The Ministry of Finance has proposed small-value goods transported via express delivery services to be no longer exempt from value added tax (VAT) which might help to add trillions of billions of Vietnamese đồng to the State budget every year. — VNA/VNS Photo

HÀ NỘI — The Ministry of Finance has proposed small-value goods transported via express delivery services should no longer be exempt from value added tax (VAT), which might help to add trillions of billions of Vietnamese đồng to the State budget every year.

The ministry has released a draft decision on abolishing the Prime Minister’s Decision No 78/2010/QĐ-TTg dated on November 30, 2010 on the value of imported goods via express delivery services that are exempt from VAT.

The draft decision is now open for comments.

A VAT exemption has been applied since 2010 in line with the trade rules under the Tokyo Convention, while the Law on VAT does not mention this. Under the decision, imported goods with value of below VNĐ1 million (US$40) via express delivery services are exempt from import tax and VAT. Gifts and presents are also exempt from import tax according to the Decree 134 guiding the Law on Export and Import Tax.

The ministry has proposed that this decision to be abolished.

The ministry pointed out that many countries including the UK, Australia, Thailand and Singapore have recently removed the VAT exemption on small-value imported goods.

Specifically, the EU removed the VAT exemption for goods worth 22 euros ($23.6) or less. The UK removed the exemption for imported goods worth 135 pounds ($171) or less from January 1, 2021. Singapore from January 1, 2023 removed VAT exemption for small-value imported goods, especially in the e-commerce field.

The VAT exemption for small-value goods imported via express delivery services has been applied since 2010, with an aim to speed up customs clearance when the customs declaration system was still implemented manually. However, the policy is no longer appropriate in the context of rapid e-commerce expansion.

The removal of VAT exemption on small-value imported goods aims to ensure fair competition and encourage the consumption of domestically produced goods, the finance ministry said.

The ministry said that with a total value of VNĐ27.7 trillion worth of small-value imported goods via express delivery services in 2023, the State budget could collect an additional VNĐ2.7 trillion in VAT.

Abolishing the VAT exemption might put pressure on tax declarations, but the application of information and technology in customs management will ensure a smooth process, the ministry said.

Small-value goods imported via express delivery services are mainly of domestic consumers directly buying from foreign sellers via e-commerce platforms such as Shopee, Lazada, Tiki, TikTok Shop, and AliExpress.

It is estimated that there are about 4-5 million small-value parcels imported from China via e-commerce platform every day.

Data of EcomHeat showed that more than 12 per cent of the total number of items sold via four e-commerce platforms, Shopee, Lazada, Tiki and TikTok Shop in April – September, was shipped from abroad.

Prime Minister Phạm Minh Chính at an official dispatch issued on November 26 asked the Ministry of Industry and Trade and the Ministry of Finance to study and raise mechanisms to tighten the management on imported products via e-commerce platforms which are creating huge pressure on domestic products.

At the National Assembly (NA)’s resolution approved on Saturday, the NA tasked the Government to issue a decree on customs management on imported and exported products via e-commerce channel as base to enhance tax management on e-commerce.

The amended Law on VAT was passed on November 26 and will come into effect from July 1, 2025.

The abolishment of the Prime Minister’s Decision No 78/2010/QĐ-TTg will pave the way for the enforcement of the amended Law on VAT. — VNS