The Law on Cybersecurity coming into effect in early 2019 will slap taxes on Facebook and Google as well as bring them under the supervision of Vietnamese authorities. However, the two companies have yet to express intention to establish representative offices in Vietnam.
Facebook and Google keep cards close to their chest
After the Law on Cybersecurity was officially approved on June 12 by 86.96 per cent of the delegates attending the latest National Assembly meeting, Facebook and Google have not issued comments about establishing representative offices or opening branches in Vietnam.
This was shared by Nguyen Thanh Hong, member of the Standing Committee of National Defense and Security, at the press conference to announce the results of the fifth National Assembly meeting on June 15.
Vneconomy.vn cited a foreign news source that Facebook and Google were disappointed by the new Law on Cybersecurity. Hong also said that despite having no official information, Facebook’s representative said that they will research and abide by the law.
Regarding Google, dantri.com.vn also quoted the company’s Vietnamese media representative as saying that it will soon make an official statement.
Facebook and Google are storing Vietnamese user data at their data centres in Hong Kong and Singapore. If the two technology giants do not leave the Vietnamese market, they will have to install servers in the country to store domestic users’ data.
Having to pay enough tax for Vietnamese government
Establishing representative offices in Vietnam would mean that Facebook and Google have to be under the Vietnamese authority’s supervision as they store data of Vietnamese individuals, organisations, and firms doing business in the country. In addition, the two global giants have to carry out their obligations stipulated by Vietnamese regulations, including paying taxes for the Vietnamese government via domestic bank accounts.
Currently, data about Facebook and Google’s 2016 and 2017 revenue in Vietnam has yet to be officially announced, but data from 2015 released by Vinalink show that Facebook led the online advertising market in Vietnam with the revenue of VND3 trillion ($132.1 million), followed by Google with VND2.2 trillion ($96.9 million).
According to the Department of Broadcasting and Electronic Information, in 2017 Facebook and Google accounted for 80 per cent of the online advertising market in Vietnam.
According to Article 13 of the Law on Corporate Income Tax, newly set up enterprises under investment projects in geographical areas with extreme socioeconomic difficulties, economic zones or hi-tech parks; newly set up enterprises under investment projects in the domains of high-technology, scientific research, and technological development, development of the state’s infrastructure works of special importance, or manufacture of software products are entitled to a tax rate of 10 per cent for 15 years.
Facebook and Google may be classified as high-technology companies and will be eligible for the preferential tax rate of 10 per cent for the first 15 years.
Thus, applying the 10 per cent tax rate to their 2015 revenue in Vietnam, the total the two giants would need to pay VND520 billion ($22.9 million) in income tax, more than four times higher than what they paid to the Vietnamese government in 2016-2017 ($5.28 million).
In addition, to establish representative offices or open branches in Vietnam, Facebook and Google have to hire local employees and carry out all regulations of the Labour Code of Vietnam, including paying social insurance and health insurance for their Vietnamese employees.
In Singapore, Facebook and Google employ 174 and 1,000 people, respectively.
With the two firms’ average salaries of $13,000 and $25,000 (emolument.com) and the huge number of users in Vietnam, it is expected that Facebook and Google will steadily raise the number of employees as well as scale up business in Vietnam, like it did in Singapore.