Vietnam Plans Imposing VAT on Cross-Border E-Commerce Goods

On April 23, Vietnam’s Finance and Budget Committee deliberated the imposition of value-added tax (VAT) on goods valued below 1 million dong traded through platforms such as TikTok and Shopee, aiming to bolster national revenue streams.

Presently, imports and VAT exemptions apply to low-value imported goods below 1 million VND dispatched through express delivery services. However, amidst the burgeoning growth of cross-border e-commerce, Finance and Budget Committee Chairman Le Quang Muang advocates for the review of this tax exemption provision. He highlights that numerous nations have rescinded similar regulations to safeguard domestic revenue streams and foster equitable business environments. This measure would also broaden the tax base for cross-border e-commerce activities.

According to Vietnam Posts and Telecommunications Joint Stock Company (VNPT) data, in March 2023, an average of 4-5 million orders, valued between 100,000-300,000 VND each, were shipped from China daily. Platforms like Shopee, Lazada, and TikTok witness an average daily trade value of approximately USD 45-63 million, totaling USD 1.3-1.9 billion monthly.

Vietnamese Finance Minister Hu Duc Phuc asserts that maintaining the 10% tax rate is prudent given the prevailing economic challenges. He underscores government efforts to alleviate business strains by reducing VAT rates from 10% to 8% to facilitate recovery. The Finance and Budget Committee clarifies that Vietnam presently exempts businesses, households, and individuals earning less than 100 million VND annually from VAT.

Nonetheless, Vietnam's VAT rate remains comparatively low vis-à-vis other nations, suggesting scope for enhancement. The Vietnamese government anticipates proposing amendments to the VAT law during the 7th National Assembly session in May. For Chinese e-commerce enterprises, Vietnam represents a pivotal export market. Hence, they may recalibrate pricing strategies to navigate the impact of Vietnam's policies, entice Vietnamese consumers, or explore avenues to mitigate operational expenses.