Vietnam: What taxes do online businesses have to pay?

Taxes online businesses have to pay

Selling online is carried out through different forms, for example, selling through social networking sites such as Facebook, Zalo, Instagram, etc. According to Point đ Article 2 of the Circular No. 40/2021/TT-BTC, e-commerce is subject to VAT and PIT payment in accordance with the law on taxation of Vietnam. On the other hand, according to Clause 11 Article 3 of the Circular No. 40/2021/TT-BTC and Clause 1 Article 3 of the Decree No. 52/2013/NĐ-CP, “e-commerce” means the execution of some or all e-commerce processes with electronic devices that are connected to the Internet, mobile telecommunications network or other open networks.

Thus, e-commerce connected to the Internet must pay VAT and PIT in accordance with the law on taxation of Vietnam. However, according to Clause 2 Article 4 of the Circular No. 40/2021/TT-BTC, only household business or individual business whose revenue from business operation in the calendar year exceeds 100 million VND are required to pay VAT and PIT as prescribed by VAT and PIT laws.

Moreover, online business whose revenue from business operation in the calendar year exceeds 100 million VND is required to pay as prescribed in the Circular No. 302/2016/TT-BTC.

Calculation specific taxes and fees that online sellers must pay

(1) License tax

The license tax rates applicable to individuals, groups of individuals and households producing and trading goods and services is prescribed in Clause 3 Article 1 of the Circular No. 65/2020/TT-BTC as following:

a) Individuals, groups of individuals and households having an annual turnover of over VND 500 million: VND 1,000,000 (one million)/year;

b) Individuals, groups of individuals and households having an annual turnover of over VND 300 million to VND 500 million: VND 500,000 (five hundred thousand)/year;

c) Individuals, groups of individuals and households having an annual turnover of over VND 100 million to VND 300 million: VND 300,000 (three hundred thousand)/year. 

The turnover serving as the basis for determining license tax rates applicable to individuals, groups of individuals and households is the total assessable turnover in the preceding year of the production/business activities.

(2) VAT and PIT

Household business or individual business whose revenue from business operation in the calendar year exceeds 100 million VND shall choose 1 of 3 methods: periodic declarations, separate declarations and presumptive tax in accordance with the Circular No. 40/2021/TT-BTC.

Tax payable of online household business or individual business are calculated as follows:

VAT payable = Revenue subject to VAT x VAT rate

PIT payable = Revenue subject to PIT x PIT rate

In which:

- Revenue subject to VAT and revenue subject to PIT earned by household businesses and individual businesses are revenue inclusive of tax (if subject to tax) from sale of goods, processing payment, commissions, payment for provision of services earned during the tax period from manufacture, sale of goods, provision of services, including bonuses, sales compensation, promotions, commercial discounts, payment discounts, assistance in cash or not in cash; subsidies, surcharges, extra fees to which they are entitled; compensations for breach of contract, other compensations (only included in revenue subject to PIT); other revenues earned by household and individual businesses whether they are collected in reality.

VAT rates and PIT rates are specified in Appendix I attached to the Circular No. 40/2021/TT-BTC.

Bao Ngoc

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