Is income from franchise subject to personal income tax in Vietnam?
What does income from franchise include? Is income from franchise subject to personal income tax in Vietnam?
According to Clause 8, Article 2 Circular 111/2013/TT-BTC which stipulates taxable incomes, including income from franchises. To be specific:
Taxable Incomes
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8. Income from Franchise
Franchising is a commercial activity whereby the franchisor allows and requires the franchisee to independently conduct the sale of goods and provision of services under the conditions set by the franchisor in the franchise agreement.
Income from a franchise is the income received by an individual from the franchise agreements mentioned above, including the case of transferring the franchise rights according to the laws on franchising.
Income from a franchise is the income received by an individual from the franchise agreements, including the transfer of franchise rights according to the law on franchising and is subject to personal income tax on this income.
Is income from franchise subject to personal income tax in Vietnam? (Image from the Internet)
Who pays personal income tax on income from franchise in Vietnam?
Based on Clause 3, Article 1 Circular 111/2013/TT-BTC which stipulates:
Taxpayer
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3. Taxpayer in some specific cases is determined as follows:
a) For individuals with business income.
a.1) In the case where only one person is named on the Business Registration Certificate, the taxpayer is the individual named on the Business Registration Certificate.
a.2) In the case where many people are named on the Business Registration Certificate (group of individuals doing business) and jointly participate in business, the taxpayer is each member named on the Business Registration Certificate.
a.3) In the case where there are multiple individuals in a household participating in business but only one person is named on the Business Registration Certificate, the taxpayer is the individual named on the Business Registration Certificate.
a.4) In the case where individuals or households are actually conducting business but do not have a Business Registration Certificate (or Professional Certificate, Practice License), the taxpayer is the individual conducting the business activity.
a.5) For activities of renting houses, land use rights, water surface, other properties without business registration, the taxpayer is the individual owning the house, land use rights, water surface, other properties. Where many individuals jointly own the house, land use rights, water surface, other properties, the taxpayer is each individual with the ownership rights, use rights.
b) For individuals with other taxable income.
b.1) In the case of transferring co-owned real estate, the taxpayer is each individual co-owning the real estate.
b.2) In the case of authorized real estate management where the authorized individual has the right to transfer the real estate or has rights similar to those of a real estate owner under the law, the taxpayer is the individual authorizing the real estate.
b.3) In the case of transferring, conveying ownership, or the right to use protected objects as stipulated by the Intellectual Property Law and Technology Transfer Law, where the object of transfer, conveyance is co-owned or co-authored by multiple individuals, the taxpayer is each individual with ownership rights, authorship rights receiving income from the transfer or conveyance stated above.
b.4) In the case of individuals franchising according to the Commercial Law, where the franchising object involves multiple individuals participating in the franchise, the taxpayer is each individual receiving income from the franchise.
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The taxpayer for personal income tax on income from franchising is each individual receiving income from the franchise.
How to calculate personal income tax on income from franchise for resident individuals in Vietnam?
The basis for calculating personal income tax on income from franchising for resident individuals according to Article 14 Circular 111/2013/TT-BTC is taxable income and tax rate. To be specific:
- Taxable income:
+ Taxable income from a franchise is the portion of income exceeding 10 million VND according to the franchise agreement, regardless of the number of payments or the number of times the money is received.
+ If the same franchising object is transferred through multiple contracts, the taxable income is the portion exceeding 10 million VND based on the total of the franchise agreements.
- Tax rate:
The personal income tax rate for income from franchising is 5% according to the gross tax rate schedule.
- Time of income determination:
The time of determining taxable income from a franchise is the time of payment for the franchise between the franchisee and the franchisor.
- Tax calculation:
Personal Income Tax Payable | = | Taxable Income | x | 5% Tax Rate |
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