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Regarding e-commerce activities like Google, Facebook, YouTube, etc. which generate incomes, the Tax Department of Ho Chi Minh City proposed the Government stipulate that these organizations must fulfill tax obligations in Vietnam. The tax responsibilities may include assisting in providing information of organizations and individuals in Vietnam that have business activities and earn income from Google, Facebook, YouTube, etc.
The leader of the City Tax Department said that at present, social networks such as Google, Facebook, etc. all have servers located abroad. According to their rules, they always encourage individuals to post information on their platform and if they have high views and/or high interactions, they will be paid proportionately. At the same time, these platforms integrate advertisements into newsletters/videos of that channel to collect service fees.
Tax obligation of social media platforms
However, through the coordination of information with several banks, it has shown that the tax authorities only know the amount that the owner of the social network has paid to organizations and individuals in Vietnam. On that basis, the tax authority calculates income tax for units and individuals earning income from social networks. As for the exact amount that Vietnamese organizations and individuals pay for advertising to social network owners, along with the fact whether or not contractor tax has been deducted, the tax authorities have not verified it.
Some officials of the City Tax Department said that it is difficult to verify the reason for the cash flow in and out of social networks because the bank account information does not show the money transfer content. Since then, the determination of taxable income for individuals and organizations with income from social networks depends on quite a bit on the goodwill of the taxpayer. As for the income of social network operators, it is not clear.
In particular, in the process of verifying individuals and organizations with income from Google and Facebook, the tax authorities have asked about 40 banks to provide information. However, only 6 banks cooperated to implement, while others lacked enthusiasm.
“Therefore, for banks that make payments to organizations engaged in e-commerce activities, the City Tax Department recommends that the Government have regulations that require banks to coordinate in providing information to tax authorities, as well as implementing tax deduction and payment according to regulations,” said Mr. Le Duy Minh, Director of the Tax Department of Ho Chi Minh City.
Proposal to issue regulations to make social media platforms cooperate with tax authorities
In principle, if Google and Facebook have income in Vietnam, they must set up a server in our country for the state management agency to monitor the cash flow in and out, and at the same time, these two social networks must declare and pay taxes themselves, according to regulations of the law. But at this point, both Google and Facebook are all neglecting this.
Meanwhile, the social networks created by domestic enterprises are not strong enough to replace Google and Facebook which have had years of influence all over the globe. Since then, the state wants to sanction foreign social networks by imposing a tax rate of 4%/revenue like the one the French Government is applying or restricting their activities in Vietnam, which can reduce people’s access to information and consequently, may have negative impacts on all fields of the society.
Therefore, according to the City Tax Department, the initial solution is for the Ministry of Information and Communications to ask Google and Facebook to set up representative offices in Vietnam, then declare and fulfill tax obligations themselves. As for whether they declare accurately or not, state management agencies are responsible for monitoring and supervision. Accordingly, if they perform their tax obligations improperly, the Government can consider stronger sanctions.
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