Tax evasion in online businesses in Vietnam is happening… quietly. This is the assessment of competent state agencies after several cases of individuals conducting online businesses being ordered by the Tax authorities to pay billions of dong in back taxes, highlighting the reality of tax evasion in this sector.
Tax evasion in online businesses – a huge loss for the state budget.
Through a review of four banks, the Ho Chi Minh City Tax Department discovered that over 500 billion VND had been transferred to numerous individuals in Vietnam from foreign businesses such as Google, Facebook, and YouTube. This demonstrates the reality of tax evasion through online businesses, resulting in a huge loss of national tax revenue.
The tax authorities stated that they will identify and prosecute online business tax evasion by initiating legal proceedings against those who receive notifications but deliberately fail to declare and pay taxes.
Authorities recover billions of dong from online social media business activities.
Recently, the Ho Chi Minh City Tax Department has had to plan to collect back taxes from a number of individuals with income from social media. On August 6th, one individual was ordered to pay back over 9 billion VND in taxes due to online cosmetics sales through Facebook reaching 450 billion VND. This information was confirmed by the head of the Ho Chi Minh City Tax Department.
Accordingly, the Ho Chi Minh City Tax Department inspected and verified the bank account of Ms. CTTD (residing in Phu Nhuan District), discovering revenue of approximately 450 billion VND from online sales between 2013 and 2016. However, Ms. D had not yet declared and paid taxes. When summoned to the tax office, Ms. D claimed that only a portion of that amount was revenue from sales, with the rest being her personal funds, but she could not provide any evidence to substantiate the claim of her "personal funds."
It was only when the tax authorities transferred the case file to the investigative agency that Ms. D reluctantly admitted her guilt. Ms. D's Facebook account had over 50.000 followers, and through selling weight loss, skincare, and scar reduction products, priced from a few hundred thousand to a few million dong, she generated the aforementioned revenue.
More notably, Ms. D also sold wholesale to many other distributors both domestically and internationally, not just directly. The Ho Chi Minh City Tax Department subsequently decided to collect 9.2 billion VND from this individual. This includes value-added tax (VAT), personal income tax, and penalties for late payment.
Previously, an individual was also investigated by the Ho Chi Minh City Tax Department, which discovered and enforced the recovery of 4.1 billion VND. The reason was that a telecommunications company paid this individual a total of 41 billion VND over two years (2016-2017) for game programs that he wrote, which were widely downloaded on Google, YouTube, and Facebook, and for running advertisements on those platforms.
Previously, also in Ho Chi Minh City, a game developer whose games were widely downloaded on YouTube, Google, and Facebook, and who ran advertisements on these platforms, received over 41 billion VND from the network provider in 2016-2017, but failed to declare and pay taxes. The Ho Chi Minh City Tax Department discovered this and collected 4,1 billion VND, including 3 billion VND in back taxes and 1,1 billion VND in late payment penalties.
Recovering a large sum of money from personal income.
According to the head of the Ho Chi Minh City Tax Department, this was the first time they had collected such a large amount of back taxes from individuals with income from abroad. Subsequently, the tax authorities discovered additional cases of individuals failing to declare their taxes.
According to the head of the Ho Chi Minh City Tax Department, this is the first time an individual receiving income from abroad has been subject to such a large tax recovery. However, the tax authorities later discovered several other cases of individuals receiving huge sums of money from Google, Facebook, etc., but failing to declare it for tax purposes.
Most recently, the Ho Chi Minh City Tax Department requested the Quang Nam Provincial Tax Department to verify the case of an individual named LTV (registered permanent residence in Quang Nam, temporary residence registration in Ho Chi Minh City). The tax authorities subsequently determined that this individual had failed to declare taxes despite earning $700.000 USD (approximately 16 billion VND) from Google over a three-year period from 2014 to 2017. This individual was subsequently ordered to pay back taxes by the competent authorities.
The cases mentioned above are just typical examples. According to the head of the Ho Chi Minh City Tax Department, it's not just a few cases of people receiving tens of billions of VND from Google, Facebook, YouTube, etc., but the actual figure is confirmed to be many times higher.
According to the tax authorities, a review of just four banks uncovered over 500 billion VND transferred from organizations to thousands of individuals in Vietnam, most of which had not been declared for tax purposes. Hypothetically, if reviews were conducted at other banks, the estimated amount of tax arrears could reach hundreds of billions of VND.
Furthermore, it's not just individuals; Facebook and Google are also subject to the Ho Chi Minh City Tax Department's assessment of advertising revenue in Vietnam.
Services from overseas companies are causing the national budget to lose hundreds of billions of dong.
In 2016, data from just one bank showed that Google's service had over 15.000 buyers, with payments totaling 222 billion VND across approximately 250.000 transactions. In contrast, Facebook had around 175.000 transactions – equivalent to Google's service purchases, generating approximately 450 billion VND.
Payments to these two entities were made by domestic individuals and organizations via international payment cards. Regulations regarding contractor tax deductions were ignored by these organizations and individuals.
With the explosion of information technology, the Internet, and smart devices today, the opportunities for developing online businesses are enormous, and this development will become increasingly complex and diverse.
Tax experts note that the rapid growth of business activities through social media or websites, often considered by individuals as part-time work, leads to a lack of registration and tax declaration.
Believing that tax authorities cannot track the revenue of online businesses, many people use cash payments or open multiple accounts at different banks. Furthermore, some individuals and household businesses are even more sophisticated, registering for taxes but intentionally declaring annual revenue below 100 million VND to avoid paying taxes.
Circular 92/2015/TT-BTC dated June 15, 2015, issued by the Ministry of Finance, stipulates that individuals with income from social media platforms such as Google, Facebook, or YouTube are classified as having income from business activities. If the business generates revenue of VND 100.000.000 or more per year, the individual must pay tax at a rate of 7% of their income (including 5% VAT and 2% personal income tax).
Currently, there is a lack of control tools and strict regulations to determine the actual income and revenue from online business activities. Many people with online businesses generating billions of dong in annual revenue still fail to fulfill their tax obligations to the State… www.expertis.vn
