What are amounts of licensing fees for branches established within the last 6 months of the year in Vietnam?

What are amounts of licensing fees for branches established within the last 6 months of the year in Vietnam?

Pursuant to Clause 4, Article 1 of Circular 65/2020/TT-BTC stipulates as follows:

3. Any organization, branch, representative office or business location (that is not entitled to license tax exemption in the first year of establishment or do not commence its production/business) established and granted the tax registration certificate, TINs and enterprise ID number within the first 6 months of the year and within the last 6 months of the year shall pay license tax for the whole year and pay 50% of the license tax payable for the whole year respectively.

At the end of the period of exemption from the license tax (from the fourth year from the date of establishment), a SME converted from a household business (including its branches, representative offices and/or business locations) shall pay the license tax as follows: If its exemption period ends in the first 6 months of a year, it must pay the license tax for the whole year, if its exemption period ends in the last 6 months of a year, it must pay 50% the license tax payable for the whole year.

An operating license taxpayer that has notified its/his/her supervisory tax authority in writing of its suspension of production/business in a calendar year (from January 01 to December 31) is not required to pay the license tax for that year of production/business suspension if the taxpayer has sent a written notification of production/business suspension to its/his/her supervisory tax authority before the prescribed deadline for paying the license tax (January 30 annually) and has made no payment of the license tax for the planned year of suspension. The taxpayer must pay the license tax for the whole year in case of failure to meet the abovementioned conditions for production/business suspension.

According to the provisions of Clause 1, Article 4 of Circular 302/2016/TT-BTC, amounts of licensing fees are as follows:

1. The amounts of annual licensing fees for organizations engaging in business as follows:

a) Organizations with charter capital and investment capital of greater than VND 10 billion: VND 3,000,000;

b) Organizations with charter capital and investment capital of less than or equal to VND 10 billion: VND 2,000,000;

c) Branches, representative offices, business premises, public service providers, other business entities: VND 1,000,000.The amounts of licensing fees for the organizations specified in this Clause is based on the charter capital written in the certificate of business registration, the certificate of enterprise registration, or the charter of cooperatives. In case of absence of charter capital, it is based on the investment capital written in the certification of investment registration or decision on investment policies.

If the organizations prescribed in Point a, b of this Clause change their charter capital or investment capital, the ground for determining the amount of licensing fees is their charter capital or investment capital of the year preceding the year of calculation of licensing fees.

Where the charter capital or investment capital written in the certificate of business registration or certificate of investment registration is in foreign currency, it shall be converted into Vietnamese dong as a basis for determining the amount of licensing fees in accordance with the buying rate of commercial banks or credit institutions where the licensing fee payers open their accounts at the time they make payment to the state budget.

According to this Article, the branch that is not exempted from licensing fee in the first year of establishment or commences production and business activities, if established, is granted tax registration and tax identification number and enterprise identification number within a period of time. In the last 6 months of the year, 50% of the annual licensing fee will be paid. That is, this branch has to pay a licensing fee of 500 VND/year in Vietnam.

What is deadline for declaring and paying licensing fees in Vietnam?

In Clause 9, Article 18 of Decree 126/2020/ND-CP, the deadline for paying license fee tax is as follows:

9. licensing fee:

a) Licensing fee shall be paid annually by the 30^th of January.

b) For medium and small enterprises converted from household businesses (including their dependent units and business locations), upon expiration of the licensing fee exemption period (3 years from the establishment date):

b.1) If the expiration date is in the first 6 months of the year, licensing fee shall be paid by the 30^th of July of the same year.

b.2) If the expiration date is in the last 6 months of the year, licensing fee shall be paid by the 30^th of January of the succeeding year.

c) Household businesses and individual businesses that shut down and subsequently resume their business operation shall pay licensing fee as follows:

c.1) If the resumption date is in the first 6 months of the year, licensing fee shall be paid by the 30^th of July of the same year.

c.2) If the resumption date is in the last 6 months of the year, licensing fee shall be paid by the 30^th of January of the succeeding year.

Thus, the deadline for declaration and payment of licensing fees for branches established in the last 6 months of the year is January 30 of the following year in Vietnam.

During the licensing fee exemption period, if the organization establishes a branch, can the branch be exempted from the fee in Vietnam? 

According to Clause 2, Article 1 of Circular 65/2020/TT-BTC stipulates as follows:

3. Exemption from license tax under Clause 1 Article 1 of the Government’s Decree No. 22/2020/ND-CP dated February 24, 2020:

a) Cooperatives, cooperative unions (including their branches, representative offices and business locations) operating in the field of agriculture in accordance with regulations of law on agricultural cooperatives.

Cooperatives, cooperative unions (including their branches, representative offices and business locations) must be established and operate in accordance with the Law on Cooperatives; agricultural operations involved shall be determined as prescribed in Article 3 of the Circular No. 09/2017/TT-BNNPTNT dated April 17, 2017 of the Minister of Agriculture and Rural Development, consisting of cooperatives and cooperative unions engaged in business operations in multiple fields, including agricultural field.

b) People’s credit funds; branches, representative offices and business locations of cooperatives, cooperative unions and of sole proprietorships operating in mountainous regions. Mountainous regions are determined according to regulations of the Committee for Ethnic Affairs.

c) Exemption of license tax for the first year from the date of establishment or official commencement of production/business (from January 01 to December 31) shall be granted to:

- New organizations (issued with new TINs/enterprise ID numbers).

- Household, individuals or groups of individuals that have commenced their production/business for the first time.

- During the exemption period, if an organization, household, individual or group of individuals establishes a new branch, representative office or business location, the new branch, representative office or business location shall be also exempted from the license tax for the same exemption period granted to that organization, household, individual or group of individuals.

If the new organization, household, individual or group of individuals commenced their production/business for the first time before February 25, 2020 and establishes a branch, representative office or business location on February 25, 2020 onwards (if any), such organization, household, individual, group of individual, branch, representative office or business location shall pay license tax as prescribed in the Government’s Decree No. 139/2016/ND-CP dated October 04, 2016.

d) Small- and medium-sized enterprises (SMEs) converted from household businesses (as prescribed in Article 16 of the Law on Assistance for Small- and Medium-Sized Enterprises) shall be exempted from the license tax within 03 years from the date of issuance of the first enterprise registration certificate.

- During the exemption period, if a SME establishes a branch, representative office or business location, such branch, representative office or business location shall be also exempted from the license tax for the same exemption period granted to that SME. If the SME’s branch, representative office or business location (issued with the branch, representative office or business location registration certificate) is established on February 25, 2020 onwards (the effective date of the Government’s Decree No. 22/2020/ND-CP), the period of exemption granted to the branch, representative office or business location begins from the date such branch, representative office or business location is issued with the certificate of branch, representative office or business location registration to the end of the period for which the SME is exempted from the license tax.

- The branch, representative office or business location of a SME (that is eligible to be exempted from the license tax as prescribed in Article 16 of the Law on Assistance for Small- And Medium-Sized Enterprises) established before the effective date of the Government’s Decree No. 22/2020/ND-CP shall be exempted from the license tax for the period commencing from the effective date of the Government’s Decree No. 22/2020/ND-CP to the end of the period for which that SME is exempted from the license tax.

- SMEs converted from household businesses before the effective date of the Government’s Decree No. 22/2020/ND-CP shall be exempted from the license tax according to Article 16 and Article 35 of the Law on Assistance for Small- and Medium-Sized Enterprises.

dd) Public general education schools and public pre-schools

According to the above regulations in Vietnam, during the licensing fee exemption period, if the organization establishes a branch, such branch is exempted from the fee.

Best Regards!