Vietnam introduces taxation on foreign e-commerce business

HANOI - Vietnam has introduced a new taxation regime for foreign service providers including e-commerce business. In a Client Alert, lawyers Baker McKenzie say that both banks and foreign suppliers (having no permanent establishment in Vietnam) will now be required to file and pay tax in Vietnam.

The new Law on Tax Administration,will take effect  from  July l, 2020.

BM quotes the following excerpt from the new legislation:

"Regarding e-commerce business activities, business conducted on digital platform and other services provided by offshore suppliers having no permanent establishment in Vietnam, offshore suppliers shall directly or authorise [a third party] to conduct tax registration, tax declaration and payment in Vietnam as guided by the Ministry of Finance."

Additionally, BM says, the law provides that a Vietnamese contracting party is required to use a tax code issued to an organisation or individual that has no presence in Vietnam and conducts cross-border business activities on a digital platform for the purpose of withholding and paying tax on behalf of that organisation or individual.

"Based on these provisions, there would seem to be three entities held liable for tax declaration and payment with respect to typical e-commerce transactions or transactions on a digital platform," the Client Alert says.

"However, the law does not specify which circumstance a particular entity (bank, foreign service provider without permanent establishment or customer) is responsible for tax declaration and payment.

"The law is also silent as to whether the tax registration, filing and payment is also applicable to foreign service providers having a permanent establishment.

"The Government and Ministry of Finance are expected to address these grey areas in their upcoming guidelines." www.bakermckenzie.com (ATI).