[Latest] Tax Declaration and the Newest Updates on E-commerce Taxation for Businesses

The Latest Changes and Updates on E-commerce Taxation (Updated as of 10/07/2024)

Highlights:

The Ministry of Finance has issued Circular 100/2021/TT-BTC, amending and supplementing several provisions on taxation for e-commerce (E-commerce) activities. Accordingly, the regulations on tax payment responsibility, tax declaration, and tax payment for organizations and individuals engaged in e-commerce have changed. Here are the details:

• The e-commerce platform owner is responsible for paying taxes on behalf of the seller: For e-commerce transactions valued at 100,000 VND or more and paid through the platform owner's payment system, the platform owner is responsible for paying taxes on behalf of the seller.
• The seller is responsible for declaring and paying taxes: For e-commerce transactions valued under 100,000 VND or not paid through the platform owner's payment system, the seller is responsible for declaring and paying taxes as per the regulations.
• The tax authorities enhance tax management for e-commerce activities: The tax authorities are strengthening the application of information technology and coordinating with relevant parties to enhance tax management for e-commerce activities, ensuring accurate and sufficient tax collection.

Specific Changes and Updates:

• List of Goods and Services Subject to Value Added Tax (VAT): The list of goods and services subject to VAT is applied according to the current provisions of the Law on Value Added Tax.
• Personal Income Tax (PIT): Individuals engaged in e-commerce with income from business activities must pay PIT in accordance with the Law on Personal Income Tax.
• Corporate Income Tax (CIT): Businesses engaged in e-commerce must pay CIT according to the Law on Corporate Income Tax.
• Electronic Invoices: The use of electronic invoices in e-commerce activities is mandatory according to the Law on Invoices.

Tax Considerations for Businesses Operating on E-commerce Platforms

Starting from July 1, 2024, the Tax Authority has issued a decree reducing the tax rate from 10% to 8% for certain sectors. This requires businesses to clearly determine the tax rates for their input and output costs.

For Input Costs

Currently, e-commerce platforms maintain a tax rate of 10% for platform fees such as fixed fees, transaction fees, service fees, etc. However, there are differences in advertising fees across e-commerce platforms. The advertising tax rate on Shopee remains at 10%, while Lazada and Tiki have reduced their advertising tax rate from 10% to 8%.

As TikTok is a foreign company, it has been required to register for a contractor tax code since January 1, 2024. Therefore, businesses are no longer required to declare or pay contractor tax on behalf of TikTok. However, it should be noted that once TikTok registers for the contractor tax code in Vietnam, TikTok will charge an additional 5% VAT.

For Input Costs

For businesses and brands, costs related to booking Key Opinion Consumers (KOCs) and Key Opinion Leaders (KOLs) are incurred. With the change in tax rates, some businesses have not yet clarified whether their tax rate should be 10% or 8%. Therefore, when receiving invoices and input costs with differing tax rates, businesses need to clearly specify in the contract with KOCs their responsibility for tax payment and tax declaration to avoid potential tax risks for the business.

How should businesses declare and pay Personal Income Tax (PIT) for booking KOCs and affiliates?

Declaring and Paying Personal Income Tax (PIT) for Booking KOCs

Currently, government authorities are focusing on collecting personal income tax from Key Opinion Consumers (KOCs), even though the responsibility for PIT lies with the KOCs themselves.

However, to avoid potential cost risks for businesses, according to Decree 65 of the Government in 2013, companies and organizations paying income to individuals with contracts under 3 months are required to withhold personal income tax and file tax returns.

For KOCs with contracts below 2 million VND, businesses should collect commitments regarding the KOCs' income if tax is not withheld at source. To minimize risks, businesses are encouraged to withhold the full amount of the expenses paid to KOCs, then declare and pay the tax. This approach ensures that businesses have complete records, documents, and contracts to substantiate their expenses when calculating the total tax for the company.

Declaring and Paying Taxes for Affiliates

On e-commerce platforms such as TikTok Shop, stores can create links allowing KOCs to freely obtain product links, attach them, and act as affiliates. For these affiliate costs, TikTok currently does not provide KOC information needed to withhold and declare income tax.

Businesses should be aware that while TikTok is gradually aligning with Vietnam's tax regulations, they need to keep records of TikTok transactions and KOC information (such as affiliate documents, KOC channel names, etc.) to provide and explain during corporate income tax settlements.

What are the challenges and optimal solutions for accounting in managing corporate financial activities on e-commerce platforms?

Challenges in Issuing Invoices

In accounting for e-commerce activities, accountants often face several challenges in issuing invoices and reconciling orders, specifically:

According to regulations, accountants are required to issue invoices for each order based on the time of occurrence and completion.

Currently, the accounting department is using a multi-platform sales management software - UpBase SMEs - to assist with invoice issuance. With this software, accountants no longer need to perform manual operations. UpBase SMEs supports reconciliation and invoice creation, requiring accountants only to verify the data, set up the timing and conditions for issuing invoices. As a result, using the software saves time and ensures greater accuracy in invoice issuance.

Challenges in Reconciling Accounts Receivable

Additionally, selling on e-commerce platforms presents different challenges compared to traditional sales. Accountants face difficulties in reconciling accounts receivable from customers. When selling on these platforms, the accounts receivable (sales revenue) typically returns to the wallet within 10 to 15 days and is received per order.

Accountants also encounter challenges in reconciling and monitoring the incoming funds, especially when the number of orders is large. If handled manually, accountants must create formulas and reconcile with data on the seller center.

With multi-platform sales management software, accountants can monitor whether orders have been processed (providing accurate reports from the moment the buyer places the order to when the funds are received). This reduces the need for excessive manual operations and ensures that the data remains accurate.

Challenges in Managing Returns and Cancellations

The main challenges accountants face in managing returns and cancellations arise because the store only receives information after the status changes on the seller center or updates from third-party carriers regarding the return of items. This can lead to risks of inventory loss and returned goods. Accountants may not update the order status in a timely manner to cancel issued invoices.

With the UpBase SMEs software, stores/accountants receive notifications about returns and cancellations, allowing them to promptly cancel invoices and manage the status of returned and canceled orders. This helps coordinate with other departments to assist in retrieving returned items.

Conclusion

Businesses and individuals engaged in e-commerce need to regularly update themselves on the latest changes and updates regarding taxation to ensure proper and complete tax compliance.

For more detailed information on e-commerce taxation, you can refer to the Ministry of Finance's website: https://www.mof.gov.vn/ or the General Department of Taxation's website: https://www.gdt.gov.vn/.

Additionally, businesses can consult with tax experts to receive support and answers to questions related to e-commerce taxation.