Vietnam is determined to tax monetizing creators from international social platforms like Facebook, Google and YouTube (both belong to Alphabet Inc.) but the latest move by Google has weighed down the taxation in the country.

The number of YouTubers in Vietnam on the rise. Photo: Hoang Giang

One of the taxation sector’s tasks in 2021 is to prevent tax frauds by individuals and companies whose digital and online business earning profit from Facebook, Google, and YouTube, said Dang Ngoc Minh, deputy general director of the General Department of Taxation under the Ministry of Finance.

“The taxation agencies will cooperate with banks to withhold abnormal income flow from social networks of each individual and enterprise in case they do not voluntarily declare or pay tax or deliberately avoid payment. Fines or criminal penalties would be applied depending on the amount of tax evaded,” Minh said.

Google-owned company YouTube is now going to deduct tax from content creators residing outside of the US on the earnings generated from viewers on the popular video platform from June 1.

YouTube has already sent out letters to creators, asking them to submit their tax information soon. This rule will be applicable for all YouTubers around the world, including those from Vietnam.

These are earnings from viewers in the US through ad views, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships.

This change won’t affect creators in the US, but will affect the rest of the world. YouTube needs updated tax info by the end of May, otherwise a default 24% withholding will be made.

Most popular YouTube channels in Vietnam as of January 2020, by number of uploaded video views (in billions). Source: Statista

Difficulties

Google’s move obviously would affect many who rely on the platform to make a living.

Regarding YouTube’s new policy, LQ, a Vietnamese YouTuber producing educational content, said to Hanoitimes that this is bad news for YouTube content creators in Vietnam.

The tax rate of 30% or 24% is too high, affecting income of the creators and reinvestment. Therefore, Vietnamese YouTubers are under pressure to change content to viewers in countries other than the US, or focus on Vietnamese users, he said.

LQ, who wanted to be anonymous, has so far received instructions on tax declaration on the Google AdSense account from Multi-Channel Network (MCN) – Google’s agent partner.

Thanh Phung, an owner of a famous YouTube channel, said this is really serious as the money earned from the US viewers is the highest with US$4.77 per 1,000 views while that in Vietnam it is only US$0.38.

YouTube has shown signs of saturation and making money on YouTube is no longer “delicious” as people think. High taxes and deductions will make it increasingly difficult for content creators, he noted.

According to economist Nguyen Thanh Doan, the tax rate that Google will apply to deduct for YouTubers outside the US is considered as a foreign contractor tax. Currently, Vietnam also applies the foreign contractor tax on cross-border services that generate income in the country, for example, advertising services on Google (including YouTube) at the rate of 10%.

Therefore, for YouTubers who have fulfilled tax obligations in Vietnam, they might face double taxation from June 1 when the Google’s regulations take effect, Doan said.

In July 2015, Vietnam and the US signed the Double Tax Treaty, the first income tax treaty and the Protocol for the avoidance of double taxation and prevention of tax evasion/avoidance.

Tax losses

Statistics by Vietnam’s Ministry of Information and Communications showed that by the end of 2020, there had roughly 15,000 monetized YouTube channels in Vietnam. However, only 30% of the total number are governed by Multi-Channel Network (MCN) in Vietnam and make tax declaration and payment.

Under Law on Tax Administration which took effect from July 1, 2020, individuals running this business will have to pay 7% tax on their turnover if they earn over VND100 million (US$4,340)/year.

In reality, tax collected from this field remains modest. According to the General Department of Taxation, in 2020, Vietnamese organizations who sign online advertising contracts with foreign organizations had deducted and paid for foreign organizations total VND1.14 trillion (US$49 million). This is extremely small compared to the Vietnamese advertising market that is estimated at US$1.5 billion in 2020.