Vietnam has emerged as one of the e-commerce leaders in Southeast Asia in a very quick manner, propelled by its rapidly expanding digital economy. In response to keeping up with growth, the government of Vietnam has amended the Law on Tax Administration and has enacted a new VAT law effective as of 1 July 2025. The reforms will focus on collecting higher taxes and ensuring compliance, primarily from the e-commerce sector, which grew more quickly. The following are the most significant impacts of the new law on e-commerce businesses.
VAT reforms for e-commerce
One of the most significant reforms is the charging of VAT on cross-border digital services. Foreign businesses selling digital products or services to Vietnamese customers must register for VAT in Vietnam under the new regime. Online advertising, streaming, and sales of digital content are some such services. Foreign businesses had minimal or no VAT obligations in Vietnam before, and hence, they are better off compared to domestic firms. The new law levels the playing field by requiring foreign companies to charge and remit VAT at the normal 10% rate.
Tax registration and filing requirements
Simplification of tax registration and filing by online businesses is also brought in through the new law. Domestic and overseas companies must register for VAT irrespective of whether they have a physical presence in Vietnam. This involves foreign e-commerce businesses, including those with online business platforms, to appoint a tax representative or register directly with the Vietnamese tax authorities. The registration process has been simplified through an online system, though businesses will need to make sure that they meet all the requirements to avoid penalties.
Role of e-commerce platforms
According to the amended Law on Tax Administration, from 1 January 2025, e-commerce platforms will be responsible for deducting, declaring, and paying taxes on behalf of sellers operating on their platforms. Thus, online sellers will no longer have to carry out tax procedures themselves; instead, e-commerce platforms will undertake most of this work.
Assigning e-commerce platforms to perform tax obligations on their behalf will help simplify the tax payment process for sellers, especially small and medium-sized businesses. At the same time, it also helps increase transparency in online business activities and ensures that all businesses comply with the law.
Effect on foreign sellers
Offshore foreign vendors selling directly to Vietnamese consumers through e-commerce platforms will now be required to pay VAT regardless of whether they are based in any physical facilities in Vietnam. As daunting as it may appear to small and medium-sized businesses, the Vietnamese government has made available an electronic reporting system where foreign companies would be able to meet with ease. Businessmen can maintain records and report correctly if they need to stay away from levies.
Tax authorities in Vietnam have the right to coordinate with tax authorities abroad to collect taxes from foreign suppliers if it is proven that the foreign suppliers have declared and paid taxes incorrectly.
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