The Vietnamese government recently issued several regulations to support tax collection on digital transactions conducted by non-resident foreign contractors without a permanent establishment (“PE”) in Vietnam. Announced policies give further clarification for non-PE enterprises, as well as provide timely support during the COVID-19 pandemic.
● Foreign contractors without a PE in Vietnam who conduct e-commerce, digital-based business, or other services with entities in Vietnam; or tax agents authorized by overseas suppliers.
● Vietnamese organizations that purchase goods and services from overseas suppliers, in cases where the overseas suppliers have no tax registration, declaration, and payment.
● Commercial banks or intermediary payment service providers (IPSPs) in cases of local purchasers and overseas suppliers without tax registration, declaration, and payment.
Tax liability and implications
Cross-border tax payment
The recently issued Circular 19/2021/TT-BTC stipulates that foreign e-commerce contractors and digital platform-based service providers without a PE in Vietnam must register with the Vietnamese tax authority to conduct tax declaration and payment. First, in a B2B-based digital transaction for overseas contractors without the registration to self-declare and pay taxes in Vietnam, the Vietnamese corporate customers are subject to fulfilling the withholding, filing, and VAT remittance requirements as set forth by the Vietnamese authority. Second, in B2C-based digital transactions for overseas suppliers without the registration to self-declare and pay tax in Vietnam, either Vietnamese banks or local payment intermediaries are subject to this withholding, filing, and VAT remitting on a monthly basis.
Additionally, Circular 80/2021/TT-BTC provides the tax payment allocation mechanism and principles of tax declaration and tax administration. Likewise, on January 28, 2022, the Government issued Decree 15 on the tax exemption and reduction policy according to Resolution No. 43 of the National Assembly.
The Government will apply deferred income tax with appropriate rates for corporate income tax (CIT) and value-added tax (VAT). Hence, businesses should assess the scope of the taxes applicable to the respective entity and model the financial impact.
According to the Ministry of Finance (MoF), in 2022, the VAT on goods and services will be reduced from 10% to 8% to support people and businesses facing difficulties in the COVID-19 epidemic. This policy is only applied to goods and services with the previous tax rate of 10% and regardless of the tax calculation method, so digital transactions initiated by foreign contractors as mentioned above are entitled to the same VAT rate reduction.
For new foreign contractors that are unfamiliar with current Vietnam’s fiscal policies, building an effective investment strategy and figuring out appropriate actions to take might be challenging steps. To avoid undesirable problems with the taxation system, overseas businesses can reach out to Viettonkin – a professional consultant and an honored member of GGI with an unwavering commitment that you can trust. With a comprehensive understanding of Vietnam’s tax system and experienced legal specialists, we are proud to serve as a bridge between firms from all around the world and the promising market economy of Vietnam. Let us help with your problems! For further information, please contact us via email or through our contact page.