Le Thuong Huyen, Ph.D.
Institute of State and Law - Vietnam Academy of Social Sciences
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| Inside a working office of FPT Software Quy Nhon in Quy Hoa Innovation Park in Gia Lai province__Photo: Kha Pham/VNA |
Introduction
The Fourth Industrial Revolution has strongly driven the development of the digital economy, in which the private sector has taken the lead in applying technology to create economic value. According to a World Bank report, the digital economy contributed approximately 15.5 percent of global GDP in 2022 and is expected to continue growing robustly. In Vietnam, the digital economy accounted for 8.2 percent of GDP in 2021 and is expected to reach 20 percent by 2025 under the Strategy for the development of e-government toward digital government for the 2021-25 period[2].
However, new business models such as digital platforms, artificial intelligence (AI), blockchain, and the Internet of Things (IoT) have outpaced the regulatory capacity of existing laws. This requires a flexible legal framework that protects consumer interests while promoting innovation in the private sector.
The digital economy is understood as economic activities based on digital technology, encompassing e-commerce, digital services, smart manufacturing and data-based business models[3].
Within this space, the private sector operates as a complex ecosystem in which enterprises rely on digital technologies and data as core production factors, using global connectivity to generate economic value. This model has distinct features, including a borderless scope, exponential scalability, the central role of data as a strategic asset, network effects, continuous innovation, and technological convergence.
Key business models in the digital economy include platform-based operations, the sharing economy, data-driven business, fintech and digital financial services, and cross-border e-commerce. Notably, each of these models challenges traditional regulatory and management approaches, underscoring the need for timely and adaptive policy responses.
Challenges to Vietnam’s current legal framework
Challenges arising from the cross-border nature
The inherent cross-border nature of the digital economy poses significant challenges for tax administration and law enforcement agencies. Multinational corporations such as Google and Netflix frequently remit profits to low-tax jurisdictions, resulting in substantial revenue losses for market countries.
In Vietnam, Government Decree 126/2020/ND-CP regulates the tax obligations of foreign enterprises engaged in e-commerce, but it lacks effective monitoring and enforcement mechanisms[4]. Meanwhile, Government Decree 85/2021/ND-CP requires foreign organizations conducting e-commerce activities to pay corporate income tax (20 percent) and value-added tax (5 percent). However, the enforcement remains problematic due to the absence of clear mechanisms for determining “significant economic presence” in accordance with OECD standards.
For example, platforms such as YouTube generate advertising revenue from users in Vietnam, yet tax agencies encounter difficulties in verifying taxable income due to limited access to cross-border information. Article 35 of the 2019 Law on Tax Administration provides only general principles for international cooperation, which are insufficient to effectively address these challenges in the context of the digital economy.
Challenges in data protection and privacy
Personal data has become the “fuel” of the digital economy, generating immense economic value while also posing serious risks to privacy and information security. Technology enterprises collect large volumes of personal data from users to develop products and services and to sell such data to third parties. However, the collection and use of personal data often lack clear user consent and use purpose transparency, thus giving rise to growing concerns over “surveillance capitalism”[5].
Government Decree 13/2023/ND-CP of April 17, 2023, on personal data protection, establishes a basic legal framework for data protection in Vietnam. Article 6 defines personal data as “information in the form of symbols, letters, numbers, images, or sounds, or similar forms in the electronic environment associated with or capable of identifying a specific individual.” Article 9 sets out principles for personal data processing, including obtaining the data subject’s consent, processing data for specific purposes, ensuring accuracy and updating, and storing data only for a certain period as necessary. However, the concept of “consent” referred to in Article 11 does not meet the “informed consent” standard under the European Union (EU)’s General Data Protection Regulation (GDPR), particularly due to the absence of requirement that consent be “freely given, specific, informed and unambiguous.”
The 2015 Law on Cyberinformation Security, Chapter IV (Articles 20 thru 26), regulates the protection of personal information in cyberspace but focuses primarily on cybersecurity rather than individual privacy rights. Article 21 defines enterprises’ obligations to protect personal data, yet it lacks specific sanctioning mechanisms for serious violations.
Significant gaps therefore exist between the EU’s GDPR (Regulation (EU) 2016/679) and Vietnam’s legal framework. Articles 7 and 8 of the GDPR establish stringent standards on consent, Article 17 provides for the “right to be forgotten,” and Article 20 recognizes the “right to data portability.” By contrast, Decree 13/2023/ND-CP does not fully or clearly provide for these rights, leaving substantial shortcomings in personal data protection when measured against international standards.
Articles 33 and 34 of the GDPR, which require notification of data breaches within 72 hours and notification to affected data subjects, are likewise not comprehensively reflected in Vietnam’s law. Notably, the GDPR’s sanctioning regime allows fines of up to 4 percent of global annual turnover (Article 83), whereas Decree 13/2023/ND-CP provides a maximum administrative fine of VND 50 million (Article 28).
Challenges relating to competition and monopoly
Anti-competitive practices in the digital economy are often highly sophisticated, including the use of data to create barriers to market entry, the acquisition of potential competitors, and the application of discriminatory pricing based on personal data. Traditional competition law, which focuses primarily on price and output, is no longer adequate to address such practices.
Vietnam’s 2018 Competition Law contains limitations in regulating competitive practices in the digital economy. In particular, Article 25 defines a “dominant position” based on market share thresholds - over 30 percent in the relevant market, a criterion that is poorly suited to the characteristics of the digital market. In the digital environment, enterprises may achieve market dominance without commanding high revenue-based market shares, especially when services are offered free of charge due to network effects and data advantages.
Article 26, which governs abuse of a dominant position, enumerates traditional practices such as “unreasonable pricing of goods or services” or “restricting output or markets,” but does not address practices specific to the digital economy. Such practices include the use of data to erect barriers to market entry, the self-preferencing of a firm’s own products or services on multi-sided platforms, predatory acquisitions of potential startups, and algorithmic manipulation designed to exclude competitors.
Similarly, Article 18 on the control of economic concentration sets a revenue threshold of VND 3 trillion for the Vietnamese market but fails to establish criteria tailored to mergers and acquisitions (M&A) in the technology sector. In the digital market, the value of M&A transactions is often driven by future growth potential and data assets rather than current revenue, rendering this regulatory approach less effective.
In contrast, the EU’s Digital Markets Act (DMA) (Regulation (EU) 2022/1925) introduces the concept of “gatekeeper” in Article 3, based on three criteria: (i) having a significant impact on the internal market; (ii) providing important core platform services; and (iii) holding an entrenched and durable position. The DMA prohibits specific practices, including self-preferencing (Article 6.1.d) and the tying or bundling of services (Article 6.1.f).
In the United States, recent antitrust cases, such as United States v. Google (2020) and FTC v. Facebook (2021), have expanded the approach to assessing abuse of dominance in the digital market. Rather than focusing solely on price effects, these cases examine broader harms, including innovation harm and restrictions on consumer choice.
Challenges in labor classification
The digital economy has given rise to the “gig economy,” in which workers operating through digital platforms are not protected as formal employees. This creates major challenges in classifying employment status and in defining the rights and responsibilities of the parties involved in industrial relations.
Article 3 of the 2019 Labor Code defines “employee” as a person aged full 15 years or older, capable of working, employed under a labor contract, paid wages, and subject to the employer’s management and supervision. In the context of the gig economy, however, these criteria become increasingly ambiguous. For example, should Grab or Uber drivers be regarded as being “subject to management and supervision” when they are free to choose their working hours but remain constrained by platform algorithms?
Article 16 of the Labor Code requires labor contracts to be “agreed upon in writing,” yet the relationship between platforms and workers is typically governed by “Terms of service” unilaterally drafted by the platform.
Moreover, Article 143 on compulsory social insurance applies only to “employees” under the law’s narrow definition, leaving millions of platform workers unprotected in terms of social insurance. Similarly, Article 2 of Government Decree 28/2020/ND-CP limits compulsory social insurance coverage to “employees working under labor contracts,” thereby excluding independent contractors.
By comparison, California’s Assembly Bill 5 (AB5) of 2019 applies the “ABC Test” to classify workers, under which individuals are deemed employees rather than independent contractors unless all three criteria are satisfied. In the E U, Directive 2019/1152 on transparent and predictable working conditions extends protection to “workers” more broadly, rather than limiting it to “employees.” The European Court of Justice (ECJ), in Uber v. Hogan (2016), held that Uber drivers qualify as “workers” rather than independent contractors due to the degree of control exercised by the platform.
In Vietnam, disputes over whether Grab drivers and similar platform workers should be classified as employees or independent contractors remain unresolved, creating legal uncertainty for both platforms and workers. This uncertainty affects not only workers’ rights such as access to social insurance and welfare benefits but also the cost structures and operating models of platform enterprises. The absence of an appropriate legal framework underscores the need for Vietnam to update its laws to address the specific characteristics of the gig economy, ensure adequate worker protection, and create a fair competitive environment for digital platforms.
Challenges relating to technological innovation and regulation
The pace of digital technology development consistently outstrips the law’s capacity to adapt. Emerging technologies such as AI, blockchain and the IoT are generating applications and business models that remain unregulated under existing laws. This situation gives rise to “regulatory lag,” in which enterprises are compelled to operate in legally uncertain environments. Vietnam’s legal system currently contains numerous gaps in the regulation of new technologies, posing challenges to both innovation and legal governance.
With respect to AI, the 2005 Law on Intellectual Property (as revised in 2019 and 2022) defines “author” in Article 4 as a “natural person who directly creates a work,” and therefore does not recognize AI systems as authors. Meanwhile, the 2015 Civil Code (Articles 584 thru 612 on non-contractual liability) lacks provisions governing legal liability for harm caused by AI, leaving a significant regulatory gap.
Regarding blockchain and cryptocurrencies, Circular 02/2018/TT-NHNN of the State Bank of Vietnam prohibits the use of Bitcoin and other cryptocurrencies as means of payment, but does not prohibit their ownership or trading as assets. Meanwhile, Government Decree 101/2012/ND-CP on cashless payment regulates only electronic money issued by licensed organizations and does not address cryptocurrencies, resulting in the absence of a clear and comprehensive legal framework.
As for the IoT, National Technical Regulation QCVN 3:2019/BTTTT on information security for IoT systems is purely technical in nature and does not establish a legal framework governing liability in case IoT devices cause harm or infringe upon privacy. This creates loopholes in user protection and in the determination of legal responsibility.
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| Inside a working office of FPT Software Quy Nhon in Quy Hoa Innovation Park in Gia Lai province__Photo: Kha Pham/VNA |
Solutions for improving Vietnam’s legal framework
Regulatory lag creates legal uncertainty and negatively affects enterprises. According to a survey conducted by the Vietnam Chamber of Commerce and Industry (VCCI) in 2023, 73 percent of technology enterprises consider unclear legal regulations to be the greatest barrier to innovation. At the same time, overly stringent regulations may also suppress innovation, underscoring the need for a balanced regulatory approach.
With the adoption of the Political Bureau’s Resolution 68-NQ/TW and the National Assembly’s Resolution 198/2025/QH15, Vietnam has established clear strategic orientations for developing the private economy in the digital space. However, concrete and feasible measures are required to effectively translate these orientations into practice.
Building a comprehensive legal framework
Vietnam should concretize the directions set out in Resolution 68-NQ/TW by developing a comprehensive legal framework for the digital economy, including the revision of existing laws as well as the issuance of new regulations. In line with the resolution, priority should be given to “improving the legal framework for new economic models, technology-based businesses and digital platforms,” and to establishing “regulatory sandboxes for new sectors and fields based on post-licensing inspection, in conformity with international practices.”
The new legal framework should embody the spirit of “removing barriers in awareness, thinking, perceptions and prejudices against the private economy,” as emphasized in Resolution 68-NQ/TW, while ensuring appropriate flexibility to adapt to rapid technological change. In particular, it is necessary to shift from a public administration model focused primarily on control to one centered on service provision and development facilitation, placing citizens and enterprises at the center.
Implementing the regulatory sandbox model
It is an urgent need to develop and implement a regulatory sandbox model. Such a model would create a favorable environment for sole proprietorships to engage in the research and application of AI, blockchain, big data, e-commerce, fintech, and smart healthcare. The regulatory sandboxes should be implemented systematically, beginning with priority sectors such as fintech and gradually expanding to other fields. At the same time, a strict supervision mechanism is required to ensure that the regulatory sandbox model does not pose risks to the system or consumers, while still facilitating innovation.
Improving regulations on personal data protection
Resolution 68-NQ/TW calls for “improving laws and policies on data and data governance, facilitating enterprises’ connectivity, data sharing and data exploitation, while ensuring security and safety.” It is therefore necessary to continue refining the legal framework for personal data protection, drawing on the experience of the EU’s GDPR while adapting it to Vietnam’s specific conditions and promoting the development of the private economy.
Reforming the tax system
Vietnam needs to reform its tax system to reflect the characteristics of the digital economy. Specific regulations should be in place to clarify the tax obligations of foreign enterprises providing digital services in Vietnam, including corporate income tax, value-added tax, and other relevant taxes. Applying the principle of “significant economic presence” rather than “physical presence” would help broaden the tax base.
An effective tax collection mechanism should also be established, covering requirements for foreign enterprises to make tax registration, declaration and payment in Vietnam. At the same time, measures to combat transfer pricing and tax avoidance in the digital economy should be applied, in coordination with international organizations for implementing global solutions.
Updating the competition law
Vietnam’s competition law needs to be updated with additional provisions to address abuse of a dominant position in the digital market, including the use of data to create barriers to market entry, the application of discriminatory pricing, and other anti-competitive practices.
It is also a need to devise specific regulations on the control of economic concentration in the technology sector, particularly with respect to the acquisition of startups with high growth potential. At the same time, it is necessary to strengthen the investigative and enforcement capacity of competition authorities, ensuring that sufficient expertise and resources are available to handle complex cases in the digital economy.
Innovating regulatory approaches
Vietnam needs to adopt a “regulatory sandbox” approach that allows enterprises to experiment with new products and services in a controlled environment. This model has been proven successful in Singapore and several other countries, helping strike a balance between promoting innovation and managing risks.
In addition, specialized agencies for the digital economy should be established, or the capacity of existing agencies strengthened, to ensure adequate expertise and resources for governing this field. Close coordination mechanisms among ministries and sectors are essential to avoid overlaps and conflicts in regulatory management.
Enhancing international cooperation
Given the cross-border nature of the digital economy, Vietnam needs to strengthen international cooperation in lawmaking and law enforcement. Active participation in international forums on digital economy governance is essential to learn from experience and promote regulatory harmonization.
Vietnam should conclude bilateral and multilateral cooperation agreements on information sharing, and assistance in investigations and in the enforcement of cross-border violations. In particular, cooperation mechanisms are needed for taxing multinational enterprises and resolving disputes related to e-commerce.
Conclusion
The digital economy has emerged as an important driver of growth, with the private sector playing a pioneering role. However, legal challenges relating to cross-border activities, data protection, competition, industrial relations and technological innovation require a flexible and modern legal framework. Vietnam therefore needs to build a comprehensive legal system, implement regulatory sandboxes, reform tax and competition regimes and strengthen international cooperation. Improving the legal framework is a continuous process that calls for close collaboration among the State, enterprises and society to enhance Vietnam’s competitiveness in the digital.
[1] The full text of the Vietnamese version of this article was published in Vietnam Lawyer Journal, issue No. 11(139), November 2025.
[2] The Prime Minister’s Decision No. 942/QD-TTg of July 15, 2021, approving the Strategy for the development of e-government toward digital government for the 2021-25 period.
[3] Organization for Economic Corporation and Development (OECD). (2020). OECD Publishing.
[4] VCCI, (2023), Report on exploration of technology enterprises [written in Vietnamese].
[5] Zuboff, S. (2019). The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power. Public Affairs.
