Are incomes from digital platforms taxable?

Currently, because of close coordination between tax authorities and banks, the management of money flows from abroad into individuals’ accounts is not difficult. Therefore, it is very easy for tax authorities to request banks to deduct taxes that individuals do not declare and pay taxes on. The question is, whether the income from digital platforms is taxable. What do economic experts and in-house counsels think about this issue? Let’s find out with PL & Partners Law Firm through the article below.

1. WHAT ARE INCOMES FROM DIGITAL PLATFORMS?

A digital platform is a digital space that facilitates digital collaboration, interaction, and transaction between users. Any electronic tools for communication including desktop and mobile software, email, websites and social network sites like Facebook, Instagram, Tiktok, Twitter, Lazada, Amazon, etc. are digital platforms.

Incomes from digital platforms are incomes obtained from business activities, transactions, and exchange of goods and services on digital platforms. The digital platform is a breakthrough solution to accelerate the process of digital transformation, development of digital government, digital economy and digital society. This is also a key factor in ensuring cyber security and protecting Vietnam’s prosperity in cyberspace.

Thu nhập từ nền tảng số là thu nhập được có được từ các hoạt động kinh doanh, giao dịch, trao đổi hàng hóa, dịch vụ trên nền tảng số — *Incomes from digital platforms are incomes obtained from business activities, transactions, and exchange of goods and services on digital platforms.*

2. ARE INCOMES FROM DIGITAL PLATFORMS TAXABLE?

Previously, tax authorities were still confused and faced difficulties when the legal corridor was still incomplete and clear for collecting taxes from foreign enterprises such as Google, Facebook, etc. And at that time, those who made money from these giant companies were not found by the tax authorities and didn’t have to pay any taxes despite having huge incomes.

However, so far that story has been resolved since the Government issued Decree no 126/2020/ND-CP and the Ministry of Finance issued Circular no 80/2021/TT-BTC. Accordingly, overseas service providers can directly declare and pay taxes to Vietnamese tax authorities or may authorize tax agencies or organizations operating in Vietnam to pay taxes. In case of evasion of tax declaration and payment, we already have a mechanism to handle it.

The above is for cross-border service providers (Facebook, Google, etc). For organizations and individuals earning income from these businesses, the law clearly stipulates that individuals who earn more than 100 million VND/year income on the Internet shall declare and pay taxes. Failure to declare or overdue declaration is considered as one of the acts of tax evasion. The consequence can be a light administrative sanction depending on the seriousness or a severe punishment of up to 7-year prison sentence.

Thus, regardless of the form of business, each citizen has the right and obligation to pay taxes. Individuals and organizations that earn incomes from digital platforms must pay taxes in compliance with the law. YouTubers, Facebookers in particular and those make money from overseas service providers in general should make full tax declaration and payment to avoid unnecessary legal consequences.

3. COMMENTARY OF THE ECONOMIC EXPERTS AND IN-HOUSE COUNSELS ON THE CURRENT TAX PAYMENT OF INCOMES FROM DIGITAL PLATFORMS.

In addition to the obvious benefits of using a digital platform in business which is helping promote economic and social development, doing business and paying income tax from digital platforms still has many shortcomings until now.

In the era of information technology, business activities are mainly based on e-commerce and digital platforms like today, anyone can make money online, typically YouTubers, Facebookers, Tiktokers, etc.

In the peak period of COVID-19 pandemic’s prevention and control, many enterprises have launched online businesses, and consumers have also changed their habits and preferred this shopping channel. Besides, with the development of technology, virtual currency and cryptocurrency, new business models, the use of crowdfunding in technology-based business models is becoming more and more popular.

However, this business also raises many questions that make the management agency concerned about. For example, these days, the technology-based service model that is at the boundary between providing public transport services to replace the traditional taxi and satisfying the demand for delivery services due to the impact of online shopping habits grows strong. So will the individual providing services on this technology platform be considered a self-employed individual or an employee?

According to in-house counsels, regardless of being a traditional business model or an online business, people are liable for paying taxes. Tax payment is always made public, transparent and equal by tax authorities. The biggest difficulty today is determining the correct nature of transactions to tax business transactions in the sharing economy, especially tax collection on e-commerce transactions. If enterprises and individuals do business online but do not declare taxes, there should be fine mechanisms, even severe penalties such as business bans or heavy fines to force them to comply with the law.

According to economic experts, collecting business tax online is relatively difficult as tax authorities cannot regularly check and monitor business activities on these networks, particularly in the context that online business types explode rapidly. This requires close and methodical coordination between the tax authorities and the involvement of commercial banks with strict sanctions in order to thoroughly handle the loss of tax revenue in the online business sector.

In the coming time, when the guiding documents are fully promulgated, bringing the Law to life is expected to create favorable conditions for e-commerce to develop, prevent and control the negative consequences of current e-commerce, expand tax collection base, and limit the loss of tax revenue from online business activities.

Above is a discussion about “Are incomes from digital platforms taxable?”.