How many years shall small and medium-sized enterprises (SMEs) be exempted from licensing fees when converting from household business to SMEs in Vietnam?

How many years shall small and medium-sized enterprises (SMEs) be exempted from licensing fees when converting from household business to SMEs in Vietnam?

Based on Clause 2, Article 16 of the Law on Supporting SMEs 2017 which stipulates the policies of tax exemption for SMEs converting from household businesses as follows:

Support for SMEs converting from household businesses

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2. The support includes:

a) Free consultation and guidance on the dossier and procedures for establishing enterprises;

b) Exemption from the enterprise registration fee and the first-time provision fee of enterprise information; exemption from appraisal fees, business license fees, and fees for the first-time approval for business conditions; exemption from licensing fees for 03 years from the date of issuance of the first-time Enterprise Registration Certificate;

c) Free consultation and guidance on tax administrative procedures and accounting policies within 03 years from the date of issuance of the first-time Enterprise Registration Certificate;

d) Temporary exemption and reduction of corporate income tax as prescribed by the law on corporate income tax;

đ) Temporary exemption and reduction of land levy as prescribed by the law on land.

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Thus, SMEs converting from household businesses will be supported by the State with a licensing fees exemption (also known as a license fee) for the first 03 years from the date the enterprise is issued the first-time Enterprise Registration Certificate.

How many years shall SMEs be exempted from licensing fees when converting from household business to SMEs in Vietnam? (Image from the Internet)

What are cases of exemption from licensing fees in Vietnam?

Pursuant to Article 3 of Decree 139/2016/ND-CP, amended and supplemented by Clause 1, Article 1 of Decree 22/2020/ND-CP, in addition to the above-mentioned SMEs converting from household businesses, there are the following cases that will be exempt from licensing fees, including:

- Individuals, groups of individuals, and households engaged in production and business activities with an annual turnover of VND 100 million or less.

- Individuals, groups of individuals, and households engaged in irregular production and business activities without a fixed location as guided by the Ministry of Finance.

- Individuals, groups of individuals, and households involved in salt production.

- Organizations, individuals, groups of individuals, and households engaged in aquaculture, fishing, and fishery logistics services.

- Commune cultural post offices; press agencies (printed newspapers, radio, television, electronic newspapers).

- Cooperatives and cooperative unions (including branches, representative offices, and business locations) operating in the field of agriculture as prescribed by the law on agricultural cooperatives.

- People's credit funds; branches, representative offices, business locations of cooperatives, cooperative unions, and private enterprises doing business in mountainous areas. The mountainous areas are determined according to the regulations of the Committee for Ethnic Minority Affairs.

- Exemption from licensing fees in the first year of establishment or commencement of production and business activities (from January 1 to December 31) for:

+ Newly established organizations (issued new tax codes and new enterprise codes).+ Households, individuals, and groups of individuals that are newly engaged in production and business activities.

- Public primary and preschool educational institutions.

Note:

- During the period of licensing fees exemption, any branches, representative offices, or business locations established by the organizations, households, individuals, groups of individuals, and SMEs will also be exempt from licensing fees for the same period.

- Branches, representative offices, or business locations of SMEs (exempt from licensing fees under the provisions of Article 16 of the Law on Supporting SMEs 2017) that were established before February 25, 2020, shall have the licensing fees exemption period calculated from February 25, 2020, until the end of the exemption period for the main enterprise.

- SMEs converted from household businesses before February 25, 2020, shall implement the licensing fees exemption as prescribed in Articles 16 and 35 of the Law on Supporting SMEs 2017.

Are SMEs converting from household businesses required to submit a tax declaration in Vietnam?

Based on Point a, Clause 1, Article 10 of Decree 126/2020/ND-CP, which regulates the declaration of licensing fees as follows:

Deadline for submitting tax declaration dossiers for land-related revenues, licensing fees, registration fees, licensing fees, and other revenues in accordance with the law on the management and use of public property

Taxpayers shall comply with the deadlines for submitting tax declaration dossiers in accordance with Article 44 of the Law on Tax Administration. For the deadlines of submitting tax declaration dossiers for land-related revenues, licensing fees, registration fees, licensing fees, and other revenues in accordance with the law on the management and use of public property as stipulated in Clause 5, Article 44 of the Law on Tax Administration, the following shall apply:

1. licensing fees

a) Newly established entities subject to licensing fees (including SMEs converting from household businesses) or entities that establish additional dependent units or business locations or commence production or business activities shall submit their licensing fees declaration dossiers no later than January 30 of the year following the year of establishment or commencement of production or business activities.

In the year when there is a change in capital, the licensing fees declaration dossiers shall be submitted no later than January 30 of the year after the change occurs.

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Thus, although exempt from licensing fees for the first 03 years from the date of establishment, SMEs converting from household businesses are still obliged to submit a licensing fees declaration.

The deadline for submitting the licensing fees declaration for SMEs converting from household businesses newly established is no later than January 30 of the year following the year of establishment or commencement of production or business activities.