In brief
Following the National Assembly’s adoption of the Law on Tax Administration, the Vietnam Ministry of Finance (MOF) just issued Circular No. 80/2021/TT-BTC (“Circular 80“) to provide implementing guidelines on the Law on Tax Administration and Government Decree No. 126/2020/ND-CP. One of the important provisions under Circular 80 is tax administration with respect to e-commerce business, digital-based business and other services of overseas suppliers without having a permanent establishment (PE) in Vietnam (hereafter called “overseas suppliers“).
In this client alert, we summarize below the salient points under Circular 80 that may affect your business. Circular 80 will take effect from 1 January 2022.
Key takeaways
In this client alert, the following topics will be discussed:
- Concerned entities for tax registration, declaration and payment
- Tax registration, declaration and payment process of overseas suppliers
- In case overseas suppliers do not register, declare and pay taxes in Vietnam
- Claiming tax relief according to tax treaty
In more detail
1. Definition of e-commerce business and digital-based business
Circular 80 provides the following definitions:
- ‘E-commerce activity’ is the conduct of part or the entire process of commercial activity by electronic means connected to the internet, mobile telecommunications networks or other open networks in accordance with Decree No. 52/2013/ND-CP.
- ‘Digital-based business’ is the provision of services through the internet or an electronic network, and the nature of such provision is basically automated with little to no human intervention and cannot be done without using information technology.
2. Concerned entities for tax registration, declaration and payment
- Overseas suppliers that do not have a PE in Vietnam and conduct e-commerce business, digital-based business or other services with organizations and individuals in Vietnam; or tax agents authorized by overseas suppliers
- Vietnamese organizations that purchase goods and services from overseas suppliers in case overseas suppliers do not register, declare, and pay tax
- Commercial banks or intermediary payment service providers (IPSPs) in case local purchasers are individuals and overseas suppliers do not register, declare, and pay tax
3. Tax registration, declaration and payment of overseas suppliers
Overseas suppliers will conduct tax registration on an electronic portal of the General Department of Taxation (GDT). Overseas suppliers will conduct tax registration and start declaring and paying taxes after the announcement of the GDT that the electronic portal system goes into operation. Overseas suppliers declare and pay value-added tax (VAT) and corporate income tax (CIT) on a quarterly basis at deemed rates on the revenues they receive.
Overseas suppliers can authorize organizations or tax agents in Vietnam to conduct tax registration, declaration and payment on their behalf.
4. In case overseas suppliers do not register, declare and pay taxes in Vietnam
- In case overseas suppliers do not register to pay taxes in Vietnam, Vietnamese organizations that purchase goods or services of overseas suppliers or distribute goods or provide services on behalf of overseas suppliers will be responsible for declaring, withholding and paying VAT and CIT at the deemed rates on revenues on behalf of overseas suppliers (i.e., the current foreign contractor tax withholding regime).
- In case overseas suppliers do not register to pay taxes in Vietnam with respect to sale of goods or provision of services to individuals, commercial banks and IPSPs will be responsible for withholding and paying VAT and CIT on a monthly basis at the deemed rates on revenues on behalf of overseas suppliers. Tax withholding and declaration will start only when the GDT sends a notice to commercial banks and IPSPs.
5. Claiming tax relief according to tax treaty
- Overseas suppliers that are residents of a country or territory having an effective tax treaty with Vietnam may seek tax relief according to the relevant tax treaty and subject to certain administrative procedures.
