Vietnam’s Unprecedented VAT Proposal: Exempting Small-Value Imports and Increasing Taxes on Certain Items

Vietnam has been receiving around 4-5 million applications with a value under one million VND from China every day through platforms like Shopee and Tiktok. The Finance and Budget Committee believes that taxing VAT on these transactions is crucial to ensure revenue sources are covered.

During a meeting on June 17, Minister of Finance Ho Duc Phoc presented a proposal for an amended VAT law, which includes exempting VAT on certain imported goods within the import tax exemption norms, as well as exempting VAT on small-value goods. Currently, there is no tax exemption for small-value goods, but certain imported goods of less than one million VND sent via express delivery services are exempt from import tax and input VAT.

The number of small-value imports, especially through cross-border e-commerce channels, has increased significantly, prompting the Finance and Budget Committee to suggest eliminating the current VAT exemption for these goods. This move is aimed at protecting revenue sources and promoting a fair business environment between domestic production and imports.

The average daily value of goods circulating through platforms like Shopee, Lazada, and Tiktok is around 45-63 million USD, totaling 1.3-1.9 billion USD per month. The committee emphasizes the need to implement appropriate policies to expand revenue sources considering the significant impact of these transactions on tax revenue.

In addition to this proposal, Minister of Finance Ho Duc Phoc also presented a plan to impose a 5% VAT on items like fertilizers, offshore fishing vessels, and securities depository that were previously taxed at 0%. This change aims to encourage domestic production and reinvestment by businesses while addressing concerns about how this tax may affect fertilizer prices and farmers.

The Finance and Budget Committee points out that Vietnam’s current 10% VAT rate is lower than many other countries in the region and the world. Therefore, there is room to increase VAT rates to expand the revenue base. Some ASEAN countries have already increased their VAT rates post-Covid-19 to improve budget collection efficiency