Topic Tax obligations for income from sponsored content, affiliate marketing, and digital advertising revenue in Vietnam

MINUTE DETERMINING THE INVOLVING LEVEL AND PARTICIPATION RESULTS IN GROUP WORK ACTIVITIES Date: February 8th, 2025 Venue: A1103 Total number of students in the group: + Attended: 6 + A

MINISTRY OF JUSTICE HANOI LAW UNIVERSITY

ADVANCED LEGAL ENGLISH 3

Topic: Tax obligations for income from sponsored content, affiliate marketing, and digital advertising revenue in Vietnam

Full name:

ĐẶNG THUỲ ANH – 462503 NGUYỄN THỊ QUỲNH ANH – 462505 ĐẶNG TRẦN KIM CHI – 462510 NGUYỄN THUÝ HIỀN – 462521 NGUYỄN ANH TÚ – 472842 NGÔ HOÀNG PHÁT – 472856

Class: 4625

MINUTE DETERMINING THE INVOLVING LEVEL AND

PARTICIPATION RESULTS IN GROUP WORK ACTIVITIES

Date: February 8th, 2025 Venue: A1103

Total number of students in the group:

+ Attended: 6

+ Absented: 0

Course: Advanced Legal English 3

Topic: Tax obligations for income from sponsored content, affiliate marketing, and digital

advertising revenue in Vietnam

Determining the level of participation and results of each student's participation in the involvement of group work activities, the outcomes are as follows:

No

Students’

ID

number

FULL NAME

Students’ self-assessment Students’

signature

Teachers’ assessment

A B C Grade

(in number)

Grade

(in word)

Teachers’ signature

1 462503 Đặng Thuỳ Anh X

2 462505 Nguyễn Thị Quỳnh Anh X

3 462510 Đặng Trần Kim Chi X

4 462521 Nguyễn Thuý Hiền X

5 472842 Nguyễn Anh Tú X

6 472856 Ngô Hoàng Phát X

The outcome of the group work assignment Hanoi, February 8th, 2025

+ The second teacher’s assessment :………

- The result of the presentation :………

- Teacher grading the presentation :………

- The overall grade :………

- The final assessment of the teacher :………

Table of Contents

INTRODUCTION 1

CONTENT 2

1 Understanding income stream 2

1.1 Sponsored content 2

1.2 Affiliate marketing 2

1.3 Digital advertising revenue 3

2 Tax treatment of digital income sources 3

2.1 Tax obligations for individuals 3

2.1.1 Personal income tax (PIT) 3

2.1.2 Value added tax (VAT) 6

2.2 Tax obligations for businesses (Companies) 8

2.2.1 Corporate income tax (CIT) 8

2.2.2 Value added tax (VAT) 10

2.2.3 Withholding tax (WHT) 12

2.3 Tax treatment of cross-border income 14

2.3.1 Tax liability on income earned from foreign platforms 14

2.3.2 Application of Double Taxation Agreements (DTAs) 14

2.3.3 Tax declaration and payment for cross-border income 17

CONCLUSION 19

REFERENCES 20

INTRODUCTION

As Vietnam’s digital economy continues to expand, income generated from sponsored content, affiliate marketing, and digital advertising has become a significant revenue stream for individuals and businesses The rise of social media influencers, content creators, and online marketers has led to increased scrutiny from tax authorities, aiming to ensure proper taxation of these digital income sources However, the decentralized and borderless nature of digital transactions poses challenges in enforcing tax compliance

Under Vietnamese tax law, individuals and businesses engaging in these digital activities are subject to various tax obligations, including personal income tax (PIT), corporate income tax (CIT), and value-added tax (VAT) Depending on the scale of operations and income level, taxpayers must comply with different tax registration, declaration, and payment requirements Failure to fulfill these obligations may result in penalties, back taxes, and legal consequences

This study looks at how sponsored content, affiliate marketing, and digital advertising revenue are treated tax-wise in Vietnam It offers a thorough examination

of the relevant tax laws, compliance procedures, and critical concerns for individuals and businesses operating in the digital economy

For instance, a beauty influencer on Instagram might post an in-depth review of

a skincare product, clearly marking the post with hashtags like #Sponsored or #Ad to signal its promotional intent Similarly, a TikTok creator could engage their followers with a challenge video while subtly promoting a song from a music brand, encouraging viewers to join in and share The main aim of sponsored content is to offer value to the audience through information or entertainment while discreetly promoting a product or service

1.2 Affiliate marketing

Affiliate marketing is a highly effective way to earn money online, where individuals or businesses make commissions by promoting products or services from other companies The promoters, known as affiliates, receive a special tracking link called an affiliate link When someone clicks on this link and makes a purchase, the affiliate earns a commission This process involves several key players: the merchant (or seller) who provides the product, the affiliate who promotes it, and the customer who clicks on the affiliate link to buy

Well-known platforms like Amazon Associates, Shopee, Lazada, and Tiki have established affiliate programs that enable individuals to earn income by referring products through various channels, such as websites, blogs, social media, and YouTube For instance, YouTubers might include affiliate links in their video descriptions, encouraging their viewers to buy the products they review or showcase This model is beneficial for both the merchant and the affiliate, as it helps the brand reach a wider audience while giving affiliates a reliable source of passive income

1.3 Digital advertising revenue

Digital advertising revenue refers to the income generated from online ads displayed on various digital platforms, including websites, social media, mobile apps, search engines, and streaming services There are many types of digital advertising, such as display ads (like banners or pop-ups), search ads (for instance, Google Ads), social media ads (on platforms such as Facebook, Instagram, or TikTok), video ads (shown on YouTube or streaming services), and native ads, which blend in with regular content

A prime example of digital advertising revenue is Google, which earns significant income through its Google Ads platform Businesses utilize Google Ads to pay for their advertisements to appear at the top of search results, on YouTube videos, and across Google’s extensive network of partner websites Google’s business model, based on the pay-per-click (PPC) system, ensures that advertisers only incur costs when

a user clicks on their ads This pay-per-click model has proven to be highly effective,

as it guarantees that advertisers are only charged for actual engagement with their advertisements

2 Tax treatment of digital income sources

2.1 Tax obligations for individuals

2.1.1 Personal income tax (PIT)

According to Clause 1, Article 5 of the 2019 Tax Administration Law, which outlines the principles of tax administration, all organizations, households, business households, and individuals are obligated to pay taxes in accordance with the law However, depending on specific cases and the applicable tax types, the tax obligations

of each individual or organization may vary in terms of taxable subjects, payment methods, and amounts based on their business or commercial activities In principle, under the Personal Income Tax Law, whether or not a person has registered a business,

if taxable income arises, the person is still expected to pay their tax obligations

Sponsored content, affiliate marketing, and digital advertising revenue are

classified as business income because they are freelancing business activities with no

fixed job contracts and pay based on the results of the task completed Individuals work independently, without being controlled by any organization or individual, and their

income is derived from the services they provide Article 3 of 2007 Personal Income Tax Law specifies that business income is one of the taxable income types Therefore, when an individual receives income from activities such as sponsored posts on social media, sponsored videos on YouTube, or product reviews on blogs, these incomes are considered business income and subject to PIT Similarly, income from participating in affiliate marketing programs, where individuals earn commissions from promoting products through affiliate links, is also categorized as business income and subject to PIT Additionally, revenue from advertising on internet platforms such as websites, blogs, Facebook, Google, or YouTube is considered business income and is subject to PIT

According to Article 10 of the 2007 Personal Income Tax Law, taxable income

from business activities involving sponsored content, affiliate marketing, and digital advertising revenue is calculated by subtracting the allowable expenses incurred during

the tax period from the revenue The revenue from these activities is calculated based

on the total amount received from sponsorship contracts, affiliate commissions, and

advertising income from online platforms Allowable expenses that can be deducted

when determining taxable business income for sponsored content, affiliate marketing, and digital advertising revenue include: production and content creation costs (filming, editing, designing, software, equipment); media and marketing expenses (advertising

on platforms like Facebook Ads, Google Ads); depreciation of fixed assets like computers and cameras; and management costs (office space, accounting services, legal consultancy) These expenses are considered reasonable costs related to generating income from business activities

According to Article 22 of the 2007 Personal Income Tax Law, as business

income, income from sponsored content, affiliate marketing, and digital advertising

revenue will be subject to the progressive tax rate The progressive tax rate applies to

taxable income from business activities, which is the total taxable income minus contributions to social insurance, health insurance, unemployment insurance, compulsory occupational insurance for certain industries, voluntary pension funds, and applicable deductions The progressive tax rates are specified as follows:

(Article 22, 2007 Personal Income Tax Law)

Overall, the personal income tax payable by individuals receiving income from

sponsored content, affiliate marketing, and digital advertising revenue is calculated as:

Personal income tax payable = (Taxable Income - Deductions) x Tax rate

According to the provisions of Clause 1, Article 3 of the 2007 Personal Income Tax Law, as amended by Clause 1, Article 2 of the 2014 Law on Amendments to Tax Laws, income from business activities of individuals with annual revenue of 100 million VND or less shall be exempt from personal income tax Therefore, when individuals engage in activities such as sponsored content, affiliate marketing, and digital advertising revenue with income above 100 million VND per year, they must register for tax with the local tax authority to become a business household or individual business This registration will enable individuals to obtain a Tax Identification Number (TIN) for fulfilling their tax obligations legally

For income from sponsored content, affiliate marketing, and digital advertising revenue, individuals must note that this income is considered business income and must comply with the process of tax declaration and timely payment After registering for tax, individuals need to make regular tax declarations, typically quarterly or annually,

depending on their income level This includes declaring business income and allowable expenses to calculate the personal income tax payable Electronic tax filing is common and generally available on the electronic portals of tax authorities, making it quick and convenient for individuals to complete their tax procedures

2.1.2 Value added tax (VAT)

In Vietnam, individuals earning income from digital activities such as sponsored content, affiliate marketing, and digital advertising revenue may be subject to Value Added Tax (VAT), depending on their annual revenue and business scale According

to Article 3 of the Law on Value Added Tax (Law No 13/2008/QH12, amended by Law No 31/2013/QH13), VAT is levied on the supply of goods and services in Vietnam, including commercial activities conducted online Furthermore, Circular 40/2021/TT-BTC, issued by the Ministry of Finance, mandates that individuals generating VND 100 million or more per year from business activities must register for VAT This requirement applies to content creators, influencers, bloggers, and freelancers who monetize their activities through platforms such as Facebook, YouTube, TikTok, and Instagram Even if an individual does not formally establish a business, tax authorities may still classify their activities as commercial in nature, requiring them to register for and pay VAT And unlike businesses, which are required

to register for VAT upon establishment, individuals only need to register once their income surpasses the threshold

The standard VAT rate in Vietnam is 10%, applicable to most services and transactions, including digital advertising, influencer marketing, and affiliate marketing commissions However, in some cases, a reduced rate of 5% or an exemption may apply, depending on the type of service provided For instance, an influencer promoting fashion and beauty products through paid collaborations is subject to the 10% VAT rate,

whereas an individual offering educational content through online courses may qualify

for VAT exemption if their services fall under Vietnam’s education sector, as outlined

in Circular 219/2013/TT-BTC Additionally, individuals who earn revenue from international digital platforms, such as Google AdSense, Facebook’s monetization programs, Amazon Associates, or Shopify affiliate programs, may still be required to declare and pay VAT under Vietnam’s regulations on foreign-sourced income This

assures that income derived from overseas platforms remains taxable under domestic regulations

To comply with VAT regulations, individuals engaged in taxable digital activities must issue e-invoices for their services Under Decree 123/2020/NĐ-CP, since July 1, 2022, e-invoicing has been mandatory for most businesses and individuals subject to VAT, ensuring transparency and proper tax documentation For example, an independent content creator who provides paid promotions for brands must issue VAT invoices for each transaction, allowing businesses to claim VAT deductions Failure to issue proper invoices may result in penalties ranging from VND 4 million to 8 million,

as stipulated in Article 24 of Decree 125/2020/NĐ-CP Additionally, individuals without proper invoicing records may face challenges in proving legitimate business expenses, leading to higher tax liabilities

Individuals must register and declare VAT on a quarterly or annual basis, based

on their revenue flow The Vietnam eTax portal provides an online system for VAT registration, filing, and payment, streamlining tax compliance for individuals However, failure to register, declare, or pay VAT properly may result in fines, back taxes, and interest penalties, as stipulated in Circular 166/2013/TT-BTC

Unlike businesses, individuals typically apply the direct tax method, where VAT

is calculated as a percentage of total revenue rather than deducted from input costs This means VAT is imposed directly on the total earnings without offsetting any business expenses Furthermore, individuals subject to VAT also have to align with Personal Income Tax (PIT) obligations, as VAT and PIT are separate tax liabilities While VAT

is imposed on gross revenue, PIT is calculated based on net taxable income after deductions For example, a freelancer earning VND 500 million per year must pay 10% VAT on their total revenue but will also be liable for PIT based on their taxable income

With the rise of digital entrepreneurship and freelance work, tax authorities in Vietnam have increased scrutiny over high-earning individuals In recent years, the General Department of Taxation (GDT) has launched multiple tax audits targeting digital content creators and online entrepreneurs Several tax audits in 2022 targeted Vietnamese influencers and affiliate marketers who failed to declare income from foreign platforms, emphasizing the need for proper tax compliance

2.2 Tax obligations for businesses (Companies)

2.2.1 Corporate income tax (CIT)

Businesses in Vietnam generating income from sponsored content, affiliate marketing, and digital advertising are subject to corporate income tax (CIT) obligations All digital income streams must be fully recorded and reported, regardless of whether a company applies cash or accrual accounting Revenue recognition is generally based on

an accrual basis, meaning income is recognized when services are rendered or content

is published, rather than when payment is received This ensures that financial statements accurately reflect a company’s financial position However, cross-border digital advertising transactions, such as payments to global platforms like Google or Facebook, introduce additional complexities, including potential obligations under the

foreign contractor withholding tax (FCWT)

Tax rate includes standard CIT rate, tax incentives and preferential rates In terms

of tax rates, the standard CIT rate in Vietnam is 20% of taxable income, including revenue from digital business activities However, tax incentives may apply, with reduced CIT rates between 10% and 17% for businesses operating in high-tech zones

or industries such as software development Small and medium enterprises (SMEs) with annual revenues under VND 100 billion and fewer than 200 employees may benefit from a preferential 17% rate, while certain priority sectors, such as IT and innovation, may receive additional incentives, including a 0% CIT rate for four years followed by

a 50% reduction for the subsequent nine years

Tax declaration and filing

Vietnamese tax regulations mandate that businesses fulfill both periodic and year-end tax obligations to ensure proper reporting and payment of CIT First, companies are required to make provisional CIT payments on a quarterly basis These payments, which are based on estimated taxable income, are typically due on the 20th

or 30th day of the month following the end of each quarter This system is designed to distribute the tax burden evenly throughout the year and reduce the risk of a substantial final tax liability at year-end Second, businesses must complete an annual CIT finalization at the close of the fiscal year The final CIT return must be submitted, and any outstanding tax liabilities must be settled, within 90 days of the fiscal year’s end

For instance, if the fiscal year concludes on December 31, the final tax return and payment must be submitted by March 30 of the following year This process ensures that any discrepancies between the provisional payments and the actual tax liability are properly reconciled

In addition to timely filing and payment, firms must adhere to severe documentation and record-keeping standards Maintaining correct financial records, such as financial statements, invoices, and receipts, is critical for verifying stated income and expenses This is particularly important for businesses seeking tax incentives, as tax authorities require comprehensive documentation to verify compliance with eligibility conditions Furthermore, most enterprises in Vietnam must file electronically (e-filing), resulting in a more transparent and efficient tax reporting system The e-filing technology simplifies the submission process, eliminates administrative responsibilities, and reduces the possibility of errors, improving overall tax compliance

Deductible expenses

One of the key advantages of Vietnam’s CIT regime is the ability to reduce taxable income through the deduction of legitimate business expenses To qualify for deduction, expenses must be incurred in the course of generating taxable revenue and must be supported by valid documentation Expenses eligible for deduction generally

fall into two broad categories: direct costs and indirect costs

Direct costs include expenses directly related to business operations, such as production costs for creating and editing content Businesses may also deduct fees associated with digital platforms and services, including commissions paid to affiliate networks or costs incurred for digital advertising services Additionally, payments made

to influencers or business partners are deductible, provided that proper invoices are available to substantiate these transactions

Indirect costs cover a broader range of operational expenses necessary for maintaining business activities These include employee salaries and associated benefits, as well as marketing expenses, software subscriptions, and licensing fees Office rent, utilities, and other overhead costs are also deductible, along with depreciation on fixed assets such as cameras, computers, and office equipment Despite