1. Advertising cost principles
The expenses of a business for advertising activities on social networking sites (e.g., Facebook, Google, Bing, Tiktok), as well as domestic and foreign network providers, are all counted as deductible expenses unless the income subject to corporate income tax is determined to be related to the business production and business activities of the enterprise and has sufficient legal documents or invoices.
2. Documents, invoices to be included in the deductible advertising costs
2.1. For domestic network providers or advertisers
To be reasonable expenses, the following documents are required:
– Contract/bid acceptance or order placed via email or appropriate method under Commercial Law, E-Commerce Law, Information Technology Law;
– VAT invoice;
– Non-cash payment documents (if the total value of the invoice is VND 20 million or more per time)
illustration. Are Facebook and Google advertising costs deductible?
2.2. For international network providers/advertisers
There is usually no paper contract and invoice similar to Vietnam’s but there are often separate contractual terms right on the advertisement page. Accordingly, if customers need to advertise and accept the regulations on time, method, acceptable payment amount via credit card or bank account,… then that service will be performed. Therefore, the necessary documents for enterprises to be included in the deductible costs may include:
– Facebook, Google… invoices with full and accurate 3 information: company name, company address and company tax code.
– Regulations of units on purchasing services online, including advertising in accordance with Vietnamese laws (as mentioned above);
– Written proposal of the business department that needs advertising with superiors, accompanied by a printout of the terms that the network provider/advertisement page offers (price, advertising method, payment method, advertising time,…) approved by business leaders;
– Report of acceptance or documents proving that the advertising request of the enterprise has been carried out as proposed;
– Together with payment documents such as bank statements with proxies or checks, … of the enterprise proving that the enterprise pays the money to the advertising page;
– Declaration and documents of foreign contractor tax payment according to regulations (Currently, Facebook, Google have registered tax in Vietnam, so they do not have to pay contractor tax in this case).
3. Are Facebook and Google advertising costs deductible for VAT?
According to Clause 1 Article 15 Circular 219/2013/TT-BTC on conditions for VAT deduction, in order for enterprises to deduct input VAT, enterprises must meet one of three conditions:
– Have a legal VAT invoice for purchased goods or services;
– Have a VAT payment document at the import stage;
– Have a VAT payment document instead of foreign parties.
According to Clause 1 Article 8 Decree 123/2020/NĐ-CP defining: “VAT invoice is an invoice for organizations that declare VAT using deduction method for sales activities, service provision…”.
And according to Section c Clause 1 Article 77 Circular 80/2021/TT-BTC on tax declaration methods of foreign suppliers: “Foreign suppliers pay VAT and CIT based on revenue ratio”.
Therefore, Facebook and Google are currently paying VAT based on revenue ratio rather than declaring VAT using deduction method so the invoices issued by Facebook are not VAT invoices and do not meet the conditions for VAT deduction under Clause 1 Article 15 Circular 219/2013/TT-BTC.
Therefore, the VAT portion on Facebook and Google’s invoices cannot be claimed as a tax deduction but can only be recorded as reasonable expenses of the company.