Currently, selling products on e-commerce platforms and social media in Vietnam has become popular. Among them, TikTok, originally a social entertainment platform similar to Facebook and Instagram, has recently introduced the TikTok Shop feature, officially functioning as an e-commerce platform. Consequently, individuals that sell products on TikTok must fulfill their tax payment obligation according to the law on tax in Vietnam.
According to Article 4, Clause 2 of Circular 40/2021/TT-BTC, individuals selling products on TikTok are required to pay value-added tax (VAT) and personal income tax (PIT) if their revenue exceeds 100 million VND per year.
Based on Article 10, Clause 3 of Circular 40, the taxes that individuals selling products on TikTok, who are registered taxpayers in Vietnam, must pay include:
- VAT to be paid = Taxable revenue subject to VAT x VAT rate
- PIT to be paid = Taxable revenue subject to PIT x PIT rate
If the seller is a business entity that is not registered for tax in Vietnam or if the tax identification number provided by the seller has not been verified, TikTok will withhold 5% of VAT and 5% of corporate income tax from the seller’s revenue and remit it to the General Department of Taxation in Vietnam.
If the seller is already registered for tax in Vietnam and has provided their tax identification number to TikTok, TikTok will not withhold any taxes arising from transactions made by the seller in Vietnam after verifying the tax identification number.
Currently, the VAT rate for online sales and distribution of goods is 1%, and the personal income tax rate is 0.5%.
In addition to personal income tax for individual sellers and corporate income tax for business sellers on TikTok, both individuals and businesses engaged in selling on TikTok should also consider the applicable contractor tax rate for advertising transactions on this platform.
ASL LAW’s team of lawyers has participated in an interview conducted by VTV titled “Lawyer Nguyen Tien Hoa ASL LAW, interviewed by Vietnam Television (VTV), talked about the issue of advertising tax management loopholes on Tiktok” on the website https://aslgate.com/, providing further detailed explanations on this matter.
Failure to pay taxes when required can result in penalties for sellers on TikTok according to the provisions of Decree 125/2020/NĐ-CP.