Vietnam has been ranked no. 1 two times in a row in Chainalysis’s Global Crypto Adoption Index, and there are good reasons for it. According to a report by Statista, over 69% of the Vietnamese population does not have access to traditional financial services like banking. Moreover, Vietnam is one of the biggest beneficiaries of remittance payments, receiving over $13.5 billion in 2022 alone. With more than 60% of the Vietnamese population residing in rural areas without access to a bank account, Bitcoin and other cryptocurrencies offer a great alternative.

Moreover, Vietnam is one of the few countries lacking a proper framework to regulate cryptocurrencies. Almost all crypto transactions are tax-free in the country, as there is no official statement from the State Bank of Vietnam or other central authorities that categorises cryptocurrencies as an asset or security.

Now, there are regulations governing the categorisation of assets in Vietnam and facilitating their taxation. However, interpreting these regulations in the context of crypto assets is a fairly complicated task and is beyond the expertise of regular citizens. The goal of this article is to explain the current crypto regulatory landscape and summarise the future of crypto taxation in the country.

Latest Updates/Guidelines

Decree 80/2016/ND-CP

Document No. 5747/NHNN-PC

Decision No. 1255/QD-TTg

Official Directive No. 10/CT-Ttg

Decision 942/QD-TTg

Decision No. 664/QD-BTC

Investment Law 2020

Is Crypto Legal in Vietnam?

In Vietnam, cryptocurrencies are categorised as assets or goods based on legal definitions provided in the 2015 Civil Code and the Commercial Law 2005. These laws broadly define property to include objects, money, valuable papers, property rights, as well as movable property, including those that may form in the future. This classification implies that cryptocurrencies can be traded within the country.

However, despite their categorization as assets or goods, the legal status of cryptocurrencies in Vietnam is complex and multifaceted. The State Bank of Vietnam, which serves as the country's central bank, does not recognize cryptocurrencies as a legal means of payment. This position is outlined in Article 1 of Decree 80/2016/ND-CP on non-cash payments. The State Bank's stance is further reinforced in Document No. 5747/NHNN-PC dated July 21, 2017.

The Investment Law 2020 does not explicitly prohibit virtual currency investment in its list of industries where business investment is prohibited. Moreover, there is no specific directive that forbids individual investors from participating in virtual currency investments.

However, it's essential to note that certain securities-related entities in Vietnam, such as public companies, securities companies, fund management companies, and securities investment funds, are prohibited from engaging in illegal issuance, trading, and brokerage activities related to virtual currencies. This directive aligns with an Official Letter, specifically Official Letter 4486/UBCKGSDC, dated July 20, 2018, issued by the State Securities Commission.

However, buying and selling crypto assets is legal in Vietnam, and there are no regulations restricting individual investment in crypto assets in the region.

Can the Authorities Track Crypto?

Although the authorities have made attempts to regulate exchanges and crypto service providers based in the region, the task has proved to be more challenging than expected due to the lack of a concrete regulatory framework.

The absence of AML and reporting regulations has posed significant challenges for authorities in the country. First off, the lack of investor protection measures has left individuals exposed to various scams and fraudulent schemes within the crypto sector. Without regulatory safeguards, it becomes easier for malicious actors to deceive unsuspecting investors, leading to financial losses.

Second, the absence of a well-defined regulatory framework makes it challenging for authorities to track and combat fraudulent and criminal activities associated with crypto, including money laundering. The decentralised nature of crypto transactions can impede efforts to trace wrongdoers, leaving a gap in law enforcement.

Moreover, the volatile and uncertain business environment in the crypto sector adds complexity to the situation. Investors often lack the necessary guidance and information to make informed decisions, contributing to increased risks.

How is Crypto Taxed in Vietnam?

The taxation of cryptocurrency in Vietnam has been a subject of legal disputes and ambiguity due to the lack of a proper regulatory framework. The story starts with a 2016 guidance issued by the Ministry of Finance (MOF) in response to a query from a local tax authority.

According to the MOF's Official Letter No. 4356/BTC-TCT, cryptocurrency transactions, specifically buying and selling digital currency, were initially classified as taxable commercial business activities. These activities were subjected to various taxes, including Value-Added Tax (VAT), Corporate Income Tax (CIT) for businesses, and Personal Income Tax (PIT) for individuals. This interpretation was based on the view that digital currency was a form of property and a movable commodity.

However, this approach led to disputes, with taxpayers challenging the tax assessments imposed by local tax authorities. The legal battle culminated in a court case, which resulted in a significant decision. The court ruled that cryptocurrencies were not officially defined as an asset or good within Vietnamese law. Furthermore, the court found that the MOF's official letter had exceeded its authority.

Adding to the complexity, the State Bank of Vietnam does not recognize virtual currencies like Bitcoin as legal currencies or accepted means of payment. Decree No. 96/2014/ND-CP, issued by the government, outlines administrative penalties for the illegal issuance, supply, and use of means of payment involving virtual currencies.

As a result of these legal intricacies and inconsistencies, there has been a lack of substantial progress or clear guidance regarding crypto taxation in Vietnam. The absence of a well-defined regulatory framework leaves the taxation of crypto income in a state of uncertainty, making it challenging for both taxpayers and tax authorities to navigate this evolving landscape.

Future of Crypto Regulatory Landscape in Vietnam

The future of cryptocurrency regulations in Vietnam is transforming, led by a series of official decisions, directives, and guidelines.

In August 2017, Decision No. 1255/QD-TTg by the Prime Minister initiated the establishment of a legal framework for managing virtual currencies, electronic money, and virtual assets. This decision recognized the need for regulatory clarity in the cryptocurrency space, indicating the government's awareness of its growing importance.

Following this, April 2018 saw the issuance of Official Directive No. 10/CT-Ttg, which defined the roles and responsibilities of state agencies in overseeing crypto-related activities. This directive underlines how various government bodies should manage and regulate the cryptocurrency sector, solidifying the government's commitment to maintaining control.

A pivotal development came with Decision 942/QD-TTg, a recent move that outlines the e-Government development strategy, charting a path toward a digital government by 2030. This decision designated the State Bank of Vietnam as the primary entity responsible for researching, building, and piloting the use of virtual money based on blockchain technology between 2021 and 2023. It underscores the government's commitment to exploring the potential of cryptocurrencies and blockchain for modernising the economy and governance.

Moreover, the Ministry of Finance established a Study Group on virtual assets and currencies in April 2020 under Decision No. 664/QD-BTC. This group's mission is to conduct research and propose policy frameworks and management mechanisms for regulating digital assets. This initiative reflects the government's proactive stance in comprehending and regulating the crypto landscape.

Frequently Asked Questions (FAQs)

1. Is cryptocurrency legal in Vietnam? 

Cryptocurrency's legal status in Vietnam is currently in a state of transition. While there isn't a comprehensive regulatory framework governing cryptocurrencies, it's not explicitly illegal. The State Bank of Vietnam does not accept cryptocurrencies as legal currencies or means of payment. Decree No. 96/2014/ND-CP prohibits the illegal issuance, supply, and use of means of payment such as Bitcoin. However, this implies an outright ban on crypto transactions. The government is actively exploring the use of virtual money based on blockchain technology, signalling a potential shift in stance.

2. How are cryptocurrencies taxed in Vietnam? 

Cryptocurrency taxation in Vietnam remains uncertain due to the lack of a clear legal framework. However, some directions have been issued. Digital currency is considered a taxable commercial business activity, subject to Value-Added Tax (VAT), Corporate Income Tax (CIT) for businesses, and Personal Income Tax (PIT) for individuals. The application of these taxes is yet to be fully defined.

3. What is the current status of cryptocurrency regulations in Vietnam? 

As of now, Vietnam lacks a comprehensive regulatory framework for cryptocurrencies. The government is exploring options and has issued directions for managing virtual currencies and digital assets. This regulatory landscape is evolving, and the legal status of cryptocurrencies remains a subject of debate.

4. Do I need to report my cryptocurrency holdings to tax authorities in Vietnam? 

There is no specific requirement to report cryptocurrency holdings to tax authorities as of now. However, due to the evolving regulatory environment, it's advisable to stay informed about any changes in reporting obligations.

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