Newly established enterprises must not only consider their establishment process to comply with regulations, but also know the taxes, fees and charges businesses must pay to make their business operations legal. Below are 4 important points about licensing fees that enterprises in Vietnam must know.
Article table of contents
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1. What are licensing fees?
Legally, licensing fees are understood as fees collected based on the amount of charter capital recorded in the business registration certificate/investment capital recorded in the investment registration certificate (for organizations) or annual revenue (for business households).
2. Licensing fee payers
According to Article 2 of Decree No. 139/2016/NĐ-CP of Vietnam’s Government on licensing fees, Circular No. 302/2016/TT-BTC amended by Circular No. 65/2020/TT-BTC of the Ministry of Finance of Vietnam, licensing fee payers are organizations, individuals, groups of individuals and households producing and trading goods and services, including:
- The enterprises which are established under the regulations of law.
- The organizations which are established under the Law on Cooperatives.
- The public service providers which are established under the regulations of law.
- The business organizations of the political organizations, the social – political organizations, the occupational – social organizations and people's armed units.
- Other organizations which have their trade/production activities.
- The branches, the representative offices of organizations specified above (if any).
- The individuals, groups of individuals and households that have their trade/production activities.
However, Article 3 of Decree No. 139/2016/NĐ-CP has been amended and supplemented by Decree No. 22/2020/NĐ-CP of Vietnam’s Government, according to which there are 10 cases of exemption from licensing fees, specifically as follows:
1. The individuals, groups of individuals and households that have their trade/production activities with annual revenues of less than 100 million dong.
2. The individuals, groups of individuals and households that have their irregular trade/production activities without fixed location as guided by the Ministry of Finance.
3. The individuals, groups of individuals and households that produce salt.
4. The organizations, individuals, groups of individuals and households that do the aquaculture, fisheries and fishing logistic services.
5. The commune cultural post offices and press agencies (printed, radio, television and online newspapers).
6. Cooperatives and cooperative unions (including their branches, representative offices and business locations) operating in the field of agriculture as regulated in the law on agricultural cooperatives.
7. 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.
8. Exemption of license fees 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 businesses, individuals or groups of individuals engaging in production/business.
- During the exemption period, if an organization, household business, 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 fee for the same exemption period granted to that organization, household business, individual or group of individuals.
9. Small- and medium-sized enterprises (SMEs) transformed 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 fee within 03 years from the date of issuance of initial enterprise registration certificate.
- During the exemption period, if a SME establishes a new branch, representative office or business location, the new branch, representative office or business location shall be also exempted from the license fee for the same exemption period granted to that SME.
- The branch, representative office or business location of a SME (that is eligible to be exempted from the license fee as prescribed in Article 16 of the Law on assistance for small- and medium-sized enterprises) established before January 01, 2018 shall be exempted from the license fee for the period commencing from January 01, 2018 to the end of the period for which that SME is exempted from the license fee.
- SMEs transformed from household businesses before January 01, 2018 shall be exempted from the license fee according to Article 16 and Article 35 of the Law on assistance for small- and medium-sized enterprises.
10. Public general education schools and public pre-schools.
3. Amounts of licensing fees
According to Article 4 of Circular No. 302/2016/TT-BTC amended by Circular No. 65/2020/TT-BTC of the Ministry of Finance of Vietnam, licensing fee rates for each specific subject are as follows:
Regarding organizations engaging in business:
- Organizations with charter capital and investment capital of greater than VND 10 billion: VND 3,000,000/year;
- Organizations with charter capital and investment capital of less than or equal to VND 10 billion: VND 2,000,000/year;
- Branches, representative offices, business premises, public service providers, other business entities: VND 1,000,000/year.
Note:
- The amounts of licensing fees for the organizations specified above 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 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.
Regarding individuals, groups of individuals and households producing and trading goods and services:
- Individuals, groups of individuals and households having an annual turnover of over VND 500 million: VND 1,000,000/year;
- Individuals, groups of individuals and households having an annual turnover of over VND 300 million to VND 500 million: VND 500,000/year;
- Individuals, groups of individuals and households having an annual turnover of over VND 100 million to VND 300 million: VND 300,000/year.
Note: The turnover serving as the basis for determining license tax rates applicable to individuals, groups of individuals and households (except for individuals leasing out property) is the total assessable turnover in the preceding year of the production/business activities (excluding property leasing activities) of business locations.
Regarding organization, branch, representative office or business location (that is not entitled to licensing tax exemption in the first year of establishment or do not commence its production/business):
- Those established and granted the tax registration certificate, TINs and enterprise ID number within the first 6 months of the year shall pay license tax for the whole year.
- Those established and granted the tax registration certificate, TINs and enterprise ID number within the last 6 months of the year shall pay 50% of the license tax payable for the whole year.
A SME converted from a household business (including its branches, representative offices and/or business locations), at the end of the period of exemption from the license tax (from the fourth year from the date of establishment), 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.
4. Declaration and payment of licensing fees
According to Article 5 of Decree No. 139/2016/NĐ-CP amended and supplemented by Decree No. 22/2020/NĐ-CP of Vietnam’s Government, the declaration of license fee shall be made once when starting production/business or upon establishment.
- Payers of the license fee that have just started their production/business or established their business facilities and SMEs transformed from household businesses shall make and submit their declarations of license fee to their supervisory tax authorities by January 30 of the year following the year of commencement of production/business or the year of establishment.
- Household businesses, individuals and groups of individuals paying fixed tax must not submit declarations of license fee. Based on received tax declarations and tax databases, tax authorities shall determine revenues which are then used as the basis for determining the license fee amounts payable by household businesses, individuals and groups of individuals paying fixed tax.
The licensing fee declaration:
The licensing fee payers shall submit the licensing fee declaration to the tax authority in charge.
- Where the fee payers have their subordinate units (branch, representative office, business location) that carry on their business in the same provincial-level locality, the licensing fee payers shall submit the licensing fee declaration of such subordinate units to the tax authority in charge of the licensing fee payers;
- Where the fee payers have their subordinate units (branch, representative office, business location) that carry on their business in different provincial-level locality where the head office of licensing fee payers is located, the subordinate units shall submit the licensing fee declaration to the tax authority in charge of the subordinate units.
The license fee must be fully paid by January 30 of every year. It should be noted that:
Upon the end of the period of exemption from the license fee (from the fourth year from the date of establishment), a SME transformed from a household business (including its branches, representative offices and/or business locations) shall pay the license fee as follows:
- If its exemption period ends in the first 6 months of a year, it must pay the license fee by July 30 of the same year.
- If its exemption period ends in the last 6 months of a year, it must pay the license fee by January 30 of the following year.
A household business, an individual or a group of individuals engaging in production/business that resumes its production/business after a suspension period shall pay the license fee as follows:
- If it resumes its production/business in the first 6 months of a year, it must pay the license fee by July 30 of the same year.
- If it resumes its production/business in the last 6 months of a year, it must pay the license fee by January 30 of the following year.
Above are 04 important things about licensing fees that businesses must know to conduct business legally.
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