Ensuring tax fairness in cross-border e-commerce

As the digital economy continues to grow rapidly, particularly in the field of cross-border e-commerce, the need for effective tax management targeting foreign suppliers without a permanent establishment in Viet Nam has become more pressing than ever.
Illustrative photo (Photo: MINH PHUONG)
Illustrative photo (Photo: MINH PHUONG)

The draft amendments to the Law on Tax Administration and the Law on Value-Added Tax, currently being developed by the Ministry of Finance, are expected to address existing gaps in tax administration and foster a level playing field for both domestic and foreign enterprises.

New features and expectations in draft law

Before the proposed amendments to the Law on Tax Administration and the Law on Value-Added Tax, domestic businesses faced considerable challenges in competing with foreign suppliers. These cross-border companies — operating without a permanent presence in Viet Nam — have frequently exploited loopholes in tax policies to avoid fulfilling their tax obligations. This practice not only reduces government revenue but also creates an unfair business environment for local enterprises.

A typical example involves major online advertising platforms such as Google and Facebook. Despite generating significant revenue from Vietnamese businesses, when payments are made using international credit cards, value-added tax (VAT) is often neglected. This places domestic service providers at a notable disadvantage, as they are subject to VAT and must comply with reporting and payment regulations.

In an interview with Nhan Dan Newspaper, Vu Bao Thang, Deputy Head of the Human Resource Development Committee at the Viet Nam E-Commerce Association and CEO of Meta Ecom, explained the adverse impact on domestic companies:

"Local businesses looking to advertise or sell through digital platforms must bear high compliance costs. In contrast, foreign firms simply place ads, receive international payments, and are not required to declare taxes or undergo regulatory oversight. Without legal reforms or changes in management mechanisms, Vietnamese businesses will remain at a disadvantage."

The draft amendments to the Law on Tax Administration and the Law on Value-Added Tax are therefore expected to address these shortcomings and help establish a fairer competitive environment.

One of the key features in the amended Law on Tax Administration is the addition of detailed provisions concerning tax obligations for foreign organisations and individuals with no permanent establishment in Viet Nam but who supply goods or services across borders. Under the draft, such entities would be required to register, declare, and pay taxes directly in Viet Nam via the General Department of Taxation’s online portal. This would enable tax authorities to better monitor and enforce tax compliance among foreign suppliers.

If a foreign supplier fails to fulfil their tax obligations, the tax authorities will be entitled to apply indirect enforcement measures. These include instructing banks to withhold and remit the payable taxes or coordinating with relevant agencies to take enforcement action. Clearly defining and detailing these coercive measures is essential to ensure foreign suppliers cannot exploit legal loopholes.

The draft amendments to the Law on Value-Added Tax also introduce new provisions that clearly define the VAT obligations of foreign suppliers without a permanent establishment in Viet Nam. Under the proposed law, foreign suppliers who sell goods or provide services to organisations or individuals in Viet Nam will be required to declare and pay VAT. If they fail to do so, the responsibility for tax collection may be transferred to intermediary entities such as e-commerce platforms, banks, or payment service providers.

“This is a very welcome adjustment,” Vu Bao Thang commented. “Previously, foreign suppliers could avoid VAT or only pay a low rate — around 5% of revenue — giving them a price advantage over domestic firms, which are subject to VAT rates of 8–10%. The new law will raise the VAT rate for services provided by foreign suppliers to 10%, helping to ensure fairness between domestic and foreign businesses.” This measure is expected to narrow the pricing gap and enhance the competitiveness of Vietnamese enterprises in the digital marketplace.

Challenges

Despite these progressive steps in the draft law, experts warn that implementation remains the biggest hurdle. Enforcing tax obligations on foreign suppliers with no physical presence in Viet Nam will pose significant difficulties. To ensure effective tax collection, a centralised data system is needed — one that integrates information across state agencies, banks, payment processors, and digital platforms.

We cannot expect foreign suppliers to voluntarily comply without concrete enforcement mechanisms. Enforcement tools — whether through banks, payment intermediaries, or information management agencies — must be deployed effectively.

Vu Bao Thang,

Deputy Head of Human Resources Development at the Viet Nam E-commerce Association and CEO of Meta Ecom

Vu Bao Thang emphasised: “We cannot expect foreign suppliers to voluntarily comply without concrete enforcement mechanisms. Enforcement tools — whether through banks, payment intermediaries, or information management agencies — must be deployed effectively.”

Yet, as he pointed out, the issue extends beyond legal provisions: the real challenge lies in the practical ability to implement these measures on the ground.

Speaking to Nhan Dan Newspaper, lawyer Nguyen Xuan Dung of the Hanoi Bar Association added: “The legal framework is already in place, but effective enforcement requires timely and coordinated action by the relevant authorities. Without access to transaction data and financial flows it will be extremely difficult to determine tax liabilities.”

He stressed that tracking cross-border financial flows remains a major challenge, as many transactions are conducted through international payment platforms that fall outside the monitoring scope of Vietnamese tax authorities. To address this, state agencies must establish close cooperation mechanisms with international financial institutions, banks, and e-commerce platforms to ensure tax responsibilities are clearly defined and enforced.

Vietnamese businesses, especially those in the fields of e-commerce and digital advertising, hope that the provisions in the draft laws will create a more level playing field between domestic and foreign companies. By clearly stipulating the tax obligations of foreign suppliers, local enterprises will no longer be subjected to unfair competition from cross-border providers.

However, raising taxes could also result in higher prices — particularly for individuals or businesses that are not registered for VAT and therefore cannot claim input tax credits. This may impact consumer purchasing power, but overall, it is considered a necessary step to promote greater transparency and fairness in the market.

The provisions outlined in the amended Law on Tax Administration and the Law on Value-Added Tax mark an important move towards ensuring fair competition between domestic and foreign businesses. Nonetheless, achieving this objective will require strong and coordinated implementation by state agencies, including the development of a comprehensive database, streamlined information sharing, and clear guidance for the effective enforcement of the new regulations.

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