Penalty for late declaration of license tax in Vietnam

License fees are one of the types of business expenses regulated by law on tax administration. This is one of the obligations that special businesses have when first established need to pay attention and comply with regulations to avoid being fined or subject to related sanctions. In the following article, Viet An Law Firm – Tax Agent will inform you of the penalty for late declaration of license tax in Vietnam according to current tax laws.

Legal basis

• Law on Tax Administration 2019.
• Decree 139/2016/ND-CP, as amended and supplemented by Decree 22/2020/ND-CP regulating license fee collection rates.
• Decree 126/2020/ND-CP details several articles of the Law on Tax Administration, amended and supplemented by Decree 91/2022/ND-CP.
• Decree 125/2020/ND-CP regulates penalties for administrative violations of taxes and invoices.
• Circular 302/2016/TT-BTC provides guidance on license fees, amended and supplemented by Circular 65/2020/TT-BTC.

What is license tax?

Previously, license fees were called license taxes. From January 1, 2017 (Decree 139/2016/ND-CP took effect) until now, the term “license tax” is no longer used in legal documents, but instead the term “license fee” is used.

Based on Decree 139/2016/ND-CP and Circular 302/2016/TT-BTC, it can be understood a license fee is an amount that must be paid periodically every year or when new production or business is launched. This fee is calculated based on the amount of charter capital recorded in the enterprise registration certificate/ investment capital recorded in the investment registration certificate (for organizations) or annual revenue (for business households and individuals).

Based on Clause 5, Article 44 of the Law on Tax Administration 2019 guided in Article 10 of Decree 126/2020/ND-CP, payment of license fees and license fee declaration is a mandatory obligation for entities subject to appropriate cases according to the provisions of law.

The time required to declare license fees

According to the provisions of Article 10 of Decree 126/2020/ND-CP on the deadline for submitting license fee declaration documents, businesses only need to declare this fee in the following cases :

• New establishment of enterprises and cooperatives (including small and medium-sized enterprises converted from business households);
• The enterprise has established additional dependent units and business locations;
• Enterprises begin production and business activities;
• Enterprise has any changes in capital in the preceding year.

Thus, businesses only need to submit license fee declaration documents when newly established, when opening additional branches, business locations or when there are changes in capital.

Tax declaration records are the basis for tax authorities to determine revenue as a basis for calculating the amount of license fees payable and notify license fee payers to pay the fees according to regulations.

Location for declaring license fees

• At the tax administration agency where the enterprise is headquartered;
• At the tax administration agency where the dependent unit or business location is located.

Currently, there are two main forms of declaration:

• Submit the paper copy directly or by post to the one-stop department of the managing tax agency
• Submit online declaration via the electronic tax page of the General Department of Taxation.

Deadline for declaring license fees

Clause 1, Article 10 of Decree 126/2020/ND-CP stipulates the deadline for submitting license fee applications in the following cases:

• The person paying the license fee must submit the application and pay the license fee for newly established businesses (including small and medium-sized enterprises transferred from business households) establishing additional dependent units, business locations, or starting a business. Start production and business activities (collectively referred to as organizations) no later than January 30 every year (except business households and individual businesses).
• In case there is a change in capital during the year, the license fee payer shall submit the license fee declaration no later than January 30 of the year following the year in which the change information occurred.
• Business households and individual businesses do not have to submit license fee declaration documents. The tax authority bases on tax declaration records and tax management database to determine revenue as a basis for calculating the amount of license fee payable and notifies the license fee payer to comply with regulations.

Penalty for late declaration of license tax in Vietnam

According to Article 13 of Decree 125/2020/ND-CP on administrative sanctions in the tax sector, taxpayers who are late in submitting license fee declarations may be fined at the following levels :

• Late payment from 01 day to 05 days and there are extenuating circumstances: Warning fine;
• Late payment from 01 day to 30 days: Fine from 2,000,000 VND to 5,000,000 VND;
• Late payment from 31 days to 60 days: Fine from 5,000,000 VND to 8,000,000 VND;
• Late payment from 61 days to 90 days or 91 days or more but no tax payable arises: Fine from 8,000,000 VND to 15,000,000 VND;
• Late payment more than 90 days from the tax declaration submission deadline, there is tax payable and the taxpayer has paid the full tax amount and late payment interest to the state budget before the tax authority announces the decision. intending to conduct a tax audit or tax inspection or before the tax authority makes a record of late submission of tax declaration documents: Fine from 15,000,000 VND to 25,000,000 VND. Note: in case the license fee payable is less than the above fine, the maximum fine in this case is equal to the amount of tax incurred on the tax declaration but not lower than the average of the monetary fine frame.

In cases where taxpayers are late in submitting tax declaration documents, leading to late tax payment, the taxpayer will be forced to pay the full amount of late tax payment to the state budget, including includes the amount of late payment tax according to the penalty rate of 0.03%/day calculated on the amount of late payment tax according to the provisions of the current Law on Tax Administration.

Procedures for declaring license fees for businesses

Step 1: Prepare license fee declaration documents

The license fee declaration dossier is the license fee declaration according to the form issued in the Appendix attached to Decree 139/2016/ND-CP.

Content of declaration:

• Information on fee payers and tax agents (if declaration and payment are made through a Tax Agent);
• Mark additional k two for new establishments established during the year (if applicable);
• List of license fee payers.

Step 2:

The license fee payer submits the license fee declaration dossier to the directly managing tax agency.

• In case the fee payer has dependent units (branch, representative office, business location) doing business in the same provincial locality, the fee payer must submit the license fee declaration dossier of these dependent units to the tax authority directly managing the fee payer;
• In case the fee payer has dependent units (branch, representative office, business location) doing business in a different provincial locality where the fee payer has its head office, the dependent unit must submit a declaration dossier to the tax authority directly managing.

License fee rates for businesses and cooperatives

According to Clause 1, Article 4 of Decree 139/2016/ND-CP and Clause 1, Article 4 of Circular 302/2016/TT-BTC, the license tax or license fee payment rate for 2024 for organizations operating in production export and trade of goods and services as follows:

Some questions related to license fee declaration

Do businesses that are exempt from license fees have to declare?

Enterprises that are exempt from license fees still have to declare license fees according to regulations, but do not have to pay license fees within the legal deadline.

According to the provisions of Article 3 of Decree No. 139/2016/ND-CP and its amendments, businesses that can be exempted from license fees include:

• Newly established organizations (issued with new tax codes and new business codes): exempted in the first year of establishment.
• Branches, representative offices, and business locations of newly established organizations.
• Small and medium-sized enterprises converting from business households: exempted for the first 3 years from the date of issuance of the first business registration certificate. When the fee exemption period ends in the first 6 months of the year, pay the entire year’s fee; if it falls in the last 6 months of the year, pay 50% of the yearly license fee.
• Branches, representative offices, and business locations of small and medium-sized enterprises converted from business households.
• Public general education establishments and public preschool education establishments.

What is the basis revenue for license tax declaration?

• The license fee rate is based on the charter capital recorded in 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 or investment capital, the basis for determining the license fee rate is the charter capital or investment capital of the year preceding the year in which the license fee is calculated.
• If the charter capital or investment capital is recorded in the enterprise registration certificate or investment registration certificate in foreign currency, then it is necessary to convert it into Vietnamese Dong as a basis for determining the license fee according to the exchange rate. The exchange rate is the purchase price of the commercial bank or credit institution where the license fee payer opens an account at the time the license fee payer deposits money into the state budget.

Tax accounting services of Viet An Tax Agent

• Legal advice on payers, rates, and deadlines for paying license fees;
• Support documents and procedures for submitting license fee declarations and paying license fees;
• Business representatives submit documents and license fees to the tax authority;
• Register to exchange information with tax authorities;
• Consulting on minimizing the consequences of late submission of declarations and late payment of license fees.

Clients who need advice on license tax, or use other tax accounting services, please contact Viet An Tax Agent for the best support!