Circular No. 12-TC/CTN guides the collection of tax on rental activities for houses and land.

CIRCULAR

OF THE MINISTRY OF FINANCE

Guidelines for Tax Collection on House Rental and Land Leasing Activities

Pursuant to the Ordinance dated March 3, 1989, of the State Council amending and supplementing certain provisions of the Ordinance and Regulations on Commercial and Industrial Taxes and Goods Tax; Decree No. 53-HĐBT dated May 27, 1989, of the Council of Ministers detailing the implementation of the aforementioned Ordinance; the Ministry of Finance provides guidelines for tax collection on house rental and land leasing activities as follows:

I. TAXPAYERS

1- All organizations and individuals renting out houses or lands must pay taxes to the State according to the provisions of this Circular.

Organizations and individuals include: Party organizations, mass organizations, state agencies, administrative and service units, state-owned economic units, armed forces units, collective establishments, and individual households renting houses or lands to other organizations or individuals.

Houses and lands for rent include residential houses, restaurants, warehouses, drying yards, docks, residential land, agricultural land, ponds, and lakes under ownership or usage rights granted or leased and then sublet in full or in part, including cases of tendering for payment in cash or in kind, long-term or short-term leases, regardless of whether the lessees are organizations or individuals, and whether the purpose of the lease is for residence or production and business operations.

The taxpayer is the organization or individual who rents out houses or lands and receives payment.

2- Cases not subject to taxation.

State agencies and state-owned economic units renting houses to civil servants and employees at levels prescribed by the State based on their salaries for residential purposes and collecting rent.

Cooperatives renting collective housing to members for residential purposes at rates equivalent to those charged to civil servants and employees of state agencies.

Authorities providing houses and lands to agencies and organizations for office use or to economic units for production and business purposes.

Houses and lands without owners, if used for public welfare purposes and not rented for profit, are exempt from taxation; however, if they are rented out for profit, the person receiving the rent must pay taxes.

II. TAX RATE AND BASIS FOR CALCULATING TAX

1- Tax rate: Organizations or individuals renting out houses or lands must pay corporate income tax and corporate profit tax according to the tax schedule of the relevant industry specified in Article 3 and Article 14 of the Ordinance dated March 3, 1989, specifically:

Corporate income tax is paid at a rate of 5% on the total amount of rent received from renting houses or lands, without deducting any expenses.

Corporate profit tax is paid at a progressive rate from 0% to 40% on taxable profits. For individuals renting out houses or lands, if the taxable profit exceeds 400,000 dong per month, in addition to paying tax at a progressive rate from 0% to 40%, they must also pay additional profit tax at a rate of 10% on the portion of the taxable profit exceeding 400,000 dong per month.

2- Basis and method of calculating tax

Corporate income tax and corporate profit tax are collected monthly. The basis and method of calculating tax are as follows:

a) Corporate income tax:

Total rent received

from renting houses or

enterprises must = lands in a month x 5%

pay monthly (without deducting any expenses)

If rent is received in kind, it must be converted to Vietnamese dong based on current market prices.

If rent is received in foreign currency, it must be converted to Vietnamese dong based on the exchange rate published by the State Bank of Vietnam at the time of tax calculation. However, payment can be made in foreign currency.

b) Corporate profit tax:

Taxable profit Profit Tax rate progressive

of enterprise = subject to x from 0%

payment in a month tax up to 40% according to

monthly the rates and supplementary

tax (if applicable).

The taxable profit in a month equals the total rent received from renting houses or lands in that month (as stated in point a) minus (-) legitimate expenses.

Legitimate expenses are those directly related to the rental of houses or lands and only apply to the actual rented portion of the house or land, such as:

Depreciation of houses, calculated according to the State regulations on the rented portion of the house. For example, if a person has 50 square meters of house and rents out 20 square meters, with a total monthly depreciation cost of 50,000 dong, the legitimate depreciation expense would be:

(50,000 dong : 50 square meters) x 20 square meters = 20,000 dong

Expenses for electricity, water, and sanitation of the rented portion of the house or land actually incurred by the lessor (if the tenant pays these expenses, they cannot be included in legitimate expenses). For example, if a person has a house with three rooms and rents out one room, with the monthly electricity bill for the rented room being 3,000 dong, this amount can be included in legitimate expenses.

Regular maintenance, repair, and improvement costs for the rented portion of the house or land (if major repairs or improvements require significant expenses, these costs should be allocated over the period of use and included in the depreciation cost of the house or land).

Corporate income tax payable (as calculated in point a above) and land tax or agricultural tax for the rented portion of the house or land (if the land tax is paid by the tenant, it cannot be included in the lessor's legitimate expenses). For example, if a person has 60 square meters of house and the annual land tax payable by the owner is 72,000 dong, and they rent out 30 square meters, the monthly land tax included in legitimate expenses would be:

72,000 dong² x 30 square meters²

---------------------------------- = 3,000 dong

Twelve months

III. TAX DECLARATION AND PAYMENT

1. Taxpayers have the responsibility to:

a) Declare to the district, county, or town commercial and industrial tax office where the rented house or land is located about:

Area of the rented house, area of the rented land, type of house, grade of house, address of the rented house or land, name of the organization or individual, and address of the tenant.

Lease contracts or agreements regarding the rental of houses or lands, clearly stating the terms of the lease, lease duration, responsibilities of each party, and the monthly rent received from renting houses or lands.

Any changes in the content of the house or land rental.

b) Provide the tax authority with relevant documents, situations, and data related to tax calculation and payment.

c) Pay taxes in accordance with the content and notifications from the tax authority. If the taxpayer believes that the calculated tax amount is incorrect, they have the right to appeal to the higher-level tax authority or the People's Committees at various levels (district, county, city or provincial, municipal level) for resolution. However, while waiting for resolution, the taxpayer must still pay the full amount of tax and submit it within the deadline specified in the tax notification.

d) Any violation of tax policy implementation shall be handled according to the provisions set forth in Article 44 of the current Business Tax Regulations, specifically:

Failure to declare to the tax authority may result in a fine of up to 100,000 VND.

If taxes are not paid on time, in addition to paying the full amount of tax as notified, a daily fine of 1% of the overdue tax amount will also be imposed.

If false declarations are made to evade taxes, in addition to paying the full amount of tax, a fine of up to five times the evaded tax amount may be imposed.

If there is resistance to tax collection, depending on the severity of the violation, criminal penalties under the Penal Code may apply.

2. Organizations or individuals who assist the tax authority in detecting and preventing tax evasion and fraud, and achieve results, in addition to being recognized and rewarded according to the general state system, will also receive a monetary reward equal to 5% of the fines collected.

In special cases where organizations or individuals expend significant effort in investigation and detection; complex tax evasion requiring multiple organizations and individuals to participate in detection... the reward may reach up to 10% of the fines collected. The specific amount is decided by the Director of the Provincial, Municipal Special Zone Tax Administration.

3. The tax authority has the responsibility:

a) To accept tax declarations from taxpayers, review the declarations, calculate taxes according to the guidelines in this Circular, establish a tax ledger, and issue tax notifications to each taxpayer for payment into the treasury. The tax notification must clearly state the amount of tax due, the payment deadline, and the location for payment;

b) To maintain complete records for each taxpayer;

c) To monitor and urge tax payments; detect and handle violations of tax policy; resolve tax appeals according to assigned responsibilities and authorities.

This Circular takes effect from the date of signature. Previous guidelines on tax collection for rental of houses and land that conflict with this Circular are hereby abolished.

During implementation, if difficulties or issues arise, please promptly report them to the Ministry of Finance for additional guidance./.