E-commerce platforms to pay taxes on behalf of sellers: a bold move in need of test run

The Hanoi Times — Starting April 1, all e-commerce platforms, including foreign ones and digital platforms with payment functions, must withhold and pay taxes on behalf of individual and household businesses operating on their platforms.

This regulation is part of the revised Tax Management Law, passed by the National Assembly on November 19, 2024. Instead of requiring each seller to declare and pay taxes individually, platforms will deduct taxes directly from their revenue.

Currently, Vietnam has nearly 725,000 organizations and individuals doing business on e-commerce platforms, with total transaction value reaching VND75 trillion (US$2.9 billion) and daily transactions worth VND150 billion ($6 million).

In response to the new law, Shopee has announced its compliance plan. The platform confirmed that it will withhold, declare, and pay taxes on behalf of businesses and individuals selling on Shopee.

The company is working closely with tax authorities and making necessary preparations to ensure compliance. Once the official decree is issued, Shopee will provide detailed guidelines for sellers, including applicable tax rates and calculation methods.

Under the Tax Management Law, sellers must provide accurate information, including their legal business status, full name, tax identification number, and other necessary details. If a seller fails to provide this information, Shopee will still deduct taxes based on their transaction revenue starting April 1, 2025.

Shopee also clarified that once taxes are withheld, they will not be refunded or adjusted if the seller later corrects their business classification.

As of now, other major e-commerce platforms like Lazada, TikTok Shop, Tiki, and Sendo have not made official announcements regarding their implementation of the new tax policy.

This measure is believed to reduce administrative procedures for tax authorities, simplify tax payments for businesses, promote business growth and, most importantly, prevent tax evasion in online commerce.

Le Hong Duc, founder of OneAds Digital, believes this policy benefits individual and household businesses by saving them time and effort in tax filing and preventing penalties due to incorrect declarations.

“Having platforms handle tax payments reduces administrative burdens for us. Not every seller understands tax procedures, and many have faced heavy fines for late payments,” Pham Thu Hang, an online seller, said.

According to a recent report by Metric, the total revenue of Vietnam’s top five e-commerce platforms (Shopee, Lazada, TikTok Shop, Tiki, and Sendo) reached VND318.9 trillion ($12.5 billion) in 2024, a 37.36% increase from 2023.

Tran Van Lam, a standing member of the National Assembly’s Finance and Budget Committee, sees the new regulation as a step forward in tax management.

“Previously, tax authorities had to collect taxes from hundreds of thousands of individual sellers. Now, platforms will handle it, simplifying the process and preventing tax losses,” he said.

Hoang Van Cuong from the same committee agrees, saying that platforms that directly manage transactions between buyers and sellers should be responsible for tax collection rather than leaving it to individual sellers.

Nguyen Thi Lan Anh, Head of the Tax Department for Small and Medium Enterprises and Household Businesses under the General Department of Taxation, said that platforms already have detailed seller information, so tax withholding should not be an issue.

“The only challenge is establishing a standardized connection method between platforms and tax authorities to ensure smooth implementation,” she said.

To further assist taxpayers and e-commerce platforms, the General Department of Taxation is developing an online portal for individual and household businesses, she added.

In its first phase, this portal will support tax registration, declaration, and payment. After the law takes effect, it will be upgraded to align with new regulations.

Between Q4 2022 and Q4 2024, Vietnam’s tax authorities collected data from 439 e-commerce platforms, covering 40 billion transactions worth VND366 trillion ($14.4 billion). Additionally, tax agencies are gathering information from delivery services and foreign online platforms to build a more comprehensive database.

In 2024 alone, tax authorities investigated and penalized 33,003 cases (736 businesses and 32,267 individuals), resulting in nearly VND1.4 trillion ($55 million) in back taxes and fines.

The government is also collaborating with the Ministry of Industry and Trade to track data from 929 websites and 284 e-commerce applications. Tax authorities are verifying active platforms to ensure compliance with tax reporting obligations.

Remaining doubts

Bui Ngoc Tuan, Deputy General Director of Deloitte Vietnam, emphasized the need for tax authorities and e-commerce platforms to develop automated tax calculation tools as they avoid creating unnecessary burdens for stakeholders.

Some countries require platforms to withhold taxes on transactions conducted via intermediary platforms, he said.

For example, the European Union introduced the One Stop Shop (OSS) mechanism on July 1, 2021. This system mandates e-commerce platforms to collect and remit value-added tax (VAT) on sales where sellers are not based in the EU but sell goods to EU consumers.

In the US, large platforms like Amazon, eBay, and Etsy are responsible for collecting and remitting sales tax on transactions where the seller has no physical presence in some certain states.

"Platforms must also gather and ensure proper tax reporting for all cross-border sales," Tuan said.

“The concept of tax withholding is not new, but it is crucial. However, authorities must provide clear and detailed guidelines on who is responsible for withholding and what procedures must be followed,” he added.

Some businesses and individuals earn income from Vietnam’s digital economy without having a physical presence in the country, he said.

Taxing them may may conflict with international tax principles and the Double Taxation Agreements (DTAs) that Vietnam has signed, Tuan warned.

"Regulators need to clarify the legal basis for identifying taxable income from these activities while considering Vietnam's international commitments under DTAs," he added.

“From a taxpayer's perspective, it is essential to clarify the responsibilities of e-commerce platforms and digital service providers. This will protect taxpayers' rights and minimize risks related to transparency and tax compliance.”

Many platforms also question the implementation timeline of tax laws, including the Law on Tax Administration, the Personal Income Tax Law, and the Value-Added Tax Law. These laws have different effective dates, causing confusion among e-commerce businesses.

Nguyen Thanh Ha, Chairman of SB Law Firm, said that companies need time and resources to adjust their systems and processes to comply with new regulations.

"It could take one to two years for businesses to fully implement these requirements. Compliance will increase operational and management costs as platforms handle tax collection and reporting," he said.

E-commerce platforms may have to invest in technology, hire tax and technology experts, and provide continuous training to ensure compliance, Ha noted.

"To offset these costs, platforms may raise service fees, making products and services more expensive. This would disadvantage small and medium-sized sellers who already struggle with competitiveness," he said.

Ha also questioned whether e-commerce platforms would be legally liable for tax obligations or merely act as intermediaries collecting tax on behalf of authorities.

Determining the revenue, profits, and tax obligations of individual sellers on digital platforms is challenging, particularly for transactions conducted outside official systems, he said.

"Online sellers operate in diverse ways, making it difficult to apply a standardized tax policy. Some may underreport income or avoid taxes, creating legal risks for platforms," he said.

He suggested a phased approach to implementation, allowing time for testing and adjustments to prevent disruptions.

Nguyen Van Duoc, General Director of Trong Tin Tax Consulting and Accounting, stressed the importance of early implementation to reduce tax collection costs, despite initial challenges in data exchange between platforms and sellers.

Identifying taxable sellers is not difficult since e-commerce platforms already collect business registration details, national ID numbers, bank accounts, and product quality registrations, he said.

"The key now is for platforms to inform sellers about tax obligations and encourage them to report their revenue. Platforms can then consolidate this information and remit taxes on their behalf," Duoc said.