In today's digital age, online selling has become a popular and rapidly growing trend. However, many online sellers still wonder whether they are required to pay taxes. In this article, let's explore the tax implications of online selling with UpBase!
Is Online Selling Taxable?
The answer is yes. Online sellers are required to pay taxes once they have registered their business. When conducting online business and registering with the tax authorities, online store owners must comply with tax regulations just like any other form of business.
*Tax Exemption Cases:
According to Vietnamese law, individuals or small businesses may be exempt from taxes if they meet the following conditions:
- Revenue Below the Tax Threshold: If the total sales revenue in a year does not exceed 100 million VND, you will be exempt from VAT and personal income tax.
- Infrequent Business Activity: Sales activities that are not conducted regularly, are seasonal, or involve small-scale retail sales without a fixed business location.
Certain types of online businesses may be exempt from taxes if they meet specific conditions, including:
- Handmade Products: If you sell handmade products such as crafts or snacks and your revenue does not exceed the tax threshold, you may be exempt from taxes.
- Seasonal Sales: Seasonal business activities, such as selling New Year or Mid-Autumn Festival decorations, with revenue below the tax threshold, may also be exempt from taxes.
- Small-scale Social Media Sales: Sales conducted on social media with a small scale and revenue under the tax threshold are also eligible for tax exemption.
When did online sales tax collection begin?
The taxation of online business activities is not a new concept. However, the rapid development of e-commerce has prompted tax authorities worldwide, including in Vietnam, to adjust and enhance tax management measures for this business model. In Vietnam, the taxation of online sales was introduced and implemented in 2018.
2018 marked a significant milestone when the General Department of Taxation of Vietnam issued Document No. 3200/TCT-DNL on August 21, 2018, regarding the tax management of e-commerce business activities. This document provides guidance for local tax authorities to strengthen tax management for activities on e-commerce platforms (such as Shopee, Lazada, TikTok Shop, etc.) and other online platforms (such as Facebook, YouTube, TikTok, etc.).
Legal regulations on taxes for online sales
In Vietnam, online sales must comply with legal regulations on taxation to ensure fairness and transparency in business. Here are the main regulations that individuals and businesses engaged in online sales need to be aware of:
1. Current tax laws
The current tax laws in Vietnam include:
Corporate Income Tax Law (CIT)
- Legal Basis: Corporate Income Tax Law No. 14/2008/QH12, amended and supplemented in 2013 and 2014.
- Tax Rate: 20% on taxable income of the business.
- Applicable Entities: All businesses, including those engaged in online sales, involved in the production and trading of goods and services.
Value Added Tax (VAT) Law:
- Legal Basis: Value Added Tax Law No. 13/2008/QH12, amended and supplemented in 2013 and 2016.
- Tax Rate: 10% on the value of goods and services sold.
- Taxable Revenue Threshold: Above 100 million VND per year.
- Applicable Entities: All organizations, individuals, and businesses engaged in taxable goods and services, including online businesses.
Personal Income Tax (PIT) Law:
- Legal basis: Personal Income Tax Law No. 04/2007/QH12, amended and supplemented in 2012 and 2014.
- Tax rate: The tax rate ranges from 0.5% to 5% on revenue, depending on the type of business.
- Taxable revenue threshold: Above 100 million VND per year.
- Applicability: Individual businesses, including those selling online.
2. Forms of Tax Penalties for Identified Violations
According to current regulations in Vietnam, late or non-payment of taxes will be subject to penalties in the following forms:
Late Payment Penalty: A penalty interest rate is applied to the late tax payment, calculated as a percentage of the overdue tax amount and the number of days late. Currently, the rate is 0.03% per day on the overdue tax amount.
Penalty for Incorrect Tax Declaration:
- Penalty Amount: Ranges from 10% to 20% of the incorrectly declared tax amount, depending on the severity of the violation and the duration of the incorrect declaration.
- Measures: In addition to the monetary fine, individuals or businesses must also pay the full amount of the underpaid tax and the penalty as stipulated by regulations.
Tax Fraud Penalty:
- Penalty Amount: It can range from 1 to 3 times the amount of the tax evaded.
- Measures: In the case of serious violations, individuals or businesses may face criminal prosecution under the law.
Other Penalties:
- Suspension of Operations: Temporarily halt or suspend business operations in cases of severe and prolonged violations.
- Revocation of Business License: If there are repeated or serious violations, tax authorities may revoke the business license.
Types of Taxes to be Paid When Selling Online
The types of taxes required will vary depending on the business format, specifically:
1. According to the Business Household Model
When engaging in online business under the household business model, sellers must also comply with tax regulations and pay the corresponding taxes. Here are the taxes that need to be paid for household businesses:
Value Added Tax (VAT):
- Tax Rate: 10% on the value of goods and services sold.
- Applicable To: Business households with sales revenue from goods and services exceeding 100 million VND per year.
Personal Income Tax (PIT):
- Tax Rates:
- 0.5% on revenue from trading goods.
- 1% on revenue from service activities.
- 2% on revenue from manufacturing, transportation, and services related to goods.
- Applicable Entities: Business households with annual revenue from business activities exceeding 100 million VND.
Business License Tax:
- Tax Threshold: Determined based on the annual revenue of the business household.
- Tax Rates:1 million VND per year for business households with revenue from 100 million to 300 million VND annually.2 million VND per year for business households with revenue from 300 million to 500 million VND annually.3 million VND per year for business households with revenue exceeding 500 million VND annually.
- Applicable Entities: All registered business households.
2. Under the Business Model
When conducting online business under the business model, the types of taxes and tax obligations must also comply with legal regulations. Here are the taxes that businesses need to pay:
Value Added Tax (VAT):
- Tax Rate: 10% on the value of goods and services sold.
- Applicable To: All businesses conducting online sales with revenue from goods and services exceeding 100 million VND per year.
Corporate Income Tax (CIT):
- Tax Rate: 20% on the taxable income of the business.
- Applicable To: All businesses engaged in online sales, including companies and organizations involved in the production and sale of goods and services.
Personal Income Tax (PIT) for Employees:
- Tax Rate: Calculated using a progressive tax rate from 5% to 35% on the individual's taxable income.
- Applicable To: Businesses with employees working under employment contracts. The business is responsible for withholding and remitting personal income tax on behalf of the employees.
Business License Tax:
- Tax Threshold: Determined based on registered capital or annual revenue.
- Tax Rates:
- 3 million VND per year for businesses with registered capital exceeding 10 billion VND.
- 2 million VND per year for businesses with registered capital of 10 billion VND or less.
- 1 million VND per year for branches, representative offices, business locations, non-profit organizations, and other economic entities.
- Applicable To: Businesses, individual business households, branches, representative offices with registered business activities.
Other Contributions:
- Social Insurance (SI) and Health Insurance (HI):
- Applicable To: Businesses with employees working under labor contracts.
- Contribution Rates: Both the employer and employees contribute based on the employee's salary.
- SI: 17.5% from the employer and 8% from the employee.
- HI: 3% from the employer and 1.5% from the employee.
- Unemployment Insurance (UI): 1% from the employer and 1% from the employee.
Trade Union Fees:
- Applicable To: Businesses with 10 or more employees.
- Contribution Rate: 2% of the wage fund used as the basis for Social Insurance (SI) contributions.
How to Calculate Taxes for Online Sales
When engaging in online sales, tax calculation depends on various factors such as the type of business (individual, household business, or company), revenue, the type of goods or services sold, and current legal regulations. Below is a guide on how to calculate the main types of taxes for online sales activities in Vietnam.
1. Value Added Tax (VAT):
For households and businesses: VAT payable = Taxable revenue x VAT rate (10%)
2. Personal Income Tax (PIT)
For individual business households:
Taxable revenue threshold: Over 100 million VND/year.
Tax rates:
- 0.5% for revenue from goods trading activities.
- 1% for revenue from service activities.
- 2% for revenue from manufacturing, transportation, and services associated with goods.
Calculation method: Payable PIT = Taxable revenue x PIT rate
3. Corporate Income Tax (CIT)
For businesses: The tax rate is 20% on taxable income of the business.
Calculation method: Payable CIT = Taxable income x CIT rate (20%)
How to pay online business tax?
To pay online business tax in Vietnam, you can use the General Department of Taxation's electronic portal. Sellers can conveniently and quickly declare and pay taxes online through the following websites:
- National Public Service Portal: dichvucong.gov.vn
- General Department of Taxation Electronic Portal: thuedientu.gdt.gov.vn
- Electronic Tax Declaration Service: nopthue.gdt.gov.vn
Compliance with tax regulations for online business is necessary to ensure transparency and fairness in the business environment. Online sellers need to understand the types of taxes to be paid, the registration and tax declaration process, as well as the penalties for violations. This not only helps avoid legal risks but also contributes to building credibility and sustainable business development.
