by Steven Jacob, Foreign Associate

Recently, I came across an update that referred to an official letter clarifying tax issues as relates to foreign e-commerce providers. I’ll discuss it in more depth in a bit, but in essence, it said that foreign e-commerce providers will be treated like all foreign service providers for purposes of taxes. I’ve been running across Vietnam’s continuing efforts to extend its authority over foreign providers in the digital space lately, so when I read about this newest development it made me pause.

Why is Vietnam so intent on trying to control cyberspace providers offshore?

I don’t have an answer to that, though I suspect there are two reasons. One, the government wants to expand its tax base–fiscal motivations are always attributable to governments–and, two, it has a very urgent desire to control its citizen’s access to the internet. Throughout the various laws and drafts of new decrees that address different aspects of cyberspace, the government repeatedly includes the option to terminate access to Vietnam for foreign service providers who fail to comply with its policies. It missed its opportunity to impose a countrywide filter like China so now it is trying to pick and choose the information it wants to let through. At least, that’s what I suspect is behind these continued policies of expansionary cyberspace control.

But I digress. As a Vietnam-based blogger, it is not my place to theorize on these issues too expansively. What I want to discuss, though related, is more restricted in scope. E-commerce, specifically, foreign e-commerce, and when they are deemed to be within the control of Vietnam’s laws.

The rest of this article will address three things. First, the existing policy regarding foreign e-commerce providers. Second, the recent decision on the tax treatment of those foreign e-commerce providers. And third, the proposed policy for the treatment of foreign e-commerce providers that is currently under consideration.

Existing Policy for Foreign E-Commerce Providers

The current e-commerce policies date from 2013 before the government of Vietnam embarked on its current policy trajectory. As such, they are limited in scope. In general, they do not apply to foreign e-commerce service providers. The stated application is, in fact, limited to:

  1. Vietnamese traders, organizations or individuals;
  2. Foreign individuals residing in Vietnam;
  3. Foreign traders and organizations with their presence in Vietnam through investment operation, establishment of branches and representative offices or website set-up under Vietnamese domain name.

This would suggest that foreign e-commerce service providers have little to no obligation to abide by Vietnamese laws. But this is before taking into consideration the law on cybersecurity of 2018 which requires that anyone

carrying out activities of collecting, exploiting [using], analysing and processing data [being] personal information, data about service users’ relationships and data generated by service users in Vietnam

must not only have servers in Vietnam in which to store that information but must also have a representative office or branch in the country. Therefore, foreign e-commerce service providers who offer their services to customers in Vietnam would most certainly be required to abide by this policy and thus come within the scope of Vietnam’s laws.

I won’t go into further discussion of the cybersecurity law as I’ve discussed it multiple times, originally in my article on data localisation in Vietnam, and again in my article on data protection obligations.

Tax Treatment of Foreign E-commerce Providers

On 17 December 2020, the tax department issued an official letter in response to Netflix’s apparent request to be treated differently than traditional offshore commercial entities which are subject to the foreign contractor tax. In their official letter, the tax department refused Netflix’s request and announced that there is currently no legal basis for treating foreign e-commerce providers as different than foreign commercial entities that provide goods or services to Vietnamese citizens. This means, therefore, that foreign e-commerce providers who provide goods or services cross-border to Vietnamese citizens (including companies) are subject to the foreign contractor tax the same as any foreign service provider.

Foreign Contractor Tax

As I’m not an expert in tax, I’ll quote from our soon to be updated legal guide on the matter:

While not a separate tax, the FCT is the scheme by which the earnings of foreign companies or individuals offshore providing services for Vietnamese tax residents (“Foreign Contractor”) are taxed. It is a combination of the VAT [value added tax] and CIT [corporate income tax] or PIT [personal income tax]. There are three methods by which a Foreign Contractor can choose to be taxed by Vietnam. First, the deduction method which requires the Foreign Contractor to register with the Ministry of Finance, conduct Vietnamese accounting, and pay taxes as if they were a Vietnamese tax resident. Second, the direct method allows the Vietnamese purchaser of the goods or services of the Foreign Contractor to withhold the relevant taxes from its payment to the Foreign Contractor and then submit that withheld amount to the tax authorities on behalf of the Foreign Contractor. Finally, the hybrid method allows the Foreign Contractor to act as a Vietnamese tax resident for the purposes of VAT but to have their CIT or PIT withheld by the Vietnamese purchaser. The applicable tax rates are published separately by the Ministry of Finance and vary depending on the nature of the goods or services sold into Vietnam.

That’s all I have to say about the foreign contractor tax.

Proposed Policy for Foreign E-Commerce Providers

Last year, the government issued a second draft of a decree to amend the existing regulations on e-commerce. There are a couple of points worth exploring here. First, the draft decree changes the scope of the regulations. The existing rules currently apply to the following foreign providers:

Foreign traders and organizations with their presence in Vietnam through investment operation, establishment of branches and representative offices or website set-up under Vietnamese domain name.

The draft decree amends that list and broadens it to include “Foreign traders and organizations who have e-commerce activities in Vietnam.”

This amendment alone broadly expands the ability of Vietnam to access foreign e-commerce providers. If this language is adopted, it will include any foreign e-commerce provider who is deemed to be “in” Vietnam under the increasingly broad definitions being adopted by the National Assembly and government.

But the draft decree goes further and actually defines when an e-commerce website has “activities in Vietnam.”

There are two approaches that are proposed in the draft law.

The first approach would impose compliance obligations on any e-commerce website that uses a Vietnamese domain name, the Vietnamese language, or has more than 100,000 transactions originating in Vietnam in a given year. Any foreign e-commerce provider who meets one of these criteria would be obligated to register their activities and open a representative office in Vietnam.

The second approach would apply to any foreign e-commerce website that uses a Vietnam domain name, the Vietnamese language or has a total number of transactions/views/orders from Vietnamese organizations or individuals that exceed a number to be determined by the authorities. Any foreign e-commerce provider who meets one of these criteria would be required to register their activities and appoint a legal representative in Vietnam.

In either case, the proposed policy would act to dramatically expand Vietnam’s reach, though at least they are likely to require some nexus with Vietnam.


E-commerce is a major market. According to, e-commerce accounted for over six billion dollars in 2020, a sizable chunk of the country’s GDP. With nearly seventy percent of the population accessing the internet in 2019, there is a huge potential for e-commerce providers, both domestic and foreign, to make a profit in Vietnam. There is also a huge potential for tax revenues to be gained by the government. Whatever the National Assembly’s motivations–which are often opaque–for expanding its reach to foreign cyberspace actors, Vietnam is on the march. Foreign e-commerce providers need to be aware of the rules before they deal with Vietnamese customers and understand that they may already have some legal obligations in the country.