MAJOR LAW CHANGES ON TAX APPLICATION AND ADMINISTRATION

As with the fast-changing pace of the business and investment environment in the digital age, current legal regulations in Vietnam have revealed many limitations in administration and practical application to suit the development needs of new business models and the increase in average personal income. On November 30, 2024, the 8th session of the National Assembly of Vietnam ended with the approval of 18 laws, 21 resolutions and initial discussions on 10 draft laws. Many of these regulations will take effect from January 2025.
The large number of passed laws and amendments are likely to affect the management of enterprises and investment activities of foreign investors significantly. Some notable changes which will applied to organizations/ individuals doing business in Vietnam
(especially for cross-border, e-commerce transactions) are as follows:
Law on Value Added Tax (amended), effective from July 1, 2025:

• Some changes in the classification of goods and services that are not subject to VAT, subject to 0% tax rate and changes in other applicable tax rates.
• Conditions for all input VAT deductions will now require non-cash payment supporting documents (while cash payments of less than VND 20,000,000 were allowed previously).
• Conditions for VAT refund: the buyer is only eligible for VAT refund in cases where the seller has declared and paid VAT on the issued invoice. This condition is to eliminate cases of tax refund based on fabricated invoices.
• Additional definition for VAT taxpayer includes foreign suppliers without a permanent establishment in Vietnam who conduct e-commerce business activities on digital platforms with organizations/individuals in Vietnam (collectively referred to as “foreign suppliers”). In addition, organizations who manage e-commerce trading/digital platforms (with payment functions) must declare, deduct, and pay VAT on behalf of sellers for transactions made via their platforms.

Amending and supplementing the Law on Tax Administration:

• Foreign suppliers engage in e-commerce business activities or trading of goods and services based on other types of digital platforms, have obligations to directly or authorize others to complete tax registration, make tax declarations and payments in Vietnam (effective from January 1, 2025).
• Business individuals, legal representatives of enterprises, foreigners, etc.… must fulfill their tax payment obligations before leaving the country. This may affect individual investors and representatives of foreign companies who may be temporarily suspended from leaving the country in case they have not fulfilled their tax obligations (the tax authorities will notify taxpayers in cases when they impose such suspensions).

Amendments and supplements to the Law on Personal Income Tax:

• Amendments to the Law on Personal Income Tax are also adjusted in a synchronous manner with the amendments to the Law on VAT and the Law on Tax Administration in the direction of: regulating the responsibilities of organizations and individuals paying income, managing e-commerce trading floors and digital platforms… to declare, deduct and pay personal income tax on behalf of taxpayers participated on their platforms, including both resident and non-resident taxpayers in Vietnam.

n general, these changes and supplements to various Tax Laws focus on solving administrative issues of cross-border transactions to avoid tax losses. As in the cases of Temu and Shein (e-commerce trading platforms), who have taken initial steps to penetrate the Vietnamese market without being officially licensed, connecting domestic consumers with competitive pricing goods mainly originating from China. Temu has to temporarily suspend its operation after a discussion with the Ministry of Industry and Trade until the license is approved.
Along with other regulatory changes and amendments passed by the National Assembly at the same time such as the Law on Planning, Law on Investment, Bidding, Accounting, Auditing, Securities, Handling of Administrative Violations, Health Insurance… organizations and individuals (including foreign investors) conducting businesses in Vietnam will have to prepare for many adjustments in strategy and approach in the near future.

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