On March 21, three months after Circular 80/2021 took effect, the General Department of Taxation organized a ceremony to launch the electronic information portal for overseas service providers at Etaxvn.gdt.gov.vn and an electronic tax app on a mobile platform (eTax Mobile).
The new regulation will remove obstacles in the legal framework existing for many years. Now cross-border businesses can directly pay tax for revenue from transactions with individual Vietnamese customers.
Nguyen Van Phung, director of the Department of Tax Administration at Large Enterprises, said that, in recent years, some foreign corporations have been providing services to the Vietnamese market across borders. However, Vietnam can only collect taxes through a contractor tax.
Under Circular 103/2014 on tax obligations applied to foreign institutions and individuals doing business in Vietnam or have income in Vietnam, foreign institutions receiving income from Vietnam when selling goods and services to Vietnam must pay tax.
With the regulation, since 2014, Vietnam has assigned Vietnamese institutions such as banks and advertising service providers to withhold contractor tax when paying money to their foreign institutional partners, which is the contractor tax.
However, with the mechanism, Vietnam still cannot collect tax from transactions between cross-border service providers and individual users in Vietnam.
Netflix, for example, provides services to individual clients in Vietnam and the money from the clients goes to Netflix’s account. As such, though Vietnam has a legal framework for taxing these service providers, problems in implementation still exist because of insufficient regulations.
The Ministry of Finance (MOF) has developed a law on tax management, and decrees and circulars to fix the problems in collecting tax from cross-border services. The law created a turning point in tax management for e-commerce activities, especially for activities conducted by foreign suppliers with no presence in Vietnam. It lays down a firm legal framework for the taxation agency and creates a fair business field.
In addition to these legal documents, MOF has submitted to the Government the tax administration mechanism applied to e-commerce.
For overseas suppliers, Vietnam will apply two mechanisms at the same time, including the foreign contractor withholding tax, and direct payment via the electronic information portal.
GDP recommends that foreign service providers declare tax via the electronic information portal, which is better and more transparent.
According to Phung, Vietnam has collected nearly VND5 trillion worth of tax from business activities on the Internet, mostly through the contractor withholding tax. With the new method, the figure is expected to increase by 20-30 percent per annum.