- Vietnam not too long ago launched a draft decree which is able to influence overseas and native companies concerned with e-commerce platforms.
- The rules are supposed to regulate the fast-growing e-commerce sector in Vietnam whereas enhancing the federal government’s capacity to impose tax obligations on e-commerce service suppliers.
- Vietnam Briefing offers perception on the brand new draft and the way this may have an effect on overseas traders concerned in e-commerce actions in Vietnam.
Vietnam’s authorities launched a draft decree amending Decree No. 52/2013/ND-CP (Decree 52) regulating e-commerce platforms and actions. This can cowl native in addition to overseas companies that conduct e-commerce actions in Vietnam.
Whereas nonetheless within the draft stage, Dezan Shira & Associates’ Business Advisory Services Supervisor Tam Nguyen notes that “the primary goal of creating a modification to the present rules on e-commerce is for the administration of tax assortment. Thus, the draft rules will influence overseas traders instantly which can be concerned in e-commerce actions in addition to overseas merchants who’re e-commerce suppliers and repair suppliers.”
E-commerce actions outlined
As per the draft decree, an e-commerce service is outlined as any e-commerce exercise the place the dealer, particular person or group offers e-commerce providers and units up an e-commerce web site that provides a spot for different merchants, organizations, and people to hold out commerce, gross sales of products or the provision of service actions.
The definition is extra particular and doesn’t consists of companies which can be solely concerned in web site and software design and due to this fact don’t instantly take part within the enterprise operations of such web sites, which is a welcome change.
As per the draft, an internet site is deemed offering e-commerce providers if it offers the next circumstances:
- It permits members to open gross sales cubicles for displaying and/or selling items and providers;
- Members can open accounts that present interplay or transactions with clients; and
- Have providers associated to the supply of products and providers with clients.
Social networking web sites fall underneath rules
Thus, social networks can be answerable for regulation as e-commerce platforms in the event that they meet the aforementioned circumstances but additionally make their subscribers instantly or not directly pay a charge to hold out these actions. An instance can be the Fb market.
Whereas overseas companies are required to adjust to Vietnamese legal guidelines, Vietnamese e-commerce suppliers are required to confirm the identities of overseas companies promoting items on their e-commerce platforms. They’re additionally required to do the next:
- Ask overseas companies to adjust to export and import legal guidelines for these companies that don’t have any presence in Vietnam;
- Ask overseas companies to find out commercials brokers in Vietnam; and
- Arrange the implementation of import actions concerning items traded by overseas companies.
The draft will not be clear if these are obligatory necessities and it’s unclear what would occur if the overseas dealer doesn’t meet the above necessities.
Thang Vu, Affiliate Supervisor, Tax at Dezan Shira & Associates’ Ho Chi Minh Metropolis workplace notes that the brand new rules will affect a number of worldwide e-commerce retailers like Amazon, eBay, Fb, and Netflix. The aim of the brand new legislation is to impose tax obligations on retailers, whether or not native or overseas, on Vietnam-sourced revenue from native particular person clients.
The earlier withholding tax system may solely maintain native firms answerable for such obligations and the brand new regulation goals to rectify such billion-dollar-shortfall of tax assortment.
Affect on overseas traders
International companies together with these concerned with cross-border e-commerce and B2C e-commerce companies should adjust to native legal guidelines. As per the draft decree, overseas merchants engaged in e-commerce actions is outlined as:
- Those that arrange e-commerce websites underneath Vietnam domains (for instance .vn);
- Those who arrange e-commerce websites that can be within the Vietnamese language; and
- Those who arrange e-commerce platforms that have greater than 100,000 transactions originating from Vietnam in 12 months.
For such, the overseas enterprise will probably be required to arrange a representative office in Vietnam.
As well as, overseas companies are required to nominate a authorized consultant or arrange a consultant workplace in Vietnam in the event that they perform the next e-commerce actions:
- Those who arrange an e-commerce web site utilizing Vietnam domains;
- Those who arrange an internet site that’s within the Vietnamese language; and
- Those who arrange e-commerce platforms the place the variety of transactions or visits or buy orders by Vietnamese organizations or people exceeds a specific threshold.
Beneath the final bullet level, the Ministry of Industry and Trade (MoIT) in collaboration with the Ministry of Information and Communications, Ministry of Finance and so forth, will regulate the brink for the variety of transactions or purchases.
Any imported or exported items are topic to customs procedures and e-commerce suppliers are required to cooperate with the related authorities to stop the unlawful transaction of products and providers. E-commerce suppliers should file a report on their enterprise operations and undergo the MoIT by January 15 of yearly.
Market entry circumstances
The draft decree comes underneath the ambit of the brand new Law on Investment (LOI), which got here into impact in January 2021. International traders are due to this fact required to hold out funding in e-commerce actions in compliance with the LOI. Moreover, overseas traders that put money into e-commerce companies have to be listed underneath the ‘internationally respected know-how firms’ as introduced by the MoIT.
Whereas how this listing is generated remains to be unclear, exceptions could be given to traders contributing to small and medium-sized startups. If this stipulation is finalized it could have important implications for Vietnamese e-commerce firms that elevate funds from overseas traders as they must meet the brand new necessities.
The draft, nonetheless, doesn’t point out that the proposed rules are retroactive, due to this fact the brand new rules shouldn’t have an effect on overseas funding that has already been authorized.
Logistic firms
The draft additionally provides firms offering logistics providers and different supportive providers that can come underneath the ambit of the decree. Logistic firms will share legal responsibility to supply documentation concerning the origin of products throughout supply.
Assured cost system
The draft additionally mandates a assured cost system the place e-commerce web sites are required to permit clients to make funds utilizing this method. Which means that funds have to be stored in an middleman account for a sure period of time to settle any claims between clients and sellers.
The draft doesn’t specify the period of time earlier than the cost could be launched to the e-commerce supplier however this proposal could damage small e-commerce firms that rely on income and money move.
Different adjustments
If an internet site doesn’t have a web-based ordering perform then there isn’t a must notify or register with authorities. The purpose of the varied legal guidelines is to make sure that as e-commerce grows it’s clear whereas guaranteeing that the federal government can take care of counterfeit merchandise and the infringement of mental property rights.
Takeaways
E-commerce actions in Vietnam are on an excessive development trajectory because of the pandemic and shifting shopper patterns. The proposal is a part of the federal government’s plan to assist this development whereas regulating e-commerce actions in Vietnam. The federal government has set out a goal of reaching 55 % of the inhabitants concerned in online purchasing by 2025.
Whereas the draft decree affords extra safety for Vietnamese customers, it tightens circumstances for overseas funding in e-commerce firms in Vietnam. It’s, nonetheless, necessary to notice that the decree remains to be within the draft stage and never finalized. The MoIT is anticipated to submit the decree to the federal government someday within the first half of 2021. We’ll proceed to observe and difficult insights concerning any developments associated with rules on e-commerce actions.