In the context of the growing digital economy, using online advertising through platforms such as Facebook and Google Ads has become essential for businesses in Vietnam. However, not all advertising expenses are tax-deductible. This article clarifies the legal conditions for tax deduction of advertising expenses on Facebook and Google Ads based on current legal foundations in Vietnam.

I. Legal Basis for Tax Deduction of Advertising Expenses on Facebook and Google Ads

According to the Corporate Income Tax Law (CIT) 2008 and related implementation guidance, businesses must meet specific conditions for advertising expenses on Facebook and Google Ads to be tax-deductible. First, expenses must be actual costs incurred directly related to the business’s production activities and legally documented. In other words, these expenses must directly promote the business’s revenue and profits.

Additionally, businesses must have all valid documentation to substantiate transactions with Facebook and Google. This includes that invoices and related documents must comply with tax laws, including providing service contracts with Facebook, Google, and other relevant spending documents.

II. Requirements for Invoices and Documents for Tax Deduction of Advertising Expenses on Facebook and Google Ads

One of the basic conditions for advertising expenses on Facebook and Google Ads to be tax-deductible is providing valid documentation. This includes an invoice or document verifying the legal and legitimate payment. Under Circular 96/2015/TT-BTC on CIT guidance, deductible expenses must have a valid invoice, including an electronic invoice issued by the service provider.

For advertising services from Facebook and Google, invoices are typically electronic invoices provided by these platforms. However, a common issue is that these companies have no legal representation in Vietnam, resulting in businesses having to take responsibility for VAT and foreign contractor tax payments on behalf of the providers. This is regulated by Circular 103/2014/TT-BTC on foreign contractor tax, which states that businesses must declare and pay taxes on behalf of Facebook and Google before these advertising expenses are deductible.

III. Content on VAT Invoice for Advertising Account

• Account ID;
• Invoice/Payment Date;
• Payment Method;
• Transaction ID and Reference Number;
• Total Payment for Invoice Period;
• Campaign Information and Amount per Campaign;
• Business Information.

IV. Advertising Expenses on Facebook and Google Ads and Foreign Contractor Tax

Another important aspect for businesses to consider is the foreign contractor tax applicable to advertising services from foreign providers like Facebook and Google. When using advertising services from these providers, Vietnamese businesses are responsible for paying taxes on behalf of the foreign contractor. According to Circular 103/2014/TT-BTC, the VAT rate for online advertising services is 5%, while the CIT for contractors is 5%.

Paying foreign contractor tax is a prerequisite for Facebook and Google Ads advertising expenses to be considered valid and deductible for tax purposes. If a business fails to fulfill the foreign contractor tax obligation, the advertising expense will not be recognized as a legitimate expense and cannot be deducted from CIT, underscoring the importance of strict tax compliance when using online advertising services from foreign providers.

V. Corporate Income Tax Deduction Conditions

The Ministry of Finance outlines that deductible expenses must:

• Relate to the production or business activities of the enterprise;
• Have legal invoices and documents as per current regulations;
• Include invoices for goods or services purchases with a minimum transaction value of 20 million VND (including VAT) with non-cash payment evidence.

If the foreign service provider (Meta/Facebook/Google Asia Pacific Pte) registers, declares, and pays taxes in Vietnam:

Businesses purchasing services from foreign providers are not required to declare, withhold, and pay taxes on behalf of the foreign provider;

The business may record advertising expenses on Facebook and Google Ads as deductible if:

• Payment is non-cash;
• The expense serves the company’s production and business activities;
• A complete and accurate invoice for Facebook and Google Ads advertising expenses is available.

VI. Conditions for Deductible Input VAT

To be eligible for VAT input deduction, the business must meet one of the following three conditions:

• Have a legitimate VAT invoice for goods or services purchased;
• Have documents proving VAT payment at the import stage;
• Have documents proving VAT payment on behalf of the foreign provider.

From June 1, 2022, Facebook and Google customers will have to pay an additional 5% value added tax when running ads in Vietnam, specifically changing as follows:

Thus: Since June 1, 2022, businesses do not need to declare foreign contractors for Google and Facebook. Enterprises are allowed to use this cost in the cost of the enterprise when fully meeting the conditions prescribed by law.

VII. Conditions Regarding Business Purpose and Reasonableness of Advertising Costs on Facebook and Google Ads

Another condition for the tax deduction of Facebook and Google Ads expenses is that these expenses must serve the business’s operations. According to the Corporate Income Tax Law, the expense must relate directly to taxable income generation. Expenses that do not serve business purposes or do not relate directly to the company’s revenue are not tax-deductible.

For example, if the company’s advertising expense is aimed at marketing products or services or increasing brand awareness, then this expense may be considered reasonable and deductible. However, if the advertising expense is for personal purposes or unrelated to business activities, it will not qualify for deduction.

VIII. Tax Declaration and Deduction Process for Facebook and Google Ads Advertising Expenses

To ensure advertising expenses on Facebook and Google Ads are tax-deductible, businesses must complete the tax declaration process accurately and on time. This includes VAT, CIT, and foreign contractor tax (if applicable) for transactions related to online advertising. According to the Tax Administration Law, companies must declare taxes on time for taxes arising from online advertising services purchases.

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