According to statistics, 40.95% of the populationare using the Internet. In particulars, the internet users in the two biggest cities, namely Hanoi and Ho Chi Minh City has reached 28% of the total users in Vietnam. The Internet has become an indispensable part of life and been used for various purposes such as searching for news, exchanging information, searching for partners, doing e-commerce, etc.
In comparison with the traditional transaction, e-commerce is faster and much more convenient. Thanks to the support of smart devices, multiple payment channels have facilitated buyers and sellers to easily connect and make transactions without being affected by geographic distance. In the world, hundred millions of e-transactions, being executed per day through ecommerce sites, online games, online advertising, digital content, etc. Such transactions have brought to enterprises and inviduals trading through Internet a stable and growing revenue. Meanwhile, from the perspective of state administration, the management of e-transactions, including tax management is now considered as new matters. The general provisions on e-transactions and specific regualtions of tax management & collection have been promulgated quite sufficiently and synchronously, however, still remain some inadequacies. Actually, the competent agencies are quite confused in managing and guiding the taxpayers on declaration and payment of taxes.Therefore, some enterprises and individuals trading via internet can take advantage of this, causing revenue loss to the State budget.
1. The laws on taxation on electronic transactionsUnder the Law on Tax Administration 2006 (amended and supplemented in 2012, 2014 and 2016), organizations and individuals who dealing in commercial services are obliged to pay taxes on commercial activities without distinction of the transaction method. Due to that, organizations and individuals that carry out e-commerce transactions via the Internet have to pay related taxes according to the provisions of laws on taxes. Depending on the subject matters and scope of the electronic transactions, organizations and individuals might have obligations on paying the following taxes:
Value Added Tax:
Under the Law on Value Added Tax 2008 (amended and supplemented in 2014, 2015 and 2016) and Circular No. 219/2013/TT-BTC dated December 31st, 2013 of the Ministry of Finance, the goods and services used for production, business and consumption in Vietnam, including goods and services purchased from foreigners, are subject to the Value Added Tax. As a result, in case the traders sell goods and services in Vietnam through Vietnamese or foreigner websites, he is obligated to declare and pay Value Added Tax.
- Enterprise Income Tax (EIT):
Under the Law on EIT 2008 (amended and supplemented in 2013 and 2014), the taxable income of an enterprise shall include income from production and trading of goods/services. All income from selling goods and services through e-transactions (even which are executed in Vietnam and abroad) must be declared and accounted into EIT under the laws on taxes. Organizations and individuals who provide with goods and services via internet must also be declared and paid EIT in the same way as by traditional methods.
- Personal Income Tax (PIT):
Under the Law on PIT 2007 (amended and supplemented in 2012 and 2014), income of individuals arising both within and outside the territory of Vietnam is subject to PIT. Therefore, the income of Vietnamese citizens arising from e-transactions at Vietnamese websites, as well as international websites, must be declared and paid Personal Income Tax.
2. Actual situation of collection of taxes conuted on e- transactionsEven the current laws of Vietnam stipulate quite sufficiently taxpayers, tax rates and methods of tax declaration, payment for e- transactions, but in practice, the tax authorities can only manage registered e-commerce businesses. The administration of unregistered businesses, especially due to individuals, is unanswerable.
Nowadays, there are many individuals and organizations doing business on social networking, having adequate facilities, equipment, thus, will subject to PIT. Moreover, a number of individuals might have a monthly income from e-commerce business up to billions per month. However, these individuals all do not declare and pay taxes as prescribed. Meanwhile, competent state agencies and tax authorities are facing to many difficulties in controlling and collecting tax applied to these individuals and organizations. One of the fundamental reasons is that at the moment, there is no regulation to control the tax declaration and payment of these individuals.
In addition, in recent years, there are many individuals having income from e- transactions generated abroad. Such incomes are diversified and much higher compared to Vietnam's per capita income. For example, a number of individuals got income from advertising on foreign websites; the others got income from freelance work via Internet and were paid via international payment cards fby foreign organizations. Although such income subject to PIT, most of such individuals did not declare & pay tax as required by the laws.
In general, except for a large number of professional organizations and enterprises doing e-commerce business that are subject to the direct management of tax authorities are currently declaring and paying tax in compliance with the laws, most of the remain organizations and individuals are delaying to declare and pay relevant taxes. Annually, the State loses a significant revenue from these taxes and this loss will be greater with the growth of e transactions.
In order to overcome the shortcomings as above-mentioned, the Government should revise and supplement the legal provisions on taxes appliet to e-transactions to facilitate tax declaration and payment. Besides, the Government should strengthen the ability to control and prevent acts of tax evasion made by organizations and individuals having income from e-commerce activities. Otherwise, it is necessary to strengthen the coordination between the tax authorities and banks, specialized management authorities and international organizations in exchanging information about tax administration in order to strictly control the tax declaration and payment applied to person generating income from e-transactions. In addition, tax authorities need to train their civil servants to improve their management capacity in this area. Simultaneously, tax authorities also need to train and make propaganda about taxes laws to raise awareness and sense of self-consciousness of organizations and individuals carring out e-transactions in relation to tax declaration and payment. Such activities shall avoid loss to the State budget.
Lawyer Dau Quoc Dung - Vietthink Law Firm.