Perfecting tax policy for goods traded via e-commerce

Workers unload goods to be sent via postal and express delivery services at Huu Nghi international border gate. Photo: H.Nu

Implement international commitments

In recent days, public opinion has been concerned about the situation of foreign goods taking advantage of Vietnamese policies and laws to "split" orders under 1 million VND to avoid taxes, enjoy incentives, causing revenue loss and unfair competition. Many opinions say that Vietnam needed to change regulations to prevent tax loss due to cross-border transactions through cheap e-commerce platforms, protecting the rights of domestic manufacturing and retail enterprises that comply with the law.

According to research, in the past, to simplify tax management, imported goods through cross-border e-commerce systems and with a value of less than 1 million VND were exempted from tax, Vietnam implemented international commitments in the 1973 Kyoto Convention because the tax rate was small compared to management costs. This also helps encourage people to consume small-value goods.

Specifically, in Standard 4.13, Section A, Chapter IV - Customs duties and other taxes of the Revised Kyoto Convention stipulates: “National law shall prescribe a minimum value and/or minimum amount of customs duties and other taxes below which no customs duties and other taxes shall be collected”.

In Vietnam, the Government provides detailed regulations in Decision No. 78/2010/QD-TTg dated November 30, 2010. Accordingly, in Article 1 of Decision No. 78/2010/QD-TTg, it is stipulated that “imported goods sent via express delivery service with a value of 1 million VND or less are exempt from import duty and VAT”.

Thus, Decision No. 78/2010/QD-TTg was issued on the basis of the Law on International Treaties, the Kyoto Convention and international practices in effect at the time of 2010.

At the same time, Clause 5, Article 16 of the Law on Export and Import Tax stipulates that goods with a value or tax amount payable below the minimum level are exempt from import tax. Specifically, it is stipulated in Clause 2, Clause 3, Article 29 of Decree 134/2016/ND-CP, amended in Clause 11, Article 1 of Decree 18/2021/ND-CP.

In addition, some free trade agreements also specifically stipulate taxes on low-value shipments such as: Article 8.2.d of the Trade Facilitation Agreement (TFA) stipulates that, to the extent possible, the minimum shipment value or the amount of customs duty payable will not be collected, except for certain types of goods that have been specified. Or Article 5.7.1.f of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) stipulates that in normal circumstances, customs duties will not be calculated on express delivery goods with a value equal to or lower than the fixed amount prescribed by the laws of each party.

According to Mr. Dang Son Tung, Deputy Director of the Import-Export Tax Department, General Department of Customs, the regulations on tax exemption for low-value imported goods of Vietnam in the past are consistent with international commitments. Regarding tax exemption levels, current legal documents of Vietnam only stipulate tax exemption for imported goods sent via postal and express delivery services. However, with the development of technology, the volume of imported goods with small value via e-commerce platforms is increasingly large. Therefore, the Government assigned the Ministry of Finance to direct the Ministry's policy advisory units to research, evaluate and review to perfect tax policies to ensure the goal of developing e-commerce activities without causing loss of state budget revenue.

Proposal to “tighten” for more effective management

Speaking on October 29, 2024 at the National Assembly on the issue of voters, National Assembly deputies and public opinion concerned about low-value imported goods, Deputy Prime Minister and Minister of Finance Ho Duc Phoc said that in reality, some countries have gradually abolished the practice and have implemented tax collection on low-value goods.

Typically, in the EU from July 1, 2021, VAT will be collected on shipments of 22 Euros or less. Or in the UK, the tax exemption for goods under 135 USD will be abolished in 2022. And from January 1, 2023, Singapore will abolish the regulation of tax exemption for small-value goods transported and traded via e-commerce. Meanwhile, Thailand imposes a 7% VAT on all types of imported goods.

Therefore, in order to comply with the current trend, the Ministry of Finance is reviewing and will submit to the Prime Minister to abolish Decision No. 78/2010/QD-TTg. However, it is necessary to consult with competent authorities on the implementation of international treaties (such as the Ministry of Justice and the Ministry of Foreign Affairs) to consider Vietnam's responsibilities in the implementation of the Kyoto Convention on non-collection of customs duties and other taxes on goods with a minimum value.

In addition, in accordance with the direction of Deputy Prime Minister Le Minh Khai in Official Dispatch No. 5657/VPCP-KTTH dated July 26, 2023 of the Government Office on assigning the Ministry of Finance to continue researching and completing the draft Decree on E-commerce, submitting it to the Government for consideration and decision in the fourth quarter of 2024. Accordingly, the policy advisory units of the Ministry of Finance are studying and reviewing the regulations on tax exemption for imported and exported goods traded via e-commerce to ensure both customs management and to avoid budget losses.

In the process of drafting the Decree regulating customs management for imported and exported goods traded via e-commerce, the Ministry of Finance, as the lead drafting unit, will assess the impact of e-commerce on the economy in general and domestic production in particular to ensure the effectiveness of tax collection for the contents of tax exemption and tax collection regulations in the draft Decree.

In addition, it is necessary to have an overall assessment related to the scope of management of many sectors and fields, including the Ministry of Industry and Trade, which has been assigned to preside over e-commerce management as well as trade defense and domestic market protection.

In the shortest time, the General Department of Customs (Ministry of Finance) will coordinate with specialized agencies of the Ministry of Industry and Trade to study and evaluate in depth this important issue. From there, there are general advisory contents, ensuring that policies are built in accordance with the State's policies and viewpoints, updating the rapid development of technology and world trade, and harmonizing the interests of affected parties.

According to Mr. Dang Son Tung, the Customs agency determined that the development of e-commerce will promote economic growth, but will also pose many difficulties for management, especially tax management of the Customs agency. In order to ensure that regulations comply with Vietnamese law as well as are compatible with international treaties and agreements, the drafting agency is carefully considering regulations on tax policies.

In particular, when a field develops strongly, before promulgating regulations, there must be a process of research and collection of experience from countries in the region and the world to ensure the goal of both creating convenience but not causing tax losses for the State and guiding customs declarants and enterprises to comply with and fulfill tax obligations in accordance with the law. In addition, tax collection and tax exemption must be carried out in accordance with international commitments and domestic laws based on an assessment of advantages/disadvantages and impacts on relevant parties, Mr. Dang Son Tung emphasized.