Time of Withholding and Determination of Tax Withheld for Business Activities on E-commerce Platforms and Digital Platforms by Households and Individuals under Decree No. 117/2025/ND-CP

To enhance transparency and ensure state budget revenue, the government has promulgated Decree No. 117/2025/ND-CP on tax administration for business activities conducted by households and individuals on e-commerce and digital platforms (“Decree No. 117/2025/ND-CP”). A key highlight of the Decree is the clear stipulation of the timing of tax withholding, the method of determining payable tax and the mechanism of tax remittance on behalf of sellers through e-commerce platforms. This establishes a solid legal basis for more effective tax administration while facilitating sellers in fulfilling their tax obligations in a simple and convenient manner.

1.Time of Tax Withholding

The accurate determination of the timing of tax withholding is a critical factor in ensuring that households and individuals conducting business on e-commerce platforms duly and promptly fulfill their tax obligations. Decree No. 117/2025/ND-CP provides specific provisions, thereby establishing a clear and transparent legal framework for tax authorities, e-commerce platform operators and online sellers alike.

Pursuant to Article 4 of Decree No. 117/2025/ND-CP, organizations managing e-commerce platforms, whether domestic or foreign, are subject to tax withholding and tax remittance obligations. These organizations may either be the direct owners of the platform or entities authorized to manage it. Their responsibilities include:

• First, to withhold and remit value-added tax (“VAT”) on behalf of households and individuals for each transaction generating revenue within Vietnam relating to the supply of goods and services.
• Second, to withhold and remit personal income tax (“PIT”). For resident individuals, this obligation applies to both domestic and overseas revenue-generating transactions. For non-resident individuals, the obligation is limited to revenue arising in Vietnam.

Notably, the aforesaid taxes must be withheld at the time the transaction is successfully confirmed and the payment is accepted. In other words, tax withholding occurs directly at the point of revenue generation, rather than being deferred to a later stage.

This provision is significant as it ensures that tax obligations are fulfilled at the source, thereby enabling the state to collect taxes accurately and sufficiently, while simultaneously reducing administrative burdens for household businesses and online sellers. Sellers are not required to independently calculate, declare, or pay taxes for each transaction, as the platform system automatically withholds tax once the transaction is completed.

2.The amount of VAT and PIT to be deducted is determined by a percentage (%) of the revenue from each sale of goods/services.

a.Method of Determining the Tax Amount to be Withheld

The determination of VAT and PIT to be withheld from households and individuals conducting business on e-commerce platforms shall be carried out based on a percentage (%) of the revenue of each transaction. This principle is essential to ensure transparency, fairness and consistency in tax administration, while also enabling households and individuals to clearly understand their tax obligations.

Specifically, with respect to VAT, the withholding rate is applied in accordance with the Law on Value-Added Tax 2024. Accordingly, transactions involving the sale of goods are subject to a rate of 1%; service transactions are subject to 5%; and transportation activities or services associated with goods are subject to 3%. This classification reflects the nature of each type of business activity and its contribution to the State budget.

For PIT, the withholding rate is determined based on the taxpayer’s residency status. For resident individuals in Vietnam, the applicable rates are: 0.5% for revenue from goods, 2% for services and 1.5% for transportation or services associated with goods. For non-resident individuals, higher rates apply: 1% for goods, 5% for services and 2% for transportation or services associated with goods. This differentiation ensures fairness between domestic and foreign business actors while aligning with international practices.

The application of fixed percentage rates on revenue simplifies tax calculation, reduces the risk of tax evasion and provides greater predictability for both tax authorities and taxpayers. This is one of the key provisions under Decree No. 117/2025/ND-CP, aiming to strengthen tax administration in e-commerce and foster a fair and transparent business environment.

b.Determination of Tax in Cases Where the Type of Transaction Cannot Be Distinguished

In practice, e-commerce platform operators are not always able to accurately determine whether a revenue-generating transaction falls under goods or services. In some cases, the nature of the service itself has not yet been clearly classified under the law. To address this issue, Decree No. 117/2025/ND-CP sets out principles to ensure transparency and prevent tax losses. Specifically, where it is not possible to determine whether a transaction involves goods, services, or the specific type of service, the tax to be withheld shall be calculated at the highest percentage rate prescribed for VAT under subsection (a) and concurrently at the highest percentage rate applicable to services for resident or non-resident individuals under subsection (b).

This provision provides tax authorities with a clear legal basis to address all circumstances, thereby preventing transactions from being subject to insufficient or incorrect withholding. While this approach may result in higher withholding tax for certain transactions that are difficult to classify, it ensures fairness in tax administration and minimizes opportunities for tax avoidance. Consequently, the rule contributes to maintaining stable state budget revenue and reinforcing compliance with tax laws in the e-commerce sector.

c.Revenue as the Basis for Tax Withholding

One of the key factors in accurately determining the tax amount to be withheld lies in the method of calculating revenue for each transaction. Pursuant to Point d, Clause 4, Article 4 of Decree No. 117/2025/ND-CP, the revenue of each goods sale or service provision transaction is defined as the actual amount received by the household or individual seller, collected on their behalf by the e-commerce platform operator. This means that revenue is not calculated based on the listed transaction value or the initial payment made by the buyer, but rather on the final amount actually received by the seller after the platform has carried out its withholding obligations.

This method of determination ensures fairness in tax withholding, accurately reflects the actual cash flow and prevents double-counting or miscalculation of taxable revenue. By linking the withholding obligation to the actual revenue received by the seller, the provision not only safeguards the rights and interests of household and individual businesses but also enables tax authorities to effectively manage and supervise revenue sources, thereby enhancing transparency and efficiency in tax administration for e-commerce activities.

It can be seen that Article 5 of Decree No. 117/2025/ND-CP establishes a clear legal framework for tax withholding in e-commerce activities. These provisions clarify the authority to withhold tax at source, thereby ensuring that the tax collection process is conducted transparently, timely and fairly. This represents an important step towards promoting the sustainable development of e-commerce in Vietnam, while at the same time strengthening State budget revenue.

This article, “Time of Withholding and Determination of Tax Withheld for Business Activities on E-commerce Platforms and Digital Platforms by Households and Individuals under Decree No. 117/2025/ND-CP” is brought to you by TNTP. If you have any questions or require further clarification, please do not hesitate to contact TNTP for timely support.

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