Parliament votes to withdraw VND 1m VAT-exemption on B2C imports
The Vietnamese parliament, the National Assembly, on 26 November 2024 voted to end its VND 1million (approx €36 or $40) low value consignment relief. This exempts from VAT parcels imported from Vietnam destined for consumers. In particular, the Ministry of Finance is looking to target tax-free imports coming from neighbouring China.
This will come into effect from 1 July 2025 if the government confirms the initiative by issuing a decree.
Vietnam’s National Assembly Standing Committee has highlighted the urgency of revising regulatory frameworks to align with contemporary e-commerce dynamics.
The current VAT rate in Vietnam is 10%.
The Ministry of Finance is concerned in the explosion in foreign e-commerce and the practise of ‘splitting’ orders by online shoppers to keep the intrinsic value below the VND 1million. Aside from the loss in VAT revenues, this creates an unfair tax burden on domestic online sellers and the traditional high-street retailer.
Many other countries have withdrawn their low-value consignment relief altogether. These include: Australia; New Zealand; the European Union; and the UK. Singapore’s GST exemption on e-commerce ended in 2023.
Vietnam’s VAT exemption
The debated removal of VAT exemptions for low-value imported e-commerce goods is aimed at curbing tax revenue erosion and bolstering local competitiveness in Vietnam. The current framework, guided by Decision No. 78/2010/QD-TTg, exempts imported goods valued under VND1 million from import duties and input VAT. However, this exemption has led to significant revenue leakage as such goods dominate Vietnam’s e-commerce landscape, constituting over half of sales in the first nine months of 2024.
This tax avoidance, coupled with the absence of VAT obligations, allows imported goods to undercut domestically produced alternatives, disadvantaging local manufacturers and retailers. Furthermore, expedited customs processes for exempt imports enhance their market appeal, deepening the competitive imbalance.
Vietnam’s National Assembly Standing Committee has highlighted the urgency of revising regulatory frameworks to align with contemporary e-commerce dynamics. A draft decree on customs management for such goods is underway, with calls to terminate Decision 78 to establish a cohesive legal system. The measure aims not only to secure fiscal sustainability but also to foster equitable competition between foreign e-commerce platforms and domestic players. As Vietnam’s online shopping expenditures exceed $1 billion monthly, reforming VAT policies on low-value imports is poised to have wide-ranging economic implications.
