Currently, commercial banks are obligated to withhold and remit taxes on behalf of foreign organizations and individuals earning income from commercial activities in Vietnam. The tax authorities publish the names and websites of foreign suppliers who haven't registered for tax purposes, enabling banks to deduct and remit taxes on their behalf.

However, in feedback on the draft revised Law on Tax Administration, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) has proposed removing this regulation.

Vietcombank argues that banks simply execute money transfers as instructed by their clients. These instructions include the recipient's name, account number, and bank name, but not their website. Therefore, the website information provided by the tax authorities is useless in determining whether the recipient falls under the tax withholding requirement.

Furthermore, foreign suppliers from different countries may share the same name. Relying solely on names to identify those subject to tax withholding could lead to errors.

Vietcombank also points out that banks are not involved in the buying and selling process and therefore lack insight into the nature of the transactions. They also lack the information needed to accurately determine the business sector and applicable withholding rate.

The bank contends that requiring commercial banks to withhold taxes, as stipulated in the 2019 Law on Tax Administration, is impractical and deviates from international norms. Developed countries such as the US, Australia, and the European Union (EU) don't mandate banks to withhold taxes from foreign sellers. The Organisation for Economic Co-operation and Development (OECD) recommends that digital platforms declare and remit taxes on behalf of sellers engaged in e-commerce.

Similarly, Law 56/2024 (amending and supplementing nine laws, including the Law on Tax Administration) requires foreign suppliers to directly or through authorized representatives register, declare, and pay taxes on revenue from e-commerce, digital platforms, and other activities.

The Ministry of Finance says it will review and consider Vietcombank's proposal.

According to tax authorities, total revenue from organizations and individuals engaged in e-commerce between 2022 and 2024 was approximately 296,000 trillion dong. In the first 6 months of this year, revenue from this sector reached 98,000 trillion dong, a 58% increase compared to the same period last year. 163 foreign suppliers have registered, declared, and paid taxes via the electronic information portal, totaling 5,700 trillion dong, a 41% year-on-year increase.

Phuong Dung