More and more businesses are using Digital marketing channels. However, most businesses do not understand the nature of these costs, leading to tax problems and financial consequences.
Facebook, Google, Youtube, … is one of the most effective channels for businesses to promote their images, products and services to customers.
However, most businesses do not understand the nature of these costs, leading to tax problems and financial consequences.
Whether costs of digital marketing be credited when calculating Corporate Income Tax in Vietnam?
INTERTAX will analyze and clarify for customers the following cases:
Case 1: Enterprises in Vietnam use services of Marketing Agency
In fact, this will not be a problem. Because all advertising expenses, if there are contracts, invoices and legal documents, enjoy input VAT credit and are determined as the valid expenses when calculating corporate income.
Case 2: Enterprises in Vietnam directly work with foreign organizations such as Facebook, Google … Troubles arise.
Foreign organizations such as Facebook, Google … are subject to Foreign Contractor Tax (FCT), but these companies do not set up their permanent establishments in Vietnam, forcing Vietnamese businesses to be responsible for declaring and paying contractor tax on their behalf. But whether these companies accept to return it to businesses or not is entirely dependent on their decision.
“The Vietnamese party signing a contract, agreement, or commitment with a foreign party is responsible for declaring and paying FCT on behalf of the foreign party. The Vietnamese party is responsible for informing the foreign party and deducting contractor tax before paying to the foreign party ”(Pursuant to Article 11, Section 3, Chapter II, Circular No. 103/2014 / TT-BTCT
Method of calculation of payable contractor tax:
FCT = (turnover subject to VAT x rate of 5% VAT calculation) + (turnover subject to CIT x 5% CIT rate).
(According to Clause 2, Article 12 and Clause 2, Article 13, Circular 103/2014 / TT-BTC)
So, what should Vietnamese businesses do?
Based on the provisions of Clause 1, Article 15 of the Ministry of Finance’s Circular No. 219/2013 / TT-BTC of December 31, 2013, vouchers of VAT payment on behalf of foreign parties can be used “to declare input VAT credit”.
Regarding valid expenses when calculating Corporate Income T, based on the provisions of Article 4, Circular 96/2015 / TT-BTC, in case enterprises have expenses for posting advertisements on Facebook and Google if these expenditures meet the conditions:
- Relating to business activities of enterprises,
- Having sufficient invoices and legal documents bearing their name, address and tax identification number
- and have proof of non-cash payment as prescribed for payments of over VND 20 million
The amount will be included in deductible expenses when determining taxable income.
But the big problem is, social networks like Facebook, Google, …:
- Do not provide advertising contracts with seals, signatures of businesses
- and they also cannot provide VAT invoices – according to Vietnamese law.
Therefore, it is likely that online advertising expenses will not be eligible to be included in valid costs.
In order to contribute to solving these difficulties, the Hanoi Tax Department issued Document No. 222454 / CT-TTHT dated April 23, 2018, explaining clearly: “In case the company uses advertising services on Facebook, Google… do not have permanent establishments in Vietnam, if the information and electronic data including:
- online account,
- terms of service, policies and pricing offered by Facebook Company, Google to determine transaction volume,
- payment vouchers…
are accurate, has a sufficiently reliable assurance of the integrity of the information; These electronic information and data are stored, accessible and usable in a complete form and, when necessary, the tax authority can check, are determined as deductible expenses when calculating taxable Corporate Income Tax.”
Subsequently, the General Department of Taxation issued Official Letter No. 3149 / TCT-CS of August 15, 2018, further guiding: “In case the seller does not provide invoices, there must be a declaration and payment document of the contractor “. Thus, businesses can use the payment voucher of contractor tax for Facebook, Google (including VAT and CIT) to account for input VAT credit and cost.
As a tax and accounting partner, INTERTAX provide following services:
Accounting and Taxation consulting services
License services- Legal services
Digital signature and Digital invoice