Affiliate marketing is a form of online brokerage in which a business (DN) pays commission to partners (individuals, organizations) when they refer customers to buy through links on the internet. Currently, e-commerce platforms use this marketing channel as a partner in business and pay commissions.
According to many people who do affiliate with Shopee Co., Ltd., they are being charged with back taxes, applying the highest progressive tax rate of up to 35% on the total commission received, instead of the provisional tax rate of 10%. Many people with high commission revenue said that they are having to pay back taxes that are greater than their profits, leading to the risk of bankruptcy.
The reason is that Shopee declares its partners as salaried employees. Specifically, the declaration of tax payment from the e-commerce platform or affiliate network to the tax authorities states that the commission revenue is wages, salaries, not in accordance with the nature of business cooperation, and affiliate marketing partners with the platform or affiliate networks.
“This method of declaration will cause the entire revenue to be subject to the highest progressive tax rate of up to 35%” – said an affiliate marketer. Initially, these people thought that the tax withheld was 10% and that this was their entire tax obligation, so when they saw that the profit they received was higher than this amount, they were assured that they were “making a profit”.
Are taxes higher than profits?
Lawyer Tran Minh Hieu, a senior legal advisor at the Legal Advisory Center of the Vietnam E-commerce Association, said: The basis for calculating personal income tax (PIT) is adjusted appropriately for each taxable subject being a business individual with a registered tax code, whose name is in the Business Registration Certificate with income arising from business activities or individuals with income from wages, salaries, bonuses, commissions, advertising service fees, and other services.
The declaration and deduction as mentioned above do not mean that affiliate partners are Shopee’s salaried employees and that Shopee is paying bonuses or service fees in the form of brokerage and marketing commissions and provisionally deducting 10% tax before payment.
“According to Article 7 of Circular 111/2013 of the Ministry of Finance, the progressive tax rate (maximum 35%) is applied when an individual settles tax on total income from wages, salaries, including bonuses received in forms such as: sales agent commission, brokerage commission; advertising service fees; other service fees, other bonuses from all sources of income payment during the year” – added lawyer Hieu.
The taxable income is stipulated in Circular 111/2013 as follows: Bonuses received in forms such as: sales agent commission, brokerage commission; participation in scientific and technical research projects; participation in projects, programs; royalties according to regulations on the royalty regime; participation in teaching activities; participation in cultural, artistic, physical, and sports performances; advertising service fees; other service fees, and other bonuses.
Thus, the commission is stipulated as one of the forms of bonuses received and is subject to tax according to regulations. In which, the tax rate of 35%/year is applied to individuals with taxable income (after deducting family deductions) from VND 960 million/year or more (i.e. the income received is always higher than the taxable income). “Affiliate marketers mistakenly think that companies declare commission as salaries and wages and consider them as employees, salaried workers,” said lawyer Hieu.
On Shopee’s side, a platform representative also said that within their responsibility, they had deducted taxes according to regulations before making any payments to partners. The platform will provide full tax documents as prescribed by law for these deductions. “Shopee’s deduction of provisional tax does not eliminate the obligations of partners with the competent tax authority. Affiliates are responsible for fulfilling tax obligations to the competent state agencies as prescribed by relevant laws,” – affirmed Shopee’s representative.
An e-commerce expert said that in the case of affiliate marketers in groups or organizations, they can register for MST according to the appropriate industry depending on the scale of their activities, and determine the method of tax declaration according to the type of registration. Businesses will be able to deduct reasonable costs according to regulations, while business individuals will be able to deduct family deductions. “The large amount of back taxes stems from the fact that the taxpayer failed to declare and pay taxes in previous years, resulting in a large amount of back taxes, penalties, and late payment of taxes,” the expert analyzed.
Must register tax code for brokerage activities
According to lawyer Tran Minh Hieu, individuals and business households must register for MST, including registering business lines, and being issued Business Registration Certificates for specific industries such as brokerage services, auctions, and agent commissions, advertising services on products… In the case of participating in affiliate marketing programs, providing advertising, communication, and brokerage services, it is necessary to issue corresponding service invoices, carry out reconciliation procedures to receive commission fees.
“If individuals participating in affiliate programs have registered as business individuals, business households, or service providers, they must be able to issue service invoices for the e-commerce platform according to regulations. They need to carry out the declaration and payment of lump-sum tax, pay tax each time it occurs, or declare tax periodically every year with the tax authority” – explained lawyer Hieu.
According to the lawyer, the act of “Not issuing invoices when selling goods and services” can be considered tax evasion under the provisions of the Penal Code. For a long time now, the issue of PIT from affiliate activities has been taken lightly, especially when most of the people doing it are individuals or groups of acquaintances cooperating informally, without registering for business as prescribed.
