Vietnam: Is it mandatory to pay PIT and VAT when renting a house?

LawNet would like to answer this question as follows:

According to Clause 1 Article 4 of Circular No. 92/2015/TT-BTC of the Ministry of Finance of Vietnam:

Article 4. 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.

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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.

Besides, according to Clause 1 Article 3 of Decree No. 139/2016/NĐ-CP of Vietnam’s Government, the individuals, groups of individuals and households that have their trade/production activities with annual revenues of less than VND 100 million shall be exempted from licensing fees.

Thus, according to the above regulations, there are 02 cases as follows:

Case 1: Individuals who rent houses with total revenue in the year < 100 VND million do not have to pay VAT, PIT and licensing fees.

Case 2: Individuals who rent houses with total revenue in the year > 100 VND million must pay VAT, PIT and licensing fees.

1. VAT and PIT

According to Clause 2 Article 4 of Circular No. 92/2015/TT-BTC, the basis for tax calculation by a property lessor is the taxable revenue and tax rate, specifically as follows:

- Taxable revenue from property lease is determined as follows:

+ 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.

+ 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.

+ 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.

- Tax rate

+ VAT rate on property lease is 5%

+ PIT rate on property lease is 5%

- Determination of tax payable

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

2. Licensing tax

According to Clause 2 Article 4 of Decree No. 139/2016/NĐ-CP of Vietnam’s Government, the rate of licensing fees for the individuals and households having the production and business of goods and services is as follows:

- The individuals, groups of individuals and households with revenues over VND 500 million/year: 1,000,000 VND/year;

- The individuals, groups of individuals and households with revenues between VND 300 million and VND 500 million/year: VND 500,000/year;

- The individuals, groups of individuals and households with revenues between VND 100 million and VND 300 million/year: VND 300,000/year;

Note: Revenue as a basis for determining license fee rates for individuals, groups of individuals, and households according to the guidance of the Ministry of Finance in Article 1 of Circular No. 65/2020/TT-BTC.

View details at Circular No. 92/2015/TT-BTC and Decree No. 139/2016/NĐ-CP.

TyNa

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