HANOI, Nov 26 (Reuters) - Vietnam's parliament on

Tuesday approved changes to a tax law to require local operators

of foreign e-commerce platforms to pay Value-Added Tax (VAT),

while calling on the government to scrap a tax exemption for

low-cost imported goods.

The move by legislators will be a blow to the

foreign-dominated e-commerce industry, which has benefited from

VAT exemption and rules in place since 2010 that stipulate

imported goods worth under 1 million dong ($40) are free from

duties.

It comes weeks after the Communist-run country threatened to

block Chinese online retailers Shein and Temu amid concerns

about unfair competition due to their deeply discounted prices.

That amendments passed on Tuesday will apply from July 1

next year and will see the maximum rate of the standard VAT rate

increase to 10% from 8% currently.

Vietnam's fast-expanding $22 billion e-commerce market

largely relies on cheap goods from neighbouring China, with up

to 5 million orders placed by shoppers on average every day,

according to state media reports, citing a lawmaker.

Among the leading platforms in Vietnam are Singapore's

Shopee, and China's Lazada and TikTok.

Those incumbents have been joined by fast-fashion retailer

Shein and more recently by Temu, owned by Chinese e-commerce

giant PDD Holdings ( PDD ), which began selling in Vietnam in

October to capitalise on its online shopping boom.

The National Assembly on Tuesday said that since the tax

exemption on low-cost goods has no expiry date, it urged the

government to issue a decree to scrap it, which would enable the

amended VAT law to be effective in ensuring taxes were fully

collected from e-commerce firms.

Temu and Shein are facing increased scrutiny and challenges

elsewhere in Asia, amid growing concerns that higher U.S.

tariffs on Chinese goods threatened by the upcoming Trump

administration could lead China to flood Asian countries with

its overcapacity of ultra-cheap items.

The amended law will also impose a 5% VAT on fertilisers,

which are not currently taxed, which could impact farmers in the

world's second-largest coffee exporter and third-largest shipper

of rice.

"The fertiliser tax will raise input cost for farmers,

including rice farmers, and will ultimately leave Vietnamese

rice less competitive on the international market," a trader

based in Ho Chi Minh City said.

($1 = 25,405 dong)