Vietnam: Notes on tax payment for apartment tenants

According to Clause 1 Article 4 of Circular No. 92/2015/TT-BTC of the Ministry of Finance of Vietnam on tax accounting method applied by persons leasing property, individuals with rental apartments will have to pay personal income tax (PIT) and value added tax (VAT). To be specific:

1. Entities of PIT and VAT payment

Chapter I of Circular No. 92/2015/TT-BTC of the Ministry of Finance of Vietnam stipulates policies on VAT and PIT incurred by residents doing business.

Article 1 clearly states that taxpayers are residents including individuals, groups of individuals, and households who manufacture and/or trade in goods, services in any field and sector prescribed by law.

More specifically for rental operations, according to Point a Clause 1 Article 4 of Circular No. 92/2015/TT-BTC:

“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, etc.”

Thus, revenues from individuals renting out houses and apartments are taxable.

2. Conditions for PIT and VAT payment

According to Point b Clause 1 Article 4 of Circular No. 92/2015/TT-BTC:

“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 rental income reaches 100 million VND/year, that individual shall be subject to PIT and VAT payment.

3. Taxable revenue and tax rate

This issue is stipulated in Point a Clause 2 Article 4 of Circular No. 92/2015/TT-BTC of the Ministry of Finance of Vietnam.

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.

4. VAT and PIT rates

Amount of VAT and PIT payable when renting an apartment for a calendar year:

In case of paying rent once for the entire rental period, you can refer to the following example to understand the exact calculation according to the law (extracted from Article 4 of Circular No. 92/2015/TT-BTC).

Ms. C signs a housing lease contract for 02 years from October 2015 to the end of September 2015 for a monthly rent of VND 10 million. 

A lump-sum of rent is paid for 02 years. Taxable revenue of Ms. C and tax payable on the lump-sum from housing lease is determined as follows:

In 2015, Ms. C leases out her house for 03 months (from October to December) and earns a revenue of: 03 months x VND 10 million = VND 30 million (< VND 100 million). Thus, Ms. C does not have to pay VAT and PIT on the house rent in 2015.

In 2016, Ms. C leases out her house for 12 months (from January to December) and earns a revenue of: 12 months x VND 10 million = VND 120 million (> VND 100 million). Thus, Ms. C has to pay VAT and PIT on the house rent in 2015.

In 2017, Ms. C leases out her house for 09 months (from January to September) and earns a revenue of: 09 months x VND 10 million = VND 90 million (< VND 100 million). Thus, Ms. C does not have to pay VAT and PIT on the house rent in 2017.

After determining annual taxable revenue, Ms. C declares tax on the lump-sum of VND 180 million. Taxable revenue is VND 120 million and tax payable for the whole contract is VND 12 million (VND 120 million x (5% + 5%)).

Duc Dung

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