New legal impacts on Vietnam’s e-commerce market

How are changes in domestic policy and tariff policies from other countries affecting the market?

Current policy changes are taking two directions. Some policies create better conditions to help businesses operate more conveniently through e-commerce. However, there are also many policies that create new regulations in business operations, requiring businesses to quickly grasp and adjust to comply with new regulations.

Businesses that are quick to grasp new policies and have well-trained personnel will have more opportunities to develop in the e-commerce environment. Specifically, from April 1, e-commerce platforms will be responsible for declaring deducted tax and paying on behalf of sellers.

As stipulated, e-commerce trading platforms, digital platforms with payment functions (including domestic and foreign organisations), and other organisations with digital economic activities as prescribed by the government shall deduct and pay taxes on behalf of, and declare deducted taxes for business households and business individuals who are eligible.

The Vietnam E-commerce Association and its member businesses have been invited by the tax authorities to a meeting to discuss plans to implement these provisions. The association and digital platforms also proactively shared this information with the online business community and received a lot of attention and problems from sellers about implementation methods, tax deduction rates for business groups and business goods groups, and tax refund procedures among others, so it is necessary to soon have a detailed guiding decree.

This is also a new and complex task, requiring time and careful preparation such as building and updating technology systems, requiring hundreds of thousands of sellers to update information to comply with regulations. To effectively implement this task, we hope that the tax authorities will coordinate to disseminate and guide the platforms, especially business households and individual businesses. It is also necessary to consider opening an online support channel to advise taxpayers.

What are the investment and business trends in the e-commerce sector amid growing interest from foreign players?

The investment and business trend in e-commerce is currently being focused on by many businesses, both in the group of businesses selling products and goods as well as the group of businesses providing business solutions on e-commerce.

In 2022, e-commerce accounted for about 8.5 per cent of the retail market share, increasing to 10 per cent by 2023. At the same time, e-commerce also contributed about two-thirds of the value of Vietnam’s digital economy, affirming its increasingly important role in commercial activities.

There are some prominent business trends in e-commerce today: strong application of IT and AI to support operations and commerce; new business solutions applied by many businesses in social and mobile commerce; and businesses focusing on improving customer experience to expand their potential new customer base as well as retain existing customers.

Cross-border e-commerce offers potential for Vietnamese products when they want to reach out to the world. This is also a solution to increase product value for Vietnamese goods. Besides this, the trend of cooperation to expand the market or improve the quality of products is also focused on by businesses.

With the changes in play, what are the driving factors for the development of the market?

According to estimates from the Ministry of Industry and Trade, e-commerce sales in 2025 could reach $45 billion, entering the top three countries with the largest e-commerce markets in Southeast Asia.

Cross-border e-commerce, sustainable e-commerce development, green trade development, and the rapid development of IT applications on business operations will continue to be the factors encouraging the development of the market in the upcoming time.

Moreover, competition between digital platforms will drive innovation and service improvements, benefiting consumers and businesses that sell through these platforms.

Online consumer behaviour and needs are changing every day, thereby creating many requirements for service improvement and innovation in providing goods and products to online consumers. Vietnam’s e-commerce has grown rapidly, at an average rate of over 20 per cent per year. Many large and small businesses in different fields are interested in joining this playground.

For the group applying e-commerce to business activities, they are facing competition in the quality of goods and services, product prices, and the level of application of IT and AI to optimise business efficiency.

The lack of regulations and businesses’ reluctance to engage in environmental protection efforts have made it difficult for Vietnam’s e-commerce sector to transition to a greener model.

The Ministry of Finance (MoF) has proposed that all VAT and personal income tax of sellers on e-commerce platforms are deducted as soon as the order is successfully confirmed and paid for.