Vendors forced out with tax tightening

Tax authorities are applying various tough measures to collect information on e-commerce vendors and statistics on their financial value in order to calculate their tax contribution. In early February, local tax departments sent notices to sellers updating them on recent tax declaration changes in terms of business activities on e-commerce platforms, which came as a surprise to some.

One long-time seller on Shopee, called Phuong, said that online businesses do not require much capital, so it is simple to launch an online shop. “It is quite straightforward and leisurely without any fees and costs for the actual operation. I gain some money if someone buys goods, and I lose very little if there is no buyer,” said Phuong.

Her items are typically valued in the $4-20 bracket, and Phuong estimated her tax arrears since 2019 to be around $15,200. She had saved about $7,800 in profits over the last four years through her online business, but it is now not enough to pay taxes.

“Previously, I paid a fee of 7 per cent of the order value to e-commerce platforms, so I thought that included tax. But after receiving a notice from the tax department about the responsibilities of online business, I am seriously worried because the tax amount looks to be around double of all the profits I have ever gained.”

The government issued Decree No.91/2022/ND-CP in October, in which owners of e-commerce platforms established and operating under Vietnamese laws are responsible for providing the tax authorities with information about individuals, organisations, and traders that conduct the sales of goods and services on the platform.

Further, e-commerce platforms must also report the revenue earned by sellers from their online transactions. The information should include name, tax ID, passport number or other ID card, address, and telephone number. The reporting must be performed on a quarterly basis.

In addition, Decree 91 states that e-commerce platforms are no longer responsible for paying taxes on behalf of sellers, and those registered in Vietnam are only required to provide accurate information about the vendors.

Through the amendments, many online vendors are facing the risk of paying more tax than the income they earn because they have taken to posting fake orders to increase online interaction and presence.

Thao, a vendor on Lazada, said that she sometimes posted some fake orders by themselves and then delivered goods to her own address or to friends simply to enhance the ranking of the shop.

“That has been a popular trick of online businesses, but it is going to backfire soon if revenue calculation for tax payment is tightened up,” said Thao. “Online business is going to be too much of a challenge.”

Elsewhere, Oanh in the southern province of Binh Duong province has had to pay $9,700 of tax for her shop on Shopee and an additional fine of 1.5 times the tax after the request from the tax agency. The total amount Oanh has had to pay has reached over $21,000. “If the sellers do not pay the tax following the notice from the tax agency, a dossier will be sent to the police agency, and the shop will be locked on the e-commerce platform,” said Oanh.

Tuan Nguyen, an e-commerce expert, explained, “Paying too much tax may destroy the motivation to sell online, and some may have to quit if the performance of the online business is too poor.”

According to the Ministry of Industry and Trade’s Online Portal, which launched in December, around 260 e-commerce platforms have already provided information to the General Department of Taxation, including big players such as Shopee, Lazada, and Sendo. By mid-February, nearly 15,000 organisations and over 53,000 individuals had registered on the portal to comply with the requirements.

The changes are deemed to make it fairer for offline sellers, who have to comply with all procedures in terms of taxes, certificates, and permits, in addition to monthly costs of shop rents and labour.

Article 19 under Decree No.125/2020/ND-CP prescribes fines ranging from $85-260 for the act of providing information, documents, or records related to the determination of tax obligations upon authorities’ request at least five days after expiration of the prescribed time limits.

Fines ranging $260-700 shall be imposed for more serious violations of collusion or evading taxes.

Further amendments could ease tax environment The Vietnamese government made welcome efforts in providing support to all enterprises in 2022 with effective tax policies including deferral and VAT reduction of 2 per cent, as well as positive and transparent changes of regulations such as the circular on tax administration, including in e-commerce.

Vietnam fixed on clawing back e-commerce taxes E-commerce tax from businesses and sellers will continue to be collected in 2023 as part of ongoing efforts to ensure cross-border giants declare profits and pay their taxes.