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Jun 23, 2021 / 18:31

Would withholding tax on e-commerce be possible?

Tax authorities said they would review the roadmap of taxation collection and pilot tax withholding at some e-commerce sites.

A new circular released by the Vietnamese Ministry of Finance has been criticized for affecting the operation of e-commerce platforms and their hundreds of thousands of sellers.

Under Circular No. 40, which will take effect on August 1, e-commerce platforms are required to declare and pay tax on behalf of third-party sellers on the platforms.

 Sendo said the application of the Circular will require a team of tax professionals to classify taxable revenue and tax rates applied. Photo: Grab

The circular on value-added tax, personal income tax, and tax administration for business households and individuals are expected to collect tax from some people who obtain income on electronic commerce platforms but for years have not paid taxes.

The tax authorities have asked e-commerce and delivery companies to take responsibility for the tax registrations, declarations, and payments of sellers. 

Confusion over the new rules

Some local major e-commerce players, including Sendo, Shopee, Tiki, and Chotot, told The Hanoi Times that they are confused about the Circular.

A representative from Sendo, who wanted to be anonymous, told that it has only provided a technology infrastructure for sellers and buyers to make transactions. 

He said the implementation of the Circular requires an investment in infrastructure including software to determine sales of the seller as well as a team of tax professionals to classify taxable revenue and tax rates applied, calculate the amount of tax to be paid, fill out tax returns.

The e-commerce companies said it is difficult for them to declare tax on behalf of sellers on the e-commerce site when they reside in different localities.

According to Article No. 45 of the Law on Tax Administration, sellers have to declare and pay tax at the local tax departments where their office is registered and e-commerce platforms and third-party sellers have their offices registered at different places. 

Nguyen Ngoc Dung, Vice Chairman of the Vietnam e-Commerce Association (VECOM), had the same view with e-commerce players, adding: “The above-mentioned requirement will lead to conflicts with another current regulation.”

Nguyen Thi Thanh Huyen, Deputy General Director of Ernst & Young Vietnam (E&Y Vietnam) said Circular No. 40 will put great pressure on businesses because there has never been a specific regulation on the declaration and payment of tax on behalf of e-commerce transactions. 

Huyen said with about 3.5 million transactions per day, the workload for the e-commerce sites is huge. Moreover, e-commerce companies do not have a database to control sellers who are subject to pay tax.

Doan Thi Ngan, a Ho Chi Minh City-based clothing seller on Shopee, was unhappy about the circular. According to the regulations, she will have to pay more than 5% of total annual revenue instead of 2% currently, according to personal income tax rules. “I don’t know how and when to pay the tax,” she told The Hanoi Times.


Sendo said the enforcement of the regulations is very complicated. It recommended the tax authorities give specific and consistent information about the application and roadmap before applying this circular. “Especially, time for the application of the Circular should be postponed because it is impossible to apply the circular on August 1,” he said.  

 Tiki needs more time to prepare its infrastructure and system for data collection. Photo: Tiki

Tiki said it takes time for the e-commerce enterprise to guide and agree with brand partners and sellers about the implementation of the regulations. “We need more time to prepare our infrastructure and system for data collection, as well as ensuring security when implementing the regulations,” a representative from Tiki told The Hanoi Times.

Huyen from E&Y Vietnam suggested, tax authorities should consider not applying the regulations for some e-commerce sites (chotot.vn, batdongsan.com.vn) as they are not directly involved in e-commerce transactions between buyers and sellers and only provide online business premises and transaction matching services.

According to lawyer Nguyen Tien Hoa, the new regulation will weaken the e-commerce site's competitiveness with other platforms such as Facebook, which are not currently not regulated by the law on electronic transactions.

According to him, e-commerce platform operators are not subject to the obligation to declare and withhold income tax of the seller according to the provisions of Clause 1, Article 24 of the Law on Personal Income Tax.

“The provisions of Decree No. 52 on e-commerce stipulate sellers on e-commerce platforms are responsible for fulfilling tax obligations in accordance with the law, not the e-commerce operators,” Hoa told The Hanoi Times

He referred to the practice of other countries including Thailand, Indonesia, China, Singapore, Malaysia, and the Philippines where sellers are responsible for declaring and paying their taxes. Such regulations are perfectly applicable and feasible in Vietnam.