E-commerce Tax in Vietnam: Striking a Balance Between Fairness and Market Growth

Tightening E-commerce Tax Regulations: An Inevitable Trend

E-commerce has rapidly become a cornerstone of Vietnam’s digital economy, with millions of online transactions taking place daily. This rapid expansion has created an urgent need for tax reform and regulatory enhancement, ensuring fair competition between online and traditional businesses while also boosting state revenue.

The tightening of e-commerce tax regulations is no longer a choice but an inevitable trend. Governments worldwide, including Vietnam, are implementing new tax policies to bring digital commerce into a more transparent and regulated framework. However, if not properly structured, these regulations could become barriers, discouraging small businesses and increasing operational costs for larger enterprises.

Vietnam’s Draft Decree on E-commerce Taxation, currently under discussion, introduces significant changes aimed at strengthening oversight and improving tax compliance. However, concerns from the business community—particularly from the Vietnam Chamber of Commerce and Industry (VCCI)—highlight potential challenges that could impact Vietnam’s e-commerce sector.

Challenges in the Current E-commerce Tax Framework

One of the most debated aspects of the draft decree is the requirement for individual sellers on e-commerce platforms to file monthly tax returns, replacing the previous fixed-rate tax system. While this measure enhances revenue transparency, it poses several challenges for smaller online merchants:

• Increased administrative burden: Many individual sellers lack professional accounting systems to track revenue accurately. Monthly tax filings could reduce their motivation to continue business, particularly for newcomers.
• Unrealistic cost declaration requirements: Many online entrepreneurs struggle to separate operating expenses such as cost of goods, shipping, advertising, and labor, making compliance cumbersome.
• Excessive tax responsibilities for e-commerce platforms: The draft decree mandates that e-commerce platforms submit tax withholding records to tax authorities, despite already reporting transaction data and collected tax amounts. This requirement may increase operational costs and put pressure on platforms handling millions of transactions annually.

Without appropriate adjustments, these regulations risk pushing small sellers away from formal e-commerce channels or encouraging tax avoidance practices, ultimately harming market development.

Balancing Tax Compliance and Business Growth

Instead of placing excessive burdens on businesses and individual sellers, e-commerce tax policies should be designed to balance effective tax collection with sustainable market growth. To achieve this, VCCI has proposed several key recommendations:

• Maintain fixed-rate taxation for small-scale sellers: Those with a limited number of transactions should be allowed to continue paying tax on a fixed-rate basis, reducing the need for monthly tax filings.
• Eliminate detailed cost declaration requirements: This should only apply to large enterprises, while smaller sellers should follow a simplified process.
• Remove the requirement for e-commerce platforms to submit tax withholding records: Platforms already report collected taxes, and additional documentation only increases administrative costs.
• Postpone implementation until July 1, 2025: Instead of enforcing the new rules in April 2025, businesses should be given more time to adapt and upgrade their systems.

These adjustments would not only ensure tax compliance but also foster transparency and sustainability in Vietnam’s e-commerce sector without imposing unnecessary obstacles.

How E-commerce Sellers Can Adapt to the New Tax Landscape

As tax regulations become stricter, businesses and individual sellers must proactively adapt to remain competitive. Key strategies include:

• Leveraging technology for tax compliance: E-commerce platforms and sellers should invest in automated tax filing systems and adopt electronic invoicing to streamline the process.
• Staying informed about policy changes: Keeping up-to-date with evolving tax regulations helps businesses avoid penalties and ensure compliance.
• Adjusting business models to align with tax requirements: Small sellers should explore fixed-rate tax options (if permitted), while larger businesses must develop financial strategies to optimize tax obligations.

With the inevitable tightening of e-commerce tax regulations, businesses must shift their mindset, embrace compliance, and explore solutions to streamline their operations. Those who proactively adapt will gain a competitive edge in an increasingly regulated market.

Tightening E-commerce Tax: Barrier or Growth Opportunity?

Vietnam is not alone in implementing stricter tax policies for e-commerce. Countries such as Singapore, Indonesia, and China have introduced similar regulations to improve tax compliance in the digital economy. However, the critical issue is not whether to tax e-commerce, but rather how to do so in a way that ensures fairness without stifling growth.

Vietnamese e-commerce merchants should view tax reform not as a hindrance but as an opportunity to legitimize their businesses, gain access to financial support, and expand their market reach. If implemented correctly, these tax policies will not only boost state revenue but also create a more structured and competitive digital commerce ecosystem.

Stricter e-commerce taxation is an unavoidable reality, and businesses that embrace these changes will position themselves as leaders in a more transparent and sustainable market.