The Framework

Vietnam’s National Assembly passed Law No. 48/2024/QH15 on November 26, 2024, fundamentally restructuring how foreign digital service providers are taxed in the Vietnamese market. The law expands the definition of “taxpayer” to include foreign suppliers that engage in e-commerce or business activities on digital platforms with organizations and/or individuals in Vietnam, foreign organizations operating digital platforms that withhold and pay tax on behalf of foreign suppliers, and organizations that operate e-commerce trading floors with payment functions.[1] Foreign suppliers without a permanent establishment in Vietnam providing services through e-commerce or digital platforms will be subject to the 10 percent rate rather than the 5 percent rate, creating a heavier financial burden for these suppliers.^[2]

The policy applies to major U.S. platforms including Google, Meta, Amazon, Netflix, and Apple, which must register with Vietnamese tax authorities, collect VAT from consumers, and remit payments directly to the government. Starting in July 2025, proof of a non-cash payment must be available to substantiate the VAT credit treatment (irrespective of the invoice value), unless otherwise specified by the government.^[3] Since January 2022, Vietnam has required foreign digital platforms to register and pay taxes directly through a dedicated web portal, with Meta becoming the first major U.S. company to announce compliance with these requirements.

Implications for U.S. Technology Leadership

The doubled VAT rate forces U.S. technology companies to absorb substantial new costs or pass them to Vietnamese consumers, undermining their price competitiveness against local and regional competitors who face lower tax burdens or operate below regulatory thresholds. The percentage varies depending on type of income (e.g., 5 percent, 3 percent, 2 percent or exempt). Under the draft law, it is inferred that the relevant VAT rate of 10 percent, or 5 percent or exempt shall be applied on their respective revenue instead.^[4] U.S. platforms must establish dedicated compliance infrastructure to navigate Vietnam’s complex tax registration processes, implement VAT collection mechanisms, ensure accurate remittance to authorities, and manage ongoing regulatory reporting obligations that smaller competitors can structure their operations to minimize. The requirement for non-cash payment verification across all transactions regardless of value creates additional administrative complexity for platforms processing millions of micro-transactions, forcing investment in sophisticated payment tracking systems that divert resources from product development and innovation.

This tax restructuring exemplifies the growing pattern of Southeast Asian countries imposing discriminatory digital taxes that systematically disadvantage U.S. technology leaders while creating opportunities for competitors from countries without similar regulatory burdens. Foreign Suppliers currently pay CIT based on the percentage applicable to revenue of 5 percent on their total taxable revenue in Vietnam. With the above imminent changes, businesses that are producing VAT-taxable goods and services might not be impacted because the increased input VAT charged by Foreign Suppliers will be creditable against their output VAT.

Meanwhile, individual customers or businesses that are producing non-VAT taxable goods and services could bear higher indirect tax costs.^[5] The policy’s revenue thresholds and compliance requirements create a growth runway for new market entrants to build presence before triggering tax obligations, while established U.S. platforms immediately face the full regulatory burden. As American companies allocate engineering and legal resources to Vietnam-specific tax compliance rather than global platform improvements, they lose the operational efficiencies that have historically enabled their technological leadership, weakening their competitive position across the rapidly growing Southeast Asian digital market.

Endnotes