Vietnam: Tighten management of advertising via Facebook to prevent tax loss

1. General situation:

Online advertising activities are accounting for a large proportion of total advertising investment in Vietnam. In particular, the majority of organizations and individuals choose online advertising on the platforms of two foreign organizations providing cross-border advertising services in the online environment, which are Google and Facebook, accounting for about 70% of online advertising market revenue.

In 2018, revenue from Facebook advertising in Vietnam was about USD 1 billion, however, taxes were not paid. This means that Vietnam is losing a tax amount of up to hundreds of millions of dollars.

2. Draft regulations on cross-border advertising activities:

Currently, the Law on Advertising and Decree No. 181/2013/NĐ-CP of Vietnam’s Government on elaboration of some articles of the Law on Advertising have basic regulations governing cross-border advertising activities in Vietnam. However, these regulations do not have specific instructions on the responsibilities of parties involved in providing services, especially on the issue of censoring the content of advertising products before release and fulfilling tax obligations when providing cross-border services in Vietnam.

Thus, the Draft Decree amending a number of articles of Decree No. 181/2013/NĐ-CP is expected to have new points to overcome the above gap. To be specific:

- Annulling the provision of Clause 2 Article 13:

Vietnamese organizations and individuals with goods and services want to advertise on the websites of foreign organizations and individuals providing cross-border advertising services do not need to go through advertising service providers who are legally registered to operate in Vietnam.

This regulation can be said to have caught up with the trend of the era of information technology development, when the demand for online advertising is increasing, the abolition of the above regulations aims to promote advertising activities on social networks, especially advertising on Facebook. In other words, businesses and individuals can more easily access online advertising services.

- Supplementing responsibilities of foreign organizations and individuals providing cross-border advertising services:

The Draft Decree specifies that these entities shall have the responsibility to:

- Comply with Vietnamese laws on advertising, management, provision and use of Internet services and online information; pay tax according to tax laws;

- Notify contact information with the Ministry of Information and Communications when providing cross-border advertising in Vietnam.

- Proactively review and check that advertising products do not violate the provisions of Article 8 of the Law on Advertising of Vietnam and do not place advertising products in positions with content that violates the provisions of the Law on Cyber Security of Vietnam;

- Implement the prevention, removal and handling of infringing information at the request of the Ministry of Information and Communications and competent authorities;

- Propose solutions to ensure that advertising publishers in Vietnam have the ability to control, detect and remove cross-border advertising products that violate Vietnamese laws on advertising;

Thus, the above regulations force Facebook to comply with the provisions of Vietnamese law, including laws on advertising, management, provision, and use of Internet services and online information. This regulation tightens Facebook's responsibilities, forcing them to proactively control and manage advertising content posted on their pages. Besides, instead of generally regulating that “tax on the revenues from advertising in Vietnam of such websites shall be paid in accordance with legislation on taxation”, the new regulation forces Facebook to “pay tax according to tax laws”.

Legal basis:

- Draft Decree amending a number of articles of Decree No. 181/2013/NĐ-CP

- Decree No. 181/2013/NĐ-CP

Nguyen Phu

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE