Tax accounting method applied by persons leasing property

1. Applied principles:

a) Persons leasing property (hereinafter referred to as lessors) are those who earn revenue from the lease of their property, including: housing, premises, stores, workshops, warehouses, depots exclusive of accommodation services; lease of means of transport, machinery and equipment without operators; lease of other property without associated services.

Accommodation services not included in property lease mentioned in this point include: provision of short-term lodging establishments for tourists and other guests; provision of long-term lodging establishments for students, workers and the like; provision of lodging establishments together with food and drink services and/or entertainments. Accommodation services do not include: long-term provision of lodging establishments as if permanent establishments such as monthly or annual lease of apartments, which are classified as real estate activities according to Vietnam’s System of Business lines.

b) If the total revenue from lease contracts earned in the calendar year is VND 100 million or lower, the lessor shall not pay VAT and PIT. If the lessee pays a lump-sum of rent in advance for many years, the taxpayer shall not pay VAT and PIT if the annual revenue, which equals (=) lump-sum revenue divided by (:) the number years, is VND 100 million or lower.

Example 5: Ms. C signs a housing lease contract for 02 years from October 2015 to the end of September 2015 for a monthly rent of VND 10 million. A lump-sum of rent is paid for 02 years. Taxable revenue of Ms. C and tax payable on the lump-sum from housing lease is determined as follows:

In 2015, Ms. C leases out her house for 03 months (from October to December) and earns a revenue of: 03 months x VND 10 million = VND 30 million (< VND 100 million). Thus, Ms. C does not have to pay VAT and PIT on the house rent in 2015.

In 2016, Ms. C leases out her house for 12 months (from January to December) and earns a revenue of: 12 months x VND 10 million = VND 120 million (> VND 100 million). Thus, Ms. C has to pay VAT and PIT on the house rent in 2015.

In 2017, Ms. C leases out her house for 09 months (from January to September) and earns a revenue of: 09 months x VND 10 million = VND 90 million (< VND 100 million). Thus, Ms. C does not have to pay VAT and PIT on the house rent in 2017.

After determining annual taxable revenue, Ms. C declares tax on the lump-sum of VND 180 million. Taxable revenue is VND 120 million and tax payable for the whole contract is VND 12 million (VND 120 million x (5% + 5%)).

c) Businesspeople who have a co-ownership of a piece of property for lease and earn a revenue of VND 100 million/year or lower shall not pay VAT and personal income tax. It is considered that the revenue is earned by only 01 representative of the group or household in the tax year.

Example 6: A and B are two people who have a co-ownership of a piece of property. In 2015, they agree to leases it out for VND 180 million/year, which is higher than VND 100 million/year. A is the representative who fulfills tax obligations. In this case, A has to pay VAT and PIT on the lease of such property on the revenue of VND 180 million.

2. Basis for tax calculation

The basis for tax calculation by a property lessor is the taxable revenue and tax rate.

a) Taxable revenue

Taxable revenue from property lease is determined as follows:

a.1) Revenue subject to VAT from property lease is the tax-inclusive revenue (if taxable) from rents periodically paid by the lessee under the lease contract and other revenues exclusive of fines and damages received by the lessor under the lease contract.

a.2) Revenue subject to PIT from property lease is the tax-inclusive revenue (if taxable) from rents periodically paid by the lessee under the lease contract and other revenues including fines and damages received by the lessor under the lease contract.

a.3) In case the lessee advances a lump sum for multiple years, the revenue subject to VAT and PIT shall be determined according to the lump sum.

b) Tax rate

– VAT rate on property lease is 5%

– PIT rate on property lease is 5%

c) Determination of tax payable

VAT payable

=

Revenue subject to VAT

x

5% VAT

PIT payable

=

Revenue subject to PIT

x

5% PIT

Where:

– Revenue subject to VAT and revenue subject to PIT are prescribed in Point a Clause 2 of this Article.

– VAT rate and PIT rate are prescribed in Point b Clause 2 of this Article.

d) Time for determination of taxable revenue

Time for determination of taxable revenue is the beginning date of each payment term written on the lease contract.

Article 5. Tax calculation method applied by persons who directly sign lottery, insurance, multi-level marketing agent contracts

1. Applied principles:

b) The person who directly signs the lottery, insurance, or multi-level marketing agent contract is the person who directly signs an agent contract with the lottery company, insurer, or multi-level marketing company to sell goods/services at prices fixed by the company and receive commission (hereinafter referred to as agent).

b) If the total commission, bonuses in any shape or form, subsidies and other revenues received by the agent in the year is VND 100 million or lower, the person shall not pay PIT.

Example 7. Mr. D directly signs a contract with lottery company X to act as a level I agent of company X. In 2015, Mr. D receives a total commission of VND 230 million (> VND 100 million) In this case, Mr. D has to pay tax on the revenue of VND 230 million from lottery agent activities.

2. Basis for tax calculation

The basis for tax calculation by a person who acts as a lottery, insurance, or multi-level marketing agent is the taxable revenue and tax rate.

a) Taxable revenue

Taxable revenue is the tax-inclusive revenue (if taxable) from the commission, bonuses in any shape or form, subsidies, and other revenues received by the person from the lottery company, insurer, or multi-level marketing company (hereinafter referred to as commission).

b) PIT rate

Rate of PIT incurred by lottery agents, insurance agents, and multi-level marketing agents is 5%.

c) Determination of tax payable

PIT payable

=

Revenue subject to PIT

x

5% PIT

Where:

– Revenue subject to PIT is prescribed in Point a Clause 2 of this Article.

– PIT rate is prescribed in Point b Clause 2 of this Article.

d) Time for determination of taxable revenue

Time for determination of taxable revenue is the time the l