License tax levels in Vietnam

License tax is the tax that businesses and companies need to pay every year. Although the regulations on this tax rate are not too complicated, not all businesses understand it. In the following article, Viet An Law informs you of the current license tax levels in Vietnam.

Legal basis

• Decree 126/2020/ND-CP on guidelines for the Law on Tax Administration, amended and supplemented by Decree 91/2022/ND-CP .
• Decree No. 139/2016/ND-CP regulating license fees , amended and supplemented by Decree No. 22/2020/ND-CP.
• Circular No. 302/2016/TT-BTC guiding license fees , amended and supplemented by Circular 65/2020/TT-BTC.
• Circular No. 80/2021/TT-BTC guiding the implementation of a number of articles of the Law on Tax Administration and Decree No. 126/2020/ND-CP detailing a number of articles of the Law on Tax Administration

Subjects paying license fees

In general, organizations and individuals that produce and trade goods and services are subject to license fees. However, the law also stipulates that some of the above cases are exempt from license fees as prescribed in Article 3 of Decree 139/2016/ND-CP.

Organizations and individuals with common activities of producing and trading goods and services include Enterprises, cooperatives, public service units, business households, households, individual businesses,… Therefore, in reality, if organizations and individuals engaged in the production and trading of goods and services want to check whether they are subject to paying license fees, they need to consider exceptional cases.

Specifically, cases that are exempt from license fees according to regulations include:

• Individuals, groups of individuals, and households engaged in production and business activities with annual revenue of 100 million VND or less.
• Individuals, groups of individuals, and households with irregular production and business activities; There is no fixed location according to instructions from the Ministry of Finance.
• Individuals, groups of individuals, and households produce salt.
• Organizations, individuals, groups of individuals, and households that farm, fish, and provide fisheries logistics services.
• Commune cultural post office; Press agencies (print press, audio press, visual press, electronic press).
• Cooperatives and unions of cooperatives (including branches, representative offices, and business locations) operating in the agricultural sector according to the provisions of the law on agricultural cooperatives
• People’s Credit Fund; branches, representative offices, business locations of cooperatives, cooperative unions, and private enterprises doing business in mountainous areas. Mountainous areas are determined according to the regulations of the Committee for Ethnic Minorities.
• Small and medium-sized enterprises converted from business households (as prescribed in Article 16 of the Law on Support for Small and Medium-sized Enterprises) are exempted from license fees for a period of 03 years from the date of issuance of the first enterprise registration certificate. The regulations also apply to dependent units of these enterprises.
• Public general education establishments and public preschool education establishments.

Newly established businesses will be exempt from license tax in the first year of establishment

This is new content added according to Decree 22/2020/ND-CP takes effect from February 25, 2020. Accordingly, the law stipulates that the following organizations and individuals are exempt from license fees in the first year of establishment or production and business activities (from January 1 to December 31):

• Newly established organization (issued with new tax code and new business code).
• Households, individuals, and groups of individuals starting production and business activities for the first time.

This regulation also applies to dependent units of the above subjects. Specifically, during the license fee exemption period, organizations, households, individuals, and groups of individuals that establish branches, representative offices, or business locations shall Business locations are exempt from license fees during the organization period; households, individuals, and groups of individuals are exempt from license fees.

License tax levels in Vietnam for individuals and organizations

Note:

• Charter capital is based on the enterprise registration certificate or recorded in the cooperative charter.
• In case there is no charter capital, it is based on the investment capital stated in the investment registration certificate or written decision on investment policy.
• If an organization changes its charter capital/investment capital, it will be based on the capital level of the previous year to calculate the license fee.
• Capital unit: Vietnam Dong, conversion from foreign currency value is based on the buying exchange rate of the commercial bank or credit institution where the license fee payer opens an account at the time the fee payer license fees are paid into the state budget.

How to determine the revenue level to calculate license fees for individuals and households

• Revenue is the total revenue calculated for personal income tax in the preceding year of production and business activities (excluding property rental activities) of business locations according to the provisions of Circular No. 92/ 2015/TT-BTC guiding the implementation of value-added tax and personal income tax for resident individuals with business activities; Guiding the implementation of a number of amendments and supplements to personal income tax specified in Decree No. 12/2015/ ND-CP.
• For individuals, groups of individuals, or households that have dissolved, temporarily suspended production or business, then resumed business, and cannot determine the revenue of the immediately preceding year, the revenue will serve as the basis for determining the tax rate. The license fee is the revenue of the tax year of a production and business establishment of the same scale, location, and industry as prescribed in Circular No. 92/2015/TT-BTC.
• The revenue used as a basis for determining the license fee rate for individuals with property leasing activities is the personal income taxable revenue of property rental contracts of the tax year.
  • In case an individual has multiple property rental contracts at one location, the revenue used as a basis for determining the license fee rate for that location is the total revenue from the year’s property rental contracts in the tax year.
  • In case an individual leases property at multiple locations, the revenue used as a basis for determining the license fee rate for each location is the total revenue from property rental contracts of those locations in the tax year, including cases where multiple property lease contracts arise in one location.
  • In case the property lease contract lasts for many years, the license fee must be paid each year corresponding to the number of years declared and paid value-added tax or personal income tax. In case declare and pay value-added tax or personal income tax once for a property lease contract that lasts for many years, they will only pay the license fee for one year.

When does the obligation to pay license fees arise?

If you are not eligible for license fee exemption, then:

• Organizations, branches, representative offices, and business locations will depend on the time of establishment and are granted tax registration, tax code, and business code;
• Individuals, groups of individuals, households, production, and business locations depend on the time of production and business;
• Small and medium-sized enterprises converted from business households (including branches, representative offices, and business locations) will be exempt from license fees after the expiration of the license fee exemption period: the fourth year from the year of establishment of the business.

According to the above time, the way to determine the fee payable in that calendar year is as follows:

If your company has different business license dates and operating dates, please note that the license tax rate is calculated from the license date. Please pay attention and calculate accurately to pay the correct fee and tax collection time during the year.

Collect license fees in case of temporary suspension of operations

In case of temporary suspension of production and business activities, the active license fee payer who wants to be exempted from paying the license fee for the year of suspension must ensure the following conditions (in the opposite case, the fee must be paid). subjects all year).

• Have a written request to temporarily suspend production and business activities sent to the tax authority or business registration agency before the prescribed fee payment deadline (January 30 every year)
• If you have not paid the license fee for the year, please temporarily stop production and business activities.

Above is some information about license tax rates that businesses, companies and organizations need to complete during the year. If you still have questions or concerns about this issue, please contact Viet An Luat to receive the best support and answers.