DOES A NEWLY ESTABLISHED BUSINESS HOUSEHOLD HAVE TO PAY LICENSE TAX?

I am selling cosmetics on a small scale under a household business which is newly established. Will I have to pay license tax when starting doing business? Where can I pay this tax?

FDVN’s opinions:

Thank you for concerning FDVN’s legal services. Regarding your consulting requests, after studying the relevant legal documents, FDVN Law Firm would like to give you the following advice:

First, regarding the license tax rates:

You shall be responsible for paying license tax when you establish a household business and doing business. The rate will depend on the revenue.  Pursuant to Clause 2,3,4,5, Article 4 of Decree 139/2016/ND-CP, the business license tax rates for business individuals are as follows:

“2. The rate of licensing fees for the individuals and households having the production and business of goods and services is as follows:

a) The individuals, groups of individuals and households with revenues over 500 million dong/year: 1,000,000 dong/year;

b) The individuals, groups of individuals, and households with revenues between 300 and 500 million dong/year: 500,000 dong/year;

c) The individuals, groups of individuals, and households with revenues between 100 and 300 million dong/year: 300,000 dong/year;

3. The organizations, individuals, groups of individuals, and households that have the trade/production activities or are newly-established, issued with tax registration certificate, tax code, and business code within the first 06 months of the year shall pay the licensing fees of the entire year or 50% of the rate of licensing fees of the entire year if being established, issued with tax registration certificate, tax code and business code within the last 06 months of the year.

The organizations, individuals, groups of individuals, and households that have the trade/production activities but do not declare their licensing fees shall pay the licensing fees of the entire year regardless of the time of detection of the first or the last 06 months of the year.

4. If the organizations specified under the Points a and b, Paragraph 1 of this Article change their charter capital or investment capital, the ground for determining the rate 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 rate of licensing fees in accord 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.

5. If the individuals, groups of individuals and households specified in Paragraph 2 of this Article change their revenues, the ground to determine the rate of licensing fees is the revenues of the year preceding the year of calculation of licensing fees.”

In addition, if you are a newly established household business and your revenue is less than VND 100 million/year, you will be exempted from tax payment specified in Clause 1, Article 3, Decree No. 139/2013/ND-CP: "Individuals, groups individuals and households engaged in production and business activities with an annual turnover of VND 100 million or less”

Second, about the competent authority to collect the license tax:

According to Clause 1, Article 28 of Circular No. 156/2013/TT-BTC:

“1. Taxpayers shall pay tax, late payment penalties, and fines at:

a) Commercial banks, other credit institutions, and other service providers prescribed by law;

b) State Treasuries;

c) Tax collection agencies;

d) The organizations authorized by tax authorities to collect tax;

Commercial banks, other credit institutions, service providers, State Treasuries, tax collection agencies, the organizations authorized by tax authorities to collect tax (hereinafter referred to as tax collectors) must prepare the locations, equipment, personnel to enable taxpayers to pay tax, late payment penalties and fines.”

Above is FDVN Law Firm's opinion for your consulting requests based on studying the relevant legal provisions. Hopefully, FDVN's advice would be helpful to you.

Legal Advisor: Hoang Tran Ngoc Anh

FDVN Law Firm

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