HCM City prevents tax loss from e-commerce

Mr. Le Duy Minh, Director of HCM City Tax Department

Can you tell us about the measures that the HCM City Tax Department has implemented to enhance the effectiveness of tax management for e-commerce?

On the basis of identifying organizations and individuals that engage in e-commerce business activities put into tax administration, HCM City Tax Department has increased communication and guidance for organizations and individuals operating e-commerce businesses to be aware of fulfilling tax obligations in accordance with regulations; building a mechanism to provide information of businesses providing logistics services and delivery services on a digital platform for tax authorities; conducting inspections and examinations of enterprises providing freight forwarding services to organizations and individuals operating e-commerce businesses, especially in the case of delivery units authorized to collect cash on delivery (COD), including checking the provision of adequate data as required.

The HCM City Tax Department also sent a document to businesses that are owners of e-commerce exchanges to request organizations and individuals selling goods and providing services to fulfill tax obligations in accordance with regulations (they must issue invoices when selling goods or providing services). At the same time, they must provide a list of organizations and individuals that do not fulfill their tax obligations to the tax authorities each quarter.

For payment intermediary businesses, the tax authority requested they provide data on the amount of money transferred from buyers to organizations and individuals that sell goods and provide services through these enterprises periodically; conducting inspections, combining the comparison of buyer's remittance data to organizations and individuals selling goods and providing services through payment intermediaries in order to review the declaration and payment of enterprises providing services through digital platforms.

Simultaneously, HCM City Tax Department has coordinated with a number of commercial banks in the area to request the provision of data of cash flow transactions from abroad to domestic organizations and individuals that receive income from foreign organizations such as Google, Apple, Netflix, etc. On that basis, the tax authority will process tax arrears for organizations and individuals that generate income from overseas but they have not declared and paid tax. After processing, they will be subject to regular tax management.

How has HCM City Tax Department achieved positive results in tax administration for e-commerce activities in recent years, sir?

With the above measures, the tax authorities initially obtained some positive and encouraging results in the fight against loss of revenue.

Specifically, in the first six months of 2022, the unit handled businesses selling goods through an e-commerce exchange with a tax amount of over VND608 million; handled tax arrears, fines and late payment interest for an enterprise providing logistics services, delivery services in the form of cash on delivery (COD) with an amount of over VND9.5 billion; handling a payment intermediary enterprise with total tax arrears, fines and late payment interest of over VND9.1 billion.

The tax authority also inspected two companies that were partners of foreign suppliers Google in Vietnam and conducted monetary penalties and tax arrears up to nearly VND27 billion. In addition, examining and handling 153 individuals and businesses that generate income from Google with the amount of tax, penalty and late payment interest were over VND149.7 billion.

Could you please share the difficulties in tax administration for domestic and cross-border e-commerce activities as well as recommendations for effective tax management of this activity?

The tax authority found that the subjects who sold goods and provided services through e-commerce exchanges, in-apps sales, and social networking sites did not make tax declarations and payments because the majority of consumers do not take invoices or organizations and individuals when receiving payment of commissions and services in cash through delivery units (COD), if making payment via banks through payment intermediaries or use accounts at banks that are not registered with the tax authorities.

Organizations and individuals earning income from abroad (from Google, Apple) do not declare and pay tax because they think that the tax authorities do not know their income arising from abroad, although these incomes are all remitted to Vietnam through commercial banks.

Therefore, the tax authority could not manage organizations and individuals that sell goods and provide services through e-commerce platforms, in-app sales, and social networking sites if they did not get the support of e-commerce floors, freight forwarding units, and payment intermediaries.

The tax authority also could not manage organizations and individuals that generate income from abroad if they did not receive the support of commercial banks in providing data to tax authorities.

Some e-commerce exchanges and some commercial banks still refuse to provide data to tax authorities, causing tax authorities to face difficulties in tax management for organizations and individuals selling goods through these e-commerce platforms as well as organizations and individuals that generate income from overseas transfer money back home through these commercial banks.

Accordingly, the HCM City Tax Department proposed the Ministry of Industry and Trade to request e-commerce exchanges strictly implement Decree No. 52/2013/ND-CP dated May 16, 2013 of the Government on e-commerce.

Specifically, organizations and individuals selling goods and providing services on e-commerce exchanges must fulfill their tax obligations as prescribed by law (must issue invoices when selling goods, and providing services). At the same time, it is suggested that the State Bank of Vietnam should request commercial banks to provide data at the request of the tax authorities, especially data on income generated from oversea and transferred to Vietnam.