Tax hammer falling on foreign OTT apps

The MIC is extending regulations over foreign OTT platforms, Photo: Shutterstock

The Ministry of Information and Communications (MIC) is planning to adjust the Law on Cinematography to prevent the rampage of misleading content via foreign over-the-top (OTT) applications in the country. The US-based Netflix will be the first platform affected by the move.

According to the MIC’s Authority of Broadcasting and Electronic Information (ABEI), the decision to revise the law stemmed from the constant appearance of distorted historical content on the platform despite the authority’s requests to remove them.

Netflix has not complied with the local government’s requirements stipulated in Document No.1330/PTTH&TTDT dated July 2020 that requires the company to comply with Vietnamese regulations related to providing television services in the country, according to an MIC report.

ABEI also emphasised the necessity of the adjustment. In comparison with movies presented at cinemas, content provided on OTT platforms do not necessarily undergo censorship before they are made accessible to viewers.

In addition to Netflix, other overseas OTT operators such as China-based WeTV and iQIYI, and US-based iflix will also be hurt by the government’s actions. To boot, most of them have yet to be licensed to actually operate in Vietnam.

Responding to the issue, Amy Kunrojpanya, Netflix’s Asia-Pacific vice-president of communications, told VIR, “Netflix respects the rules of every country where we operate.”

Tax obligations by OTT platforms also remain a headache for the local government. According to information published by the MIC, Netflix’s annual revenue in the market is $30 million based on about 300,000 subscribers across the country. However, none of that sum is cited for the platform’s tax duty in Vietnam.

To solve this, the Ministry of Finance is planning to require overseas service providers to directly perform the tax registration and declaration through the official online portal of the General Department of Taxation. Those are stipulated in the ministry’s latest draft circular offering the guidelines to perform the Law on Tax Administration and Decree No.126/2020/ND-CP providing detailed regulations on the implementation of some articles under the tax law.

The ministry is currently gathering opinions for the draft circular and will soon submit them to the government.

Hoang Minh Hai, business development manager of local OTT platform FPT Play, said that the regulations are necessary for the evolution of OTT sites in Vietnam. “Entertainment via OTT sites is growing in the country,” Hai said. “But local supervision over them has been far from efficient, causing inequality between domestic and overseas platforms.”

He explained that for the tax issue alone, local OTT companies have been paying many kinds of tax, while overseas platforms have not paid anything. “Vietnamese OTT operators have been shouldering significant costs for copyrights and diverse taxes,” Hai said.

Echoing this, Ngo Thi Bich Lien, director of local media company BHD Star Cineplexes, said that it is necessary to create equality between local and international companies, as these bigger groups simply do not pay enough tax, which leads to major challenges for local groups in the same segment. “They have to take responsibility for what they earn in Vietnam, like us,” Lien said.

In addition to a corporate income tax rate of 20 per cent, local OTT companies also have to pay 10 per cent copyright tax and 5 per cent VAT for an overseas movie or TV show.