Global tax filing requirements for FDI companies in Vietnam

As cross-border e-commerce and digital business activities grow, controlling transactions and tax management becomes more difficult than before. Before the opportunity and challenge, the tax authorities need to consult the experience of countries around the world and in the region in order to quickly amend the rules of the domestic tax law. Let’s find out with S4B Vietnam: What is global tax filing requirements in Vietnam 2025?

1. How will the Two Pillar Solution (BEPS 2.0) that Vietnam participates in affect the taxing rights of cross-border e-commerce activities, especially foreign suppliers (NCCNN) without a permanent establishment in Vietnam?

In early October 2021, 136 member countries of the Organization for Economic Cooperation and Development (OECD), including Vietnam, adopted a number of historic new cross-border tax compliance, aiming to combat tax base erosion and profit shifting, creating a fair competitive environment in attracting investment among countries. Pillar 1 of this new tax policy has proposed a solution to coordinate and reallocate a portion of profits from multinational enterprises (MNEs) to the territories where these companies do business and generate profits, regardless of whether the company has a physical presence there or not.

International tax regulations collection for NCCNNs without a permanent establishment in Vietnam is an issue of great concern to the Tax sector. However, up to now, Vietnam has only implemented tax management according to the source tax deduction approach according to the contractor tax collection mechanism, including two components: corporate income tax (CIT) and value added tax (VAT/GST cross-border compliance). With the source foreign tax credits and deductions mechanism, basically, tax authorities can only control and collect taxes on transactions between enterprises (DN) and enterprises (DN) (B2B) and have more difficulty controlling transactions between DN and final consumers (B2C), affecting the revenue for the state budget. When the Ministry of Finance issued Circular No. 80/2021/TT-BTC and the General Department of Taxation officially operated the Electronic Information Portal for NCCNN, NCCNN without a permanent establishment in Vietnam, engaging in e-commerce business, digital platform-based business and other services with organizations and individuals in Vietnam, officially had the obligation and could proactively declare contractor tax obligations directly to the tax authority of Vietnam.

VAT/GST cross-border compliance in Vietnam

Typically, a series of large companies engaging in e-commerce business, digital platform-based business such as: Amazon, Facebook, Google, Tiktok and many other companies, have registered, declared and paid taxes to the tax authority of Vietnam. With the operating mechanism of this electronic information portal, the tax authority of Vietnam has begun to control and collect a large amount of tax from B2C transactions and also for B2B transactions that were previously unable to control and collect taxes fully.

2. What opportunities does the Pillar 1 solution bring to Vietnam in exercising its taxing rights?

Pillar 1 is a progressive tax reform, aiming at a fairer way of taxing countries, not based on physical presence (where the head office and intellectual property are located) but on the basis of the final market where the goods or services are used or consumed. Applying these principles, Vietnam has the opportunity to benefit but also faces certain challenges.

With the reform of Pillar 1, there will be a new approach to taxation as well as cross-border tax reporting for countries. Vietnam is a country that can benefit from Pillar 1. For example, any multinational company, subject to the scope of Pillar 1, generating revenue of at least 1 million EUR from Vietnamese customers, a portion of the additional profit of that multinational company will be allocated to Vietnam for tax purposes (based on the allocation criterion being revenue).


International tax regulations for enterprise investing in Vietnam

>>>Read more: Understanding Value Added Tax (VAT) in Vietnam

According to OECD estimates, more than 100 billion USD in profits are expected to be redistributed to countries each year under this mechanism. These figures show that Vietnam may have the opportunity to significantly increase tax revenue from companies subject to Pillar 1. In fact, these companies are not yet headquartered in Vietnam, so Pillar 1 will create a premise and a clear basis for Vietnam to collect taxes from multinational tax strategies.

In the context of e-commerce and digital business activities becoming increasingly complex and sophisticated, leading to the control of transactions and arising tax obligations becoming more difficult than before, the traditional approach based on permanent establishment is no longer suitable. Managing international tax risks have changed significantly to better suit this development. Vietnam cannot stand outside these trends.

Accordingly, on the one hand, the tax treaties and agreements needs to grasp and update full information, be proactive and active in the negotiation process and perfect the specific principles of Pillar 1, to ensure the correct analysis and assessment of the impact of this pillar in the application process as well as to propose related domestic tax policies.

On the other hand, the Tax sector needs to refer to the experience of countries around the world and in the region to promptly amend the provisions of domestic tax laws, in order to take advantage of related opportunities when the principles of Pillar 1 are put into application.

In addition, the Tax sector needs to improve its mechanisms and procedures and provide clearer and more flexible instructions to improve the effectiveness of the direct tax declaration mechanism via the Electronic Information Portal for NCCNN in the simplest, most convenient and reliable way for transfer pricing compliance taxpayers.

If you have any questions or need further advice on global tax filing requirements, do not
hesitate to contact us!

S4B Vietnam

  • Address: Unit 701B – 701C, Tower A, Handi Resco 521 Kim Ma Street, Ba Dinh District, Hanoi, Vietnam.
  • Tel: + 84 24 3974 4181
  • Email: service@s4b.com.vn

——————————————–
We Will Show You The Way To Success!