Shake-up for online business regulations

Individuals and small businesses earn big bucks through live sales, photo Le Toan

At a seminar on business management on e-commerce and digital platforms in early October in Hanoi, experts, authorities, and businesses agreed that, in addition to business households, cooperatives, and businesses, there are millions of individuals doing business in the form of online or street activities, some of which report millions of US dollars in annual revenues.

Le Thi Thuy, head of General Information and Policy under the Ministry of Planning and Investment’s Business Registration Agency, said that Vietnam is undergoing a strong digital transformation, with business models emerging such as livestreams and online sales. In fact, the number of individual businesses is increasing, so it is necessary to study, build, and improve the legal framework for this group.

“Individuals who register their business are recognised by the state for their legal protection, and enjoy support policies if disputes arise. State authorities need information to support, coordinate, inspect, manage, and monitor business activities,” Thuy said.

Therefore, the agency recommended developing a decree-level document to regulate the legal status and issues related to individual businesses. This will clarify the legal status of individual businesses, distinguishing types of businesses, and encourage individual businesses to be formalised, clarifying which businesses are exempt from registration.

According to the agency, in 2023, 1.52 million individuals registered for tax but not business registration. This was approximately the number of households registered for business (1.92 million) and 1.6 times the number of operating enterprises.

Of these, 807,000 business individuals have generated revenue, and the amount of tax that they contributed, was $7.5 billion. However, there are still millions of business individuals who do not have business registration, and do not pay taxes.

Nguyen Lam Thanh, representative of TikTok Vietnam, said that the current legal framework for managing activities and collecting taxes of individuals doing online business is fairly strong. “TikTok Shop has also provided a feature to temporarily pay personal income tax of sellers and affiliate content creators, helping them fulfill obligations to state management agencies. If authorities have policies on business registration for these people, implementation is feasible,” Thanh said.

Expressing support for business registration for individuals doing business on e-commerce platforms, Nguyen Binh Minh, member of the Vietnam E-commerce Association’s Executive Committee said, “It is necessary to have specific amounts of revenue to pay taxes, flexible forms of business registration, and policies to encourage and support small-scale business individuals.”

Nguyen Duc Chieu from the Central Institute for Economic Management recommended adding individual business in the legal regulations on business registration in Vietnam, as well as maintaining the form of household business.

“However, the regulations on documents for registration of individual businesses must be simple and suitable to the characteristics of Vietnam. It is necessary to clearly define the subjects that are allowed to establish individual businesses, along with some specific business lines and conditions,” Chieu said.

Nguyen Thi Lan Anh, director of the Department of Tax Management for Small and Medium Enterprises and Household Businesses and Individuals, under the Ministry of Finance’s General Department of Taxation, said that household or individual businesses, regardless whether they are traditional or e-commerce in style, are all subject to VAT and personal income tax if they generate revenue of over VND100 million ($4,160) per year.

In Vietnamese laws, business households and individuals are responsible for self-declaring and self-paying. The tax authority will continue to provide electronic tax services to support declaration and payment online. Specifically, a portal will be launched for individuals and business households engaged in e-commerce activities to conveniently fulfill their tax obligations.

“Additionally, we will promote communications and support for taxpayers participating in e-commerce business activities to declare and pay taxes as the law regulations. The tax authority proposes to amend and supplement legal regulations, requiring e-commerce platforms with online ordering functions to be responsible for deducting, declaring taxes, and paying taxes on behalf of individuals doing business on the platforms,” Lan Anh raised.

According to the General Department of Taxation, tax revenue from e-commerce has increased over the years, from $3.4 billion in 2022 to $3.96 billion in 2023. In the first seven months of 2024, tax revenue from e-commerce reached more than $3.2 billion and is likely to exceed $4.1 billion for the whole year.

Tax authorities at a loss over collecting dues from online business Despite progressively stricter regulations by tax collectors, individuals running business via online platforms are always a step ahead, finding workarounds and loopholes.

Tax authorities hold full data of online vendors from 2022 Local tax authorities will have full access to data pertaining to the revenue of vendors on online platforms from 2022.

E-commerce promoting post-pandemic economic recovery: Experts The Vietnam Online Business Forum (VOBF) 2022 was held by the Vietnam E-Commerce Association (VECOM) in Ho Chi Minh City on May 10, focusing discussions on e-commerce’s role in promoting post-pandemic economic development.