What is Digital Tax? Do foreign providers have to declare, pay tax on digital services in Vietnam?

What is Digital Tax?

Digital Tax is a type of tax applied to business activities based on digital platforms, especially businesses providing online services, digital platforms, or cross-border transactions in the online environment.

With the strong development of the digital economy, many large technology companies such as Google, Facebook, Amazon, and Apple can provide services in a country without having a headquarters or physical presence there. This situation makes it difficult for countries to tax these companies, leading to tax revenue losses. Digital Tax is introduced to ensure that digitalized companies still contribute taxes to the countries where they have revenue, even if they do not have a headquarters there.

*Popular types of digital taxes currently include:

Digital Tax can be applied in various forms, depending on each country's policies. Some common forms include:

- Digital Services Tax (DST): Tax levied as a percentage on revenue from digital services (e.g., online advertising, digital platforms, user data).

- Value Added Tax (VAT) on digital services: Applies VAT to cross-border digital services, requiring foreign companies to pay VAT in the local country.

- Global minimum corporate tax: An initiative proposed by the OECD and G20, aimed to ensure that multinational companies have a minimum tax rate regardless of where they are headquartered.

Information is for reference only!

What is Digital Tax? Do foreign providers have to declare, pay tax on digital services in Vietnam? (Image from the Internet)

Do foreign providers have to declare and pay tax when conducting digital business in Vietnam?

Based on Clause 4, Article 42 of the Law on Tax Administration 2019 (amended by point a, Clause 5, Article 6 of the Amendment Law on Securities Law, Accounting Law, Independent Audit Law, State Budget Law, Law on Management and Use of Public Property, Law on Tax Management, Personal Income Tax Law, National Reserve Law, Law on Handling Administrative Violations 2024), the following is prescribed:

Principles of tax declaration and tax calculation

...

3. Taxpayers shall declare taxes, calculate taxes at the local tax authority with jurisdiction where they have their headquarters. In case taxpayers conduct centralized accounting at the headquarters, having dependent units at other provincial-level administrative divisions different from the headquarters, taxpayers shall declare taxes at the headquarters and calculate taxes, allocating tax liabilities according to each locality where state budget revenue is derived. The Minister of Finance shall specify this Clause.

4. For e-commerce business activities, digital-based business, and other services carried out by foreign providers, the foreign provider is obliged to directly or authorize the implementation of taxpayer registration, tax declaration, and tax payment in Vietnam according to the regulation of the Minister of Finance.

Thus, for e-commerce business activities, digital-based business, and other services carried out by foreign providers, the foreign provider is obliged to directly or authorize the implementation of taxpayer registration, tax declaration, and tax payment in Vietnam according to the regulation of the Minister of Finance.

In other words, foreign providers engaged in digital-platform business are obliged to directly or authorize the implementation of taxpayer registration, tax declaration, and tax payment in Vietnam.

What is the time limit for submitting tax declaration documents in Vietnam?

Based on Article 44 of the Law on Tax Administration 2019, the time limit for submitting tax declaration documents is regulated as follows:

(1) submitting deadline for tax declaration documents for taxes declared monthly, quarterly is as follows:

- No later than the 20th day of the month following the month in which the tax obligation arises, for monthly declaration and payment;

- No later than the last day of the first month of the quarter following the quarter in which the tax obligation arises, for quarterly declaration and payment.

(2) submitting deadline for tax declaration documents with tax calculation periods by year is as follows:

- No later than the last day of the third month from the end of the calendar year or fiscal year for annual tax settlement documents; no later than the last day of the first month of the calendar year or fiscal year for annual tax declaration documents;

- No later than the last day of the fourth month from the end of the calendar year for personal income tax settlement documents for individuals directly conducting the tax settlement;

- No later than December 15 of the previous year for presumptive tax declaration documents of business households, individuals paying taxes by the presumptive method; in case of new business household or individual, the deadline for submitting presumptive tax declaration documents is no later than 10 days from the start of business.

(3) The submitting deadline for tax declaration documents for taxes declared and paid on each arising tax obligation is no later than the 10th day from the date of arising tax obligation.

(4) The submitting deadline for tax declaration documents in cases of business cessation, contract termination, or enterprise reorganization is no later than the 45th day from the event occurrence.

(5) the Government of Vietnam regulates the deadline for submitting tax declaration documents for agricultural land use tax; non-agricultural land use tax; land levy; land rent, water surface rent; fees for mineral resource extraction rights; fees for water resource extraction rights; registration fee; business license fee; revenues to the state budget according to the law on management and use of public assets; cross-country profit reporting.

(6) submitting deadlines for export-import goods are in accordance with Customs Law regulations.

(7) In case taxpayers declare taxes via electronic transactions on the last day for tax declaration submission and the tax authority's electronic portal encounters issues, taxpayers shall submit tax declaration documents, electronic tax payment documents on the following day after the tax authority's electronic portal resumes operation.