Cross-border taxation to bolster national budget

The MoF is aiming to boost tax revenue from cross-border online business activities

In a summary report regarding the national budget sent to the government in last December, the Ministry of Finance (MoF) noted that the estimated extra income for the national budget in 2021 will be VND1.34 quadrillion ($58.26 billion), up 1.5 per cent on-year. Of this, earnings in the local market will occupy about 84.4 per cent, equaling VND1.133 quadrillion ($49.26 billion).

Enhancing tax income from cross-border platforms, individuals, and organisations earning from them will play an important role in these targets, according to the MoF.

Speaking at a National Assembly meeting two years ago, a delegate said if the platforms fulfil their tax obligation in Vietnam, the national budget will receive a lift of trillions of VNDs (dozens of millions of US dollars).

In 2019, 2020, the General Tax Department under the MoF collected nearly VND1 trillion ($43.5 million), as stated by Deputy General Director Dang Ngoc Minh, who said, “Much of the sum came from inspections with many measures aiming to verify and collect arrears.”

As of the end of 2020, the tax authority performed about 79,560 inspections to collect about VND69 trillion ($3 billion) in tax arrears. VND19.112 trillion ($830.96 million) of this was collected, up 5.9 per cent on-year. Tax abatement amounted to VND2.118 trillion ($92 million). In comparison with 2019, the total tax arrears in 2020 dropped by 5.5 per cent.

In 2021, tax inspections will continue with greater frequency, especially targeting individuals and organisations running business on cross-border platforms. Vietnam is home to many individuals earning from online activities and the number is forecast to keep increasing.

Four months ago, the Hanoi Tax Department sent tax notices to 1,194 individuals with a total income of VND3.614 trillion ($157 million) generated from online activities. Two years ago, the Ho Chi Minh City Tax Department sent out some 14,000 notices to individuals and organisations but with little results.

To avoid repeating this failure, the General Tax Department said that the Hanoi authority is planning to partner up with market management authorities and payment intermediaries. Specifically, the authority is holding almost the entire data of the objects.

The authorities also required businesses providing cross-border platforms to perform their tax obligations in the country.

According to Decree No.126/2020/ND-CP detailing a number of articles of the Law on Tax Administration come into force from last December 5, General Department of Taxation will identify names and the websites of overseas suppliers who have not made a tax registration to banks and intermediary companies.

Once identified, banks & other payment intermediary entities will be responsible for withholding tax on the payment to these suppliers on a monthly basis. If the bank cannot withhold tax due to unforeseeable issues, such transactions will need to be reported to the GDT on a monthly basis for the purpose of tax assessment.

Banks are also required to provide bank account details of taxpayers to the tax authority within 90 days upon the effective date of this Decree. Further, information on bank account transactions of an entity must be provided to the tax authority upon official request during the course of a tax audit or tax inspection.