Shall online sellers pay personal income tax in Vietnam? What are the administrative penalties for failing to pay taxes in Vietnam?

Shall online sellers pay personal income tax in Vietnam?

According to Article 1 of the Law on Personal Income Tax 2007 regarding subjects liable to personal income tax:

Subjects liable to tax

1. Subjects liable to personal income tax are resident individuals earning taxable income stipulated in Article 3 of this Law arising within and outside the territory of Vietnam, and non-resident individuals earning taxable income stipulated in Article 3 of this Law arising within the territory of Vietnam.

2. A resident individual is a person who satisfies one of the following conditions:

a) Being present in Vietnam for 183 days or more within a calendar year or for 12 consecutive months from the first day of presence in Vietnam;

b) Having a regular place of residence in Vietnam, including a registered permanent residence or a rented house for residence in Vietnam under a term lease agreement.

3. A non-resident individual is someone who does not satisfy the conditions stipulated in Clause 2 of this Article.

Thus, according to the aforementioned provisions, if an online seller is a resident individual with taxable income arising within and outside the territory of Vietnam or a non-resident individual with taxable income arising within the territory of Vietnam, they must pay personal income tax.

Shall online sellers pay personal income tax in Vietnam? What are the administrative penalties for failing to pay taxes in Vietnam? (Image from the Internet)

What are the administrative penalties for failing to pay personal income tax in Vietnam?

The act of not paying personal income tax by an online seller is referred to as tax evasion. According to Article 17 of Decree 125/2020/ND-CP, tax evasion is administratively penalized as follows:

- A fine of 1 times the evaded tax for taxpayers with one or more mitigating circumstances when committing one of the following violations:

+ Not submitting taxpayer registration; not submitting tax return dossiers or submitting tax return dossiers 90 days late from the due date of filing or after the expiration of the tax return submission extension, except for the cases stipulated at Points b, c, Clause 4, and Clause 5, Article 13 of Decree 125/2020/ND-CP;

+ Not recording in accounting books revenue related to determining the tax payable, underreporting or misreporting leading to underpaying tax or overreporting refunds, exemptions, or reductions, except as stipulated in Article 16 of Decree 125/2020/ND-CP;

+ Failing to issue invoices when selling goods, services, except when the taxpayer has declared tax on sold goods and services for the corresponding tax period; issuing incorrect invoices regarding the quantity, value of goods, services to report lower tax than actual and being detected after the tax filing deadline;

+ Using illegal invoices; illegally using invoices to report tax in a way that reduces tax payable or increases tax refundable, exempted, reduced;

+ Using illegal documents; or improperly reflecting transactions or actual transaction values to incorrectly determine tax payable amounts, tax exemptions, or reductions, or making incorrect material or goods destruction records leading to reduced tax payable or increased refundable, exempted, reduced tax amounts;

+ Using goods subject to tax exemption, non-tax usage, or presumed exemption for unintended purposes without declaring usage change, declaring tax with the tax agency;

+ Engaging in business activities during the suspension period without notifying the tax authority, except as stipulated at Point b, Clause 4, Article 10 of Decree 125/2020/ND-CP.

- A fine of 1.5 times the amount of tax evaded for a taxpayer committing one of the violations defined in Clause 1, Article 17 of Decree 125/2020/ND-CP without any aggravating or mitigating circumstances.

- A fine of 2 times the amount of tax evaded for a taxpayer committing one of the violations specified in Clause 1, Article 17 of Decree 125/2020/ND-CP with one aggravating circumstance.

- A fine of 2.5 times the amount of tax evaded for a taxpayer committing one of the violations specified in Clause 1, Article 17 of Decree 125/2020/ND-CP with two aggravating circumstances.

- A fine of 3 times the amount of tax evaded for a taxpayer committing one of the violations specified in Clause 1, Article 17 of Decree 125/2020/ND-CP with three or more aggravating circumstances.

Additionally, beyond administrative penalties, the individual must implement remedial measures as follows:

+ Be compelled to pay the full amount of evaded tax into the state budget for violations specified in Clauses 1, 2, 3, 4, 5, Article 17 of Decree 125/2020/ND-CP.

In cases where the acts of tax evasion specified in Clauses 1, 2, 3, 4, 5, Article 17 of Decree 125/2020/ND-CP exceed the time limit for sanctions, the taxpayer will not be penalized for tax evasion but must pay the full amount of evaded tax and late payment charges into the state budget according to the timelines stipulated in Clause 6, Article 8 of Decree 125/2020/ND-CP.

+ Be compelled to adjust losses, deduct input VAT on tax dossiers (if applicable) for violations outlined in Clauses 1, 2, 3, 4, 5, Article 17 of Decree 125/2020/ND-CP.

- Violations specified in Points b, d, e, Clause 1, Article 17 of Decree 125/2020/ND-CP detected after the tax return deadline but that do not reduce tax payable or result in tax refunds, nor increase tax exemptions or reductions, will be administratively sanctioned as per Clause 3, Article 12 of Decree 125/2020/ND-CP.

Which Cases Qualify for Personal Income Tax Reduction?

As regulated in Article 5 of Decree 65/2013/ND-CP, individuals qualify for tax reductions in the following scenarios:

Taxpayers experiencing difficulties due to natural disasters, fires, accidents, or serious illness affecting their tax-paying ability are considered for tax reduction commensurate with their losses, but not exceeding the amount payable.

Additionally, Article 4 of Circular 111/2013/TT-BTC also specifies the criteria to determine reduced tax as follows:

- Tax reduction evaluation is conducted annually. Taxpayers facing difficulties due to natural disasters, fires, accidents, or serious illnesses during a tax year are considered for tax reduction for that specific year.

- The tax payable that forms the basis for tax reduction evaluation is the total personal income tax payable in the tax year, including:

+ Personal income tax paid or withheld for income from capital investment, capital transfer, real estate transfer, winnings, copyright, franchise, inheritance; and gifts.

+ Personal income tax payable for business income, salary, and wages.

+ The basis to determine the reduction extent is the total actual expenditure to remedy losses minus (-) any compensation received from insurance organizations (if any) or from the accident-causing organization or individual (if any).

- The tax reduction is determined as follows:

+ If the tax payable in the tax year exceeds the degree of loss, the tax reduction equals the loss.

+ If the tax payable in the tax year is less than the degree of loss, the tax reduction equals the tax payable.