Two weeks ago, the General Department of Taxation (GDT) issued requested provincial and municipal authorities as well as large enterprise departments to vigorously implement tax declaration, payment, and management for e-commerce activities. This is particularly so for those engaged in livestream sales of goods and services, and affiliate marketing.
Inspection activities will be carried out and reported to the GDT before August.
Nguyen Quy Trung, deputy director of the Tax Administration Department for Small- and Medium-sized Enterprises, Business Households, and Individuals, said livestream sellers were organisations or individuals who sell products for themselves or for those with significant influence on social media, and they receive commissions from livestream sales.
According to regulations, online sellers are required to pay VAT and personal income tax (PIT) if they generate annual revenue of at least VND100 million ($3,900). Individuals and organisations earning commission on livestream sales will be subject to PIT and must comply with the progressive tax schedule.
“The commissions paid by e-commerce platforms to livestream salespeople will be calculated as part of their salary and wages. By the end of the year, these individuals will be required to independently declare and settle their income tax based on the progressive tax rate schedule with seven brackets, ranging from 5 per cent to 35 per cent,” Trung said.
“In the case of commissions paid to individual businesses, they will need to declare and pay taxes at 7 per cent, which includes 5 per cent VAT and 2 per cent PIT.”
The Ministry of Finance (MoF) is collecting comments on a draft circular guiding tax registration, which includes provisions stating that individuals engaged in e-commerce business must register directly with the tax authorities.
During the questioning session of the seventh National Assembly session held in early June, Minister of Industry and Trade Nguyen Hong Dien acknowledged that e-commerce was a challenging sector to manage, facing issues in tax evasion, personal data breaches, and fake goods.
“We cannot deny that tax revenue losses in the e-commerce sector are still occurring. The Ministry of Industry and Trade is collaborating with the MoF to share data from over 900 websites and nearly 300 e-commerce trading platforms to enhance tax management,” said Minister Dien.
The explosion of e-commerce has led to the emergence of livestream selling sessions that generate revenues that can be equivalent to the annual revenue of a business, on popular online shopping platforms such as TikTok, Shopee, or Lazada. The livestream session that reached a sales milestone of $4.1 million by TikTok account “Quyen Leo Daily” in early May is a notable case.
According to the Vietnam E-commerce Association, there is an average of 2.5 million livestream sales sessions per month, with over 50,000 sellers. This is a highly popular shopping method, with the average Vietnamese spending up to 13 hours per week shopping through livestream sessions.
Nguyen Lam Thanh, CEO of TikTok Vietnam, said that livestreaming and affiliate marketing will continue to thrive on e-commerce platforms, leading to the establishment of new revenue records.
“TikTok Shop has previously recorded livestream sessions attracting up to 350,000 viewers simultaneously at a given time, thanks to the support of technology. On average, these livestream sessions are estimated to draw in around 5-20 million viewers by the end of the session,” Thanh said.
“For a livestream session with 10 million viewers, if only 1 per cent of them make a purchase, that amounts to 100,000 orders. Therefore, revenues of over $4 million is sometimes not that significant,” he added.
He added that livestream sales sessions conducted by key opinion leaders have support in terms of traffic, vouchers, and better prices than usual from the brand and platform, so the order completion rate is higher.
All sellers on e-commerce platforms are required to register for tax codes and bank accounts associated with citizen identification. This makes it difficult for tax evasion to occur. TikTok Shop also provides tools to support sellers in fulfilling their PIT obligations in accordance with tax laws, said Thanh.
However, Thanh also acknowledged that with many sellers and a high volume of transactions, compliance with tax regulations would require significant efforts from all parties involved, especially from the regulatory authorities.
Tax revenue from e-commerce channels is expected to reach around $146 million in 2023, with total tax collection reaching VND 97 trillion (over $4 billion), a 14 per cent increase compared to the previous year, according to data from the GDT. Last year, the tax sector also conducted reviews on over 31,000 entities, processing over 22,000 violations, resulting in an additional tax revenue of nearly $125 million.
According to the GDT, there are currently almost 100 foreign companies registered for tax through the electronic portal. Including Google, Meta, Microsoft, TikTok, Netflix, and Apple, they have declared and paid taxes amounting to over VND4 trillion ($166.6 billion) as of May 15.
With this additional contribution, foreign businesses have cumulatively paid VND15.6 trillion ($650 billion) since the operation of the electronic portal for foreign suppliers began in March 2022.
According to TechCrunch, the global livestream e-commerce market is projected to reach $55 billion by 2026. Of which, Vietnam is considered a strong and rapidly growing livestream market, with an annual growth rate of 33 per cent.
Vietnam is among the top five countries with the highest e-commerce growth rate in the world, with a potential growth rate of up to 29 per cent, according to Statista.com. The total market size is projected to reach $39 billion by 2025