Vietnam. With us by your side, you can focus on what really matters to you. Let us be your trustworthy partner!