A lease of property is a form in which the person who has the right to the property hands over the property to another person for a certain period of time and collects a corresponding lease amount. In Vietnam, the property leasing activities of individuals are incredibly diverse with different property objects. So, how does Vietnam’s tax law regulate property leasing activities?

In this article, BLawyers Vietnam presents several notes below about Vietnam’s tax policies on leasing individual property

1. Tax registration

Leasing individual property requires registering for tax at competent tax authorities when generating income from the following property rental activities:

▪ Leasing of houses, premises, shops, factories, warehouses and excluding accommodation services as prescribed;

▪ Leasing means of transport, machinery and equipment without the operator; and

▪ Leasing other properties but with no other services attached to the lease.

The lessor can directly declare tax or agree to let the lessee be an organization to declare tax on behalf of or authorize an individual to be the legal representative to declare tax on a case-by-case basis according to regulations.

2. Tax declaration and payment

After completing tax registration procedures, the lessor is obliged to declare and pay tax according to regulations, specifically:

2.1 Personal income tax (PIT) and value added tax (VAT)

An individual who leases a property with revenue from the rental of the property must declare and pay PIT and VAT, unless the individual has only property leasing activities and the rental period is not a full year. If you rent out from VND 100 million/year or less, you do not have to pay PIT and VAT.

Accordingly, the amount of PIT and VAT will be calculated as follows:

▪ PIT = Taxable income with PIT x 5%

▪ VAT = Taxable income with VAT x 5%

In which:

▪ Taxable income with PIT and VAT is the tax-inclusive income of the entire lease amount as prescribed; and

▪ Tax rate is 5% on taxable income for each type of tax.

Individuals may submit tax declarations according to (i) each payment period, no later than the 10th day from the beginning of the lease term of that payment period, or (ii) according to the solar calendar year, no later than the last day of the first month of the next solar calendar year.

Example: Mr. A leases a house with a contract term of four years from 01 January 2022 to 01 January 2026 with a payment period of six months/ time. Mr. A can choose to file a tax declaration by payment period, i.e. every six months, or file a tax declaration once a year for the 2022-2026 period.

An individual who leases a property files a tax declaration, paying a one-time tax on the entire prepaid income if the lessee pays in advance for many years. The one-time payable tax amount is the total payable tax amount of each solar calendar year by law.

Example: Mr. C leases to Ms. D a house for three years starting from November 2021 and Ms. D has paid the entire rent for three years. Thus, in 2021, Mr. C has to pay tax once for all three years: 2021, 2022 and 2023.

Of note, when the leased property is located in an area managed by the same tax authority, the individual must declare tax according to each contract or declare tax for many contracts on one declaration. In addition, when the parties have a change in the content of the property lease contract leading to changes in taxable income, payment period, and lease term, the individual shall make an adjustment and supplement declaration according to regulations of the lease contract according to the tax period in which the change took place.

2.2 Licensing fee

In addition to the two taxes above, the individual who leases the property must pay a licensing fee every year, which is determined based on the taxable income of the property lease contracts of the tax year.

Licensing fee rates for leasing individual properties are as follows:

(i) Income over VND100,000,000 to 300,000,000/year: VND300,000/ year;

(ii) Income over VND300,000,000 to 500,000,000/year: VND500,000/ year;

(iii) Income over VND500,000,000/year: VND1,000,000/year.

In case there are many lease property contracts at a location, the income used as a basis for determining the licensing fee rate for that location is the total income from the asset lease contracts. If the leasing individual HAS properties at many locations, the income used as a basis for determining the licensing fee rate for each location is the total income from the lease property contracts of the locations, including the case in which there are many lease property contracts at one location.

Example: Mr. E has an income of VND100,000,000 and VND500,000,000, respectively, from renting a house in District Y and Z. Thus, the total income on which to pay a licensing fee is VND600,000,000 in District Y and VND600,000,000 in District Z.

In addition, when the lease property contract lasts for many years, the individual pays the licensing fee each year corresponding to the number of years the individual declares and pays VAT and PIT. If an individual declares and pays VAT and PIT once for a lease property contract that lasts for many years, the individual only pays the licensing fee for one year.

The above is not official advice from BLawyers Vietnam’s lawyers. If you have any questions about the above content, please feel free to contact us via email consult@blawyersvn.com. We will be happy to hear from you.

Date: 22 August 2023

Writer: Minh Truong