Penalty for not declaring taxes when selling online in Vietnam

In today’s era of economic integration and development, online sales through e-commerce platforms are increasingly favored due to their convenience. Based on this model, sellers can expand their market access, while consumers benefit from more convenient purchasing methods. Throughout business operations—whether selling in physical stores or online enterprises, business households, and individuals are required to declare and pay taxes following the law. Therefore, what is the penalty for not declaring taxes when selling online in Vietnam? In the following article, Viet An Law – Tax Agency will provide clients with a general legal consultation on this matter.

Forms of online business operations

Currently, individuals and organizations conducting online business generally operate under two main forms:

• Individuals selling online spontaneously without a fixed location (no physical store): These individuals do not register for a business license but obtain a tax identification number (TIN) to submit tax declarations and pay taxes as individuals.
• Individuals or organizations operating online businesses with physical stores and regular sales activities: These entities are registered for business, hold business licenses, and have TINs. They conduct business under two models:
• Household business: Suitable for small-scale operations with limited capital, few employees, a modest inventory, and a moderate customer base.
• Companies/Enterprises: Appropriate for larger-scale operations involving diverse goods and the intention to establish multiple branches.

Tax declaration obligations for online businesses

• For tax obligations, taxpayers include resident individuals, groups of individuals, and households engaged in the production or trading of goods and services across all sectors and industries as defined by law. Accordingly, any person conducting business, whether traditional or online, with annual revenue exceeding VND 100 million must declare and pay taxes as prescribed (Penalty for not declaring taxes when selling online in Vietnam does not apply to individuals with revenue of VND 100 million or less per year).
• Under the provisions of tax laws, including taxes, fees, and charges, individuals and organizations engaging in business activities are subject to license fees, value-added tax (VAT), corporate income tax (CIT), and personal income tax (PIT) (if salary payments to employees and the taxable income of those employees exceed zero), regardless of whether business is conducted traditionally or via e-commerce platforms.

Therefore, when conducting online sales, individuals and organizations must fulfill their tax declaration obligations in accordance with applicable regulations.

• License Fee: Online sellers must pay this annually (first year exempt).
  • Household business model: The license fee is based on annual revenue. If revenue exceeds VND 100 million/year, the license fee ranges from VND 300,000 to VND 1,000,000.
  • Enterprise model: The license fee is calculated based on the enterprise’s charter capital.
• Personal Income Tax (PIT) and Value-Added Tax (VAT):
  • Household business model: If annual revenue exceeds VND 100 million, sellers must pay PIT at a rate of 0.5%, and VAT at 1% of revenue. Tax is calculated monthly and can be declared monthly or quarterly, but is finalized annually.
  • Enterprise model:
• PIT: If the business pays salaries and the employee’s taxable income exceeds zero, the company must withhold and pay PIT on behalf of the employee. Tax calculation depends on whether the employee is a resident or non-resident individual.
• VAT: If annual revenue is VND 1 billion or more, VAT is calculated under the credit method. If under VND 1 billion, VAT is calculated under the direct method.
• Corporate Income Tax (CIT): Applicable to businesses operating under the enterprise model. CIT is calculated on net profits (after deducting legitimate expenses) at a standard rate of 20%.

Note:
For individuals engaging in online sales without business registration (but qualifying as individual business taxpayers), tax obligations are the same as for household businesses.

Penalty for not declaring taxes when selling online in Vietnam

Is it punishable not to declare tax when selling online?

• Tax declaration refers to the process in which individuals or organizations report income, expenses, and payable taxes to the tax authority by law.
• According to tax law, individuals engaged in business activities must submit tax declarations to the relevant tax authorities upon the commencement of business activities. If individuals or households are liable for taxation but fail to declare taxes, such conduct may constitute tax evasion.
• Failure to declare tax in online sales is subject to administrative penalties as penalty for not declaring taxes when selling online in Vietnam applies and prescribed in Article 17 of Decree 125/2020/ND-CP, as amended and supplemented by Decree 102/2021/ND-CP, regarding tax evasion violations, with specific penalties as follows:

Forms of Administrative Sanctions for Failure to Declare Tax in Online Sales

Monetary Fines:

• Fine equal to 1 time the amount of evaded tax if the taxpayer has one or more mitigating circumstances and fails to file the tax return or files it more than 90 days after the due date or extended deadline (excluding certain special cases)
• Fine equal to 5 times the amount of evaded tax if there are neither aggravating nor mitigating circumstances.
• Fine equal to 2 times the amount of evaded tax if there is one aggravating circumstance.
• Fine equal to 5 times the amount of evaded tax if there are two aggravating circumstances.
• Fine equal to 3 times the amount of evaded tax if there are three or more aggravating circumstances.

Remedial Measures

• Mandatory full payment of the evaded tax amount into the State budget.
• If the statute of limitations for administrative sanctions has expired, the taxpayer will not be administratively fined for tax evasion but must still pay the full evaded tax amount plus late payment interest to the State budget.
• According to Clause 2, Article 59 of the Law on Tax Administration 2019, the late payment interest is calculated at a rate of 03% per day on the amount of overdue tax. The calculation period runs from the day following the due date until the day immediately preceding the actual date of payment.

This article provides a comprehensive overview of the penalty for not declaring taxes when selling online in Vietnam. Should you have any legal inquiries or need assistance with compliance matters, please contact Viet An Law- Tax Agency for professional legal support.