How is Crypto Tax in Vietnam?
Is Vietnam the tax paradise for crypto investors?
TL;DR
Under current Vietnamese regulations, cryptocurrencies are not recognized as legal means of payment, currency, assets, or foreign currency.
The ambiguous classification of cryptocurrencies and the diverse, non-standardized forms of cryptocurrency investment activities make it difficult for the government to tax these entities.
As a result, Vietnam remains relatively free from cryptocurrency taxation due to the absence of a clear regulatory framework. However, the difficulty in trading cryptocurrencies using fiat currency has prevented the market from experiencing explosive growth that could have been fueled by the lack of taxation, leaving some room for disappointment.
1. Introduction
Taxation plays a pivotal role in any industry, with the power to either stimulate or deter retail investor participation. For instance, in Japan, despite governmental initiatives to promote the Web3 industry, the exorbitant tax rate of up to 50% on cryptocurrency transactions continues to stifle cryptocurrency trading volume. In India, the imposition of a 30% tax on cryptocurrency profits and an additional 1% tax deducted at source similarly discourages investor participation. Conversely, Vietnam grapples with a different challenge, characterized by ambiguous tax regulations that cast uncertainty over the market's landscape. This report will delve into Vietnam’s cryptocurrency taxation environment, assessing the potential opportunities and risks that these policies (or lack thereof) present.
2. Vietnam’s Current Regulatory Landscape for Crypto
April 2016, Vietnamese Ministry of Finance, Official Letter 4356/BTC-TCT
Announced that trading in cryptocurrencies is not prohibited and defined cryptocurrencies as both "property" and a liquid "commodity"
July 2017, State Bank of Vietnam (SBV), Official Letter 5747/NHNN-PC
Clearly announced that it does not recognize cryptocurrencies like Bitcoin and Litecoin as legal currencies or means of payment within Vietnam
Explicitly prohibited the issuance, supply, and use of cryptocurrencies as currencies or payment methods, with violators facing potential administrative or criminal sanctions
April 2018, Prime Minister, Official Directive 10/CT-TTg
Issued directive to various agencies, including the SBV, Ministry of Finance, and Ministry of Public Security
Instructed them to strengthen the management of activities related to Bitcoin and other cryptocurrencies to enhance control over related transactions and prevent damages
April 2018, SBV, Decision No. 02/CT-NHNN
Directed financial institutions, payment intermediaries, and SBV to control and strengthen measures related to cryptocurrency transactions
May 2020, Prime Minister Phạm Minh Chính instructed SBV to start a pilot project exploring the use of blockchain for cryptocurrency utilization
July 2021, Prime Minister Phạm Minh Chính urged the SBV to research and evaluate cryptocurrencies, and the bank was expected to develop guidelines on taxation and consumer protection, but no specific timeline was announced
March 2022, Vietnam Blockchain Association, centered around the Ministry of Home Affairs, was launched as the first crypto asset-focused legal entity in Vietnam, tasked with creating and fostering a development framework for cryptocurrencies
Vietnam has encountered significant regulatory and adaptive challenges concerning cryptocurrencies. Under current Vietnamese legislation, cryptocurrencies are neither recognized as legitimate forms of payment nor as currency. Additionally, they are not classified as assets or foreign currencies.
Reviewing Vietnamese law reveals that cryptocurrencies are explicitly excluded from recognized legal means of payment, indicating restrictive measures by the Vietnamese government on their use. The State Bank of Vietnam (SBV), which oversees cryptocurrency regulations, has issued definitive statements on this matter: "Cryptocurrencies, including Bitcoin and/or Litecoin, do not constitute legal means of payment in Vietnam. Any issuance, supply, and use of Bitcoin and/or Litecoin, and other similar cryptocurrencies as a means for payment, are hence prohibited." Consequently, penalties may be imposed for issuing or using cryptocurrencies as a payment method.
According to a directive from the Ministry of Finance, transactions involving the purchase and sale of digital currencies were initially classified as taxable commercial business activities. However, the absence of explicit legislation defining the status of cryptocurrencies as assets or goods places this directive in an ambiguous position. The lack of clear legal categorization creates ambiguity, complicating compliance and enforcement related to cryptocurrency transactions.
Additionally, Vietnam's 2015 Civil Code, specifically under Article 105.1, defines assets as encompassing various objects, money, monetary instruments, and property rights. Digital assets, including cryptocurrencies, do not clearly fit into any of these categories. Consequently, under current Vietnamese law, such assets often are not recognized as real assets in their own right. This classification—or lack thereof—presents a significant legal gap, impacting how these assets are treated and regulated within the legal framework.
This ambiguous classification exacerbates the legal uncertainties surrounding cryptocurrencies, leaving them to a largely unregulated gray area that poses challenges for both regulators and market participants. Despite these regulatory hurdles, Vietnam boasts a high rate of cryptocurrency ownership compared to other nations, indicating a strong interest and active engagement in the market. Amidst this complex scenario, the government has cautioned investors about the inherent risks associated with digital assets and cryptocurrencies, emphasizing the lack of regulatory safeguards.
3. Vietnam’s crypto taxation
Vietnam's crypto regulation currently resides in a regulatory gray area, which complicates establishing a comprehensive cryptocurrency taxation framework in the country. As it stands, there are no taxes imposed on cryptocurrency transactions or earnings in Vietnam. Typically, the government levies taxes on any investment activities that generate income. However, the cryptocurrency sector encompasses a wide range of activities beyond mere buying and selling.
For instance, Vietnamese investors frequently trade on international exchanges like Binance and OKX, which are largely beyond the reach of Vietnamese regulations. Additionally, they participate in direct cryptocurrency mining and peer-to-peer (P2P) trading. The varied and expansive nature of the cryptocurrency industry poses significant challenges to the creation and uniform enforcement of tax laws. Unlike the stock market, where taxes are calculated at 0.1% on each stock transfer, activities in the crypto sector currently escape government taxation.
These varied and numerous forms of profit generation in the crypto space add further layers of complexity to the tax legislation, which often lags behind technological advances. Consequently, regulators face the challenging task of ineffectual surveillance and taxation of these novel forms of income, potentially leading to gaps and losses in tax revenues.
In Vietnam, this situation has led to the rise of numerous crypto millionaires who enjoy significant profits without the burden of tax obligations through methods such as, but not limited to: spot trading, futures trading, airdrop farming, mining, and more.
4. Impact of No Taxation on Vietnam's Retail Market
Vietnam is often seen as a tax haven for cryptocurrency earnings due to the absence of specific regulations on crypto taxes. However, the process of acquiring cryptocurrencies using Vietnamese Dong is inconvenient. Cryptocurrency exchanges are officially prohibited, which means that unlike in many other countries where fiat currency can be directly deposited into exchanges, the primary method for buying cryptocurrencies in Vietnam is through peer-to-peer (P2P) transactions. Platforms like Binance P2P or direct purchases from sellers are the alternative routes that Vietnamese users must rely on, complicating what is typically a more straightforward process in other regions.
However, authorities can track and intervene in P2P transactions. These transactions typically involve converting Vietnamese Dong (VND) into USDT through bank transfers. An intermediary facilitates this by receiving VND via a bank transfer, then transferring USDT to the buyer's wallet or Centralized Exchange (CEX) account. The same method is used for selling USDT in exchange for VND. Should a bank transfer be identified as related to cryptocurrency transactions, authorities may choose to suspend the transaction, and direct confirmation from the bank may be necessary, such as providing relevant receipts or other documentation.
To circumvent such regulatory scrutiny, some individuals resort to cash transactions. A person would transfer USDT to a seller, who then physically delivers Vietnamese Dong (VND) in cash to a specified location. This process can be completed with just a few messages and a single transaction, allowing for the conversion of significant sums of VND. However, this approach also carries inherent risks, including the potential for fraud, as there is no legal protection for transactions conducted in this manner.
While one might expect that the lack of stringent regulations would encourage active participation from retail investors in the cryptocurrency market, the actual situation proves to be quite challenging. Investors often find entering the market inconvenient and face the possibility of being tracked and interfered with by regulatory authorities, who may require them to provide evidence of their transactions. Additionally, the methods employed to bypass regulations expose participants to high risks of fraud or other harms, as these activities occur outside the protective measures of regulatory oversight.
5. Conclusion
Vietnam's cryptocurrency market currently faces challenges due to uncertain regulations and taxation. The lack of clear rules confuses investors about taxation and exposes them to risks like fraud due to insufficient investor protection.
However, the Vietnamese government has recently been working to establish a regulatory framework to promote the healthy development of the cryptocurrency market. Active discussions are underway regarding the management and monitoring of cryptocurrency activities, and the Vietnam Blockchain Association (VBA) has been established. These efforts are expected to facilitate investor participation and boost market confidence.
If the Vietnamese government succeeds in establishing clear regulations and taxation for cryptocurrencies, along with institutional mechanisms for investor protection, Vietnam's cryptocurrency market is likely to achieve more stable and sustainable growth. This will enable Vietnam to lay the foundation for a leading role in the cryptocurrency industry.
Take a quick, 1-minute survey to enhance the weekly insights we provide. In return, get immediate access to the updated "2024 Country Crypto Matrix" by Tiger Research, featuring the latest global virtual asset market trends. Your participation helps us provide valuable content while you gain cutting-edge analysis.
Disclaimer
This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.
This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.
Terms of Usage
Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn't harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research's reports, it is mandatory to 1) clearly state 'Tiger Research' as the source, 2) include the Tiger Research logo, and 3) incorporate the original link to the report. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.