Vietnam will eliminate a decision to exempt the value-added tax on products valued below VND1 million (US$39.3) each imported via e-commerce platforms, Deputy Prime Minister and Minister of Finance Ho Duc Phoc said during the National Assembly’s (NA’s) sitting on Tuesday.

According to the deputy prime minister, the VAT exemption for low-value goods is stated in the Tokyo Convention that Vietnam is a party and Vietnam's Decision 78 issued in 2010.

However, other countries that are also members of the Tokyo Convention have scrapped the policy.

In particular, European Union countries require taxes on goods valued below $22 each, and Singapore collects the VAT on low-value products from January 1, 2023.

Thailand has also imposed a seven-percent VAT on all imports.

Deputy PM Phoc said the e-commerce platform Temu has taken advantage of the policy of waiving the VAT on products costing below VND1 million ($39.3) each to sell low-cost products.

Earlier, the NA Standing Board asked the government to terminate Decision 78 and impose the VAT on goods imported via e-commerce platforms. 

Deputy PM and Minister Phoc said the government was proposing adding mandatory regulations to e-commerce platforms, forcing them to declare and pay taxes on behalf of traders.

Foreign suppliers operating on e-commerce platforms and other digital platforms in Vietnam should declare and pay taxes, whether they have representative offices in Vietnam or not, Phoc added.

Relevant ministries will be responsible for developing databases about traders on e-commerce platforms.

They include the Ministry of Industry and Trade, the Ministry of Public Security, the Ministry of Information and Communications, the Ministry of Planning and Investment, and the Ministry of Transport.

Commercial banks, credit institutions, and payment intermediaries will have to share data and provide information about commerce transactions.

Approximately four to five million low-value orders were sent from China to Vietnam via e-commerce platforms per day in March 2023, according to data from Vietnam Posts and Telecommunications Group.

In other words, Vietnam failed to collect the VAT and import tax on an estimated $45-63 million daily imports.

From January to September, products valued below VND200,000 ($7.9) accounted for more than half of sales on e-commerce platforms in Vietnam, e-commerce market research platform Metric reported.

With Decision 78, the country is losing massive tax revenue, according to the NA Standing Board.

National Assembly Deputy Hoang Minh Hieu. Photo: Gia Han / Tuoi Tre

At the NA’s sitting, NA Deputy Hoang Minh Hieu said e-commerce development has resulted in an increasing volume of low-value imports, with the VAT exemption for low-value products hitting local producers and retailers hard.

While individual products have a low value, the total loss is bigger than expected. 

Hieu explained that the VAT exemption for low-value products results in a huge tax revenue loss, and shippers are dividing items into smaller quantities to avoid the tax.

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