Vietnam Explores E-Invoicing for Livestream Sales

Vietnam's Prime Minister Pham Minh Chinh has directed the Ministry of Finance (MOF) to study and propose draft amendments for the use of electronic invoices (e-invoices) in e-commerce and livestream shopping. This directive, announced at an early June conference, highlights the government’s focus on better regulating the rapidly growing livestream sales sector and curbing tax evasion.

Tackling Tax Regulation Gaps in E-commerce and Livestream Sales

During a recent conference, Prime Minister Pham Minh Chinh tasked the MOF with enhancing Vietnam’s tax administration to keep pace with the swift expansion of e-commerce. PM Chinh pointed out the substantial tax revenue losses from livestream sales and e-commerce transactions, instructing the MOF to address these issues in the draft amendments to Decree 123/2020/ND-CP (“Decree 123”).

Decree 123 governs the management and use of invoices for goods and services, and the management and use of records for tax-related procedures, fees, and charges. It outlines the duties, powers, and responsibilities of regulatory authorities, organizations, and individuals in managing and using invoices and records.

Proposed Amendments to Decree 123

The proposed changes to Decree 123 aim to tighten regulations on e-invoices for livestream sales and e-commerce transactions, marking a significant step towards improving tax administration. Local authorities have been encouraged to promote e-invoicing among consumers. The Prime Minister also called for strict penalties for companies that fail to issue e-invoices.

Background

On June 4, the National Assembly discussed the significant daily revenue generated by Vietnam’s social media livestreamers through their selling activities, amounting to millions of dollars. The Ministry of Industry and Trade (MoIT) forecasts that e-commerce sales will reach US$30.5 billion by 2025, with Vietnam’s e-commerce sector experiencing the fastest growth in Southeast Asia.

Amid these developments, officials acknowledged that Vietnam’s current legal framework for regulating e-commerce is outdated and needs revision to align with evolving practices and international standards.

Reviewing Existing E-commerce Regulations and Tax Guidelines

To address regulatory gaps, the MoIT has been asked to review and amend related laws and guidelines, such as the Consumer Protection Law and the E-Commerce Development Strategy. This initiative aims to support sustainable growth in Vietnam’s e-commerce sector, protect consumer rights, and prevent the sale of counterfeit and substandard goods.

In line with PM Chinh’s directives, the General Department of Taxation (GDT) issued an official dispatch directing its local departments to tighten their supervision of e-commerce taxes and e-invoices.

Last year, the GDT collected VND97 trillion (US$3.81 billion) in taxes from e-commerce, including livestream sales, a 14 percent increase from the previous year. Tax collection reached VND50,000 billion (US$1.96 billion) in the first five months of 2024, highlighting the sector's potential growth. Despite this growth, e-commerce has seen numerous tax evasion cases. In 2023, tax authorities audited over 31,000 e-commerce entities, penalized more than 22,000 cases, and collected an additional VND3 trillion (US$118 million) in taxes.

To tackle this issue, the Director General of Taxation tasked local tax department directors and the Large Taxpayers Department with several key assignments:

• Conduct thorough inspections of tax declarations, payments, and e-invoice usage by e-commerce entities, focusing on online businesses and livestreamers;

• Implement solutions to apply e-invoices generated from cash registers starting August 1, 2024, for specific business types like golf course ticket sales and services, golf apparel, and equipment;

• Develop inspection plans for these business types to ensure compliance and prevent tax revenue losses;

• Disseminate regulations on tax declaration, payment, and e-invoice use in transactions to each e-commerce business;

• Reevaluate tax management practices to apply e-invoices generated from cash registers for tourism ticket sales and entertainment activities, with reports due to the GDT by August 1, 2024.

The GDT oversees around 123,800 e-commerce taxpayers, including over 88,100 individuals and 35,100 businesses selling through e-commerce platforms. It also manages over 360 e-commerce platform enterprises, 24 major online advertisers, and 96 foreign suppliers without physical presence in Vietnam.

Current Regulations on E-invoicing for Livestream Sales

Vietnam lacks specific regulations for e-invoices in livestream sales. However, businesses should refer to existing legal documents while awaiting updates. According to Law 38/2019/QH14 on Tax Administration (“Law on Tax Administration”) and Decree 123, e-invoices are mandatory for:

• Enterprises established and operating under Vietnamese law;

• Branches and representative offices of foreign enterprises in Vietnam;

• Cooperatives and unions of cooperatives;

• Households and individual businesses, and artels;

• Public service units selling goods and services;

• Non-enterprise entities with business operations.

Circular 78/2021/TT-BTC provides directives on e-invoice matters, including authorization to issue e-invoices, form numbers, serial numbers, conversion into e-invoices with verification codes, handling errors, and storage. It guides certain provisions of the Law on Tax Administration and Decree 123 on invoices and documents.

Additionally, Circular 80/2021/TT-BTC elaborates on some articles of the Law on Tax Administration, detailing taxation on e-commerce and digital transactions in Vietnam. It mandates e-invoices in tax refund procedures in Article 28, Chapter V.

Consumer Trends in Vietnam’s E-commerce Market

Vietnam’s e-commerce market is projected to reach approximately US$24 billion by 2025, with a compound annual growth rate (CAGR) of 22 percent. Consultancy firm NIQ reports that around 60 million Vietnamese use e-commerce platforms, generating an average of 3.5 million daily visits to online shopping channels. These platforms leverage Vietnamese customers’ social tendencies to drive growth. Shoppers often prefer to see community evaluations and recommendations on social media before making purchases.

NIQ also found that nearly 90 percent of users plan to maintain or increase their online shopping frequency on e-commerce platforms by 2025. Convenience has become the most influential factor, favored by 92 percent of consumers over price reductions and special deals. This trend underscores the importance for firms to enhance user experiences on their e-commerce platforms, making shopping simple and quick on mobile devices.

Social Commerce as a Global Phenomenon

The term “social commerce,” first coined by venture capitalist David Beisel in a 2005 blog post, has gained significant traction. Facebook defines it as “buying and selling that takes place on social media and other networking sites.” This shopping method allows consumers to stay engaged and purchase goods within their familiar social media environments. Future Market Insights predicts the global social commerce market will reach US$945.92 billion in 2023 and surpass US$13.04 trillion by 2033, growing at a CAGR of 30 percent from 2023 to 2033.

In Vietnam, online shopping is shifting towards social commerce. Decision Lab’s Connected Consumer Survey Q4 2023 shows that while traditional e-commerce sites remain dominant, consumer preferences are gradually moving toward social commerce platforms like Facebook, TikTok, and Zalo.

TikTok and the Rise of Livestream Shopping

Livestreaming, the real-time streaming of video or audio, has become a powerful tool for online selling platforms. Industry data projects that Vietnam’s livestream shopping market will reach US$11 billion by 2026, with an annual growth rate of 11 percent. Over 70 percent of Vietnamese internet users have watched a livestream, and half of them made a purchase during or after the stream. Livestream sales conversion rates can be up to ten times higher than traditional e-commerce.

TikTok has become a key player in livestream shopping, driven by the ‘Shoppertainment’ trend. Over 79 percent of TikTok users make purchases based on seller content rather than sales promotions. TikTok Shop’s revenue in Vietnam grew over 239 percent year-over-year in the first five months of 2024. As livestream shopping rises, TikTok is expected to remain influential due to its video hosting capabilities, appealing to socially oriented consumers. By mid-2024, TikTok Shop surpassed Lazada in the number of vendors, becoming Vietnam’s second-largest e-commerce platform by revenue, behind Shopee.

Livestream shopping is embraced by sellers and brands of all sizes, as it enhances consumer interactions, provides a seamless shopping experience, and boosts brand credibility through social proof.

Advisory

With Vietnam’s e-commerce landscape becoming more profitable, especially through social commerce and livestreaming, businesses must be aware of tax rules and legal compliance. Recognizing the lucrative potential, Vietnam’s government is keen to regulate this sector, including mandating e-invoices and amending existing laws.

Businesses looking to enter or expand in Vietnam’s online market should stay informed about upcoming changes in the legal framework. The government aims to enhance consumer protections, ensure transparent transactions, and address counterfeit sales, while improving tax scrutiny.

Businesses should engage proactively with local tax and regulatory authorities to understand specific requirements and compliance changes. Participating in forums or industry groups can also help stay updated on best practices and regulatory changes. Providing clear tax-related information on platforms and conducting regular audits to identify and rectify compliance gaps are recommended.

To avoid non-compliance or the risk of tax evasion accusations, partnering with local firms or consultants can provide valuable insights and support in navigating Vietnam’s regulatory environment.