The Ministry of Finance wants to control taxes on Facebook and Google through Napas.

The Ministry of Finance wants cross-border services like Facebook and Google to process payments through a domestic gateway via the National Payment Corporation (Napas).

This content was recently proposed by the Ministry of Finance to the State Bank of Vietnam for collaborative research, with the aim of enabling tax authorities to control the revenue from these services and provide a basis for requesting foreign organizations to deduct and pay taxes.

In addition, the Ministry of Finance also requested that telecommunications and Internet service providers open official representative offices in Vietnam and declare and pay contractor tax.

The Ministry of Finance wants to control Facebook and Google's taxes through the National Payment Corporation (Napas).

According to the Ministry of Finance, the reason for making this proposal is that internet activity constitutes cross-border transactions.

Most foreign network operating companies are not registered businesses and do not have official representative offices in Vietnam.

This poses a challenge for the tax authorities in managing taxes on foreign businesses operating through the internet.

Currently, Google and Facebook offer online advertising services to the Vietnamese market through two methods.

In the first method, which involves using agents in Vietnam, these businesses themselves will be responsible for fulfilling their tax obligations according to Vietnamese law when revenue is generated.

Therefore, this ultimately depends on the tax compliance awareness of dealers in Vietnam.

The second method involves online buying and selling, and online payment via credit card or e-wallet, which is still not clearly regulated.

However, the service buyer will be at a disadvantage because, without an invoice, the expense will not be considered a legitimate business cost, or the service buyer will legitimize it by purchasing an invoice for another service.

Therefore, during tax audits and inspections, it will be difficult to determine the true value of the costs paid for online services. In many cases, it is necessary to cross-reference information from multiple sources and trace back to actual payment details.

On the other hand, with pay-per-click advertising, determining the advertising revenue of foreign network operators is not easy.

Currently, e-commerce is developing rapidly; however, tax authorities have not yet effectively managed taxation related to this activity.

The reason is that it would then be necessary to cross-check information between the buyer's and seller's banks and participate in the payment process under conditions where they are not directly subject to taxation, and the network company's bank is also located abroad.

Since the buyers of services from foreign organizations are individuals, it is difficult to have grounds to request a deduction of the foreign organization's contractor tax when purchasing services.

Therefore, the Ministry of Finance proposes that the State Bank of Vietnam study the requirement that cross-border services must be paid through the Napas gateway, and that foreign network operators in Vietnam should establish a point of contact, such as opening an official representative office, to coordinate more closely with the regulatory agency.

This type of model has been implemented in European countries, India, and South Korea.

In parallel, the Ministry of Finance also proposed coordinating with relevant agencies to review and amend regulations on handling violations in the fields of e-commerce and taxation to strengthen the deterrent effect on organizations and individuals engaged in e-commerce business who intentionally evade taxes.

According to TTO