Tax declaration for branches (dependent units) of a company

Legal situation: My company specializes in the electronics business and is headquartered in District H, Da Nang City. Recently, it has established a branch (dependent unit) in district D, Hanoi city. The branch has its own invoice, seal, and revenue. I want to ask, if the head office sends someone to work in Hanoi and pays wages, then is it the head office or the branch that must declare personal income tax for employees, as well as License fees, value added tax and corporate income tax? Looking forward to hearing your advice!

Response:

Thank you for sending your question to FDVN Law Firm (FDVN). Regarding your consulting request, after looking into the relevant legal regulations, FDVN has prepared an answer for you as follows:

[1]. About the declaration of Personal Income Tax for employees

Point a, Clause 3, Article 19 of Circular No. 80/2021/TT-BTC stipulates that:

“ a.1) The taxpayer that pays salaries and remunerations to employees who work at dependent units and business locations in provinces other than the province where the taxpayer is headquartered shall deduct personal income tax from salaries and remunerations, submit tax declaration dossiers according to Form No. 05/KK-TNCN, the personal income tax distribution sheet according to Form No. 05-1/PBT-KK-TNCN in Appendix II hereof to the supervisory tax authority; pay personal income tax in the provinces where the employees work in accordance with Clause 4 Article 12 of this Circular. Personal income tax payable in each province shall be determined monthly or quarterly and shall not be adjusted during personal income tax finalization.

...".

According to your information, the head office of your company sends people to the branch to work and the head office directly pays salaries to those employees, therefore, according to the above provisions, the head office shall deduct personal income tax from salaries and remunerations, submit tax declaration dossiers to the supervisory tax authority of the head office in Da Nang city.

[2] About the declaration of license fees

Branches are one of the license fee payers as prescribed in Clause 6, Article 2 of Decree No. 139/2016/ND-CP. In addition, the place to pay license fees is specified in Clause 1, Article 11 of Decree No. 126/2020/ND-CP as follows:

"1. A taxpayer that has business operation in more than one province as prescribed in Point a and Point b Clause 4 Article 45 of the Law on Tax administration shall submit tax declaration dossiers to the tax authority of the province other than the province in which the taxpayer is headquartered in the following cases:

…

k) Licensing fees shall be declared where the dependent units and business locations are located.”

Because the dependent branch has a different address from the province where the head office is located, in this case the dependent branch must declare and pay the license fee at the tax agency directly managing the branch in Hanoi.

[3] About the declaration of Value Added Tax

Clauses 3 and 4, Article 13 of Circular No. 80/2021/TT-BTC have the following instructions:

“Article 13. Declaring, calculating, distributing and paying value added tax

3. Declaring and paying tax:

d) In case of dependent units and business locations that are production facilities:

The taxpayer shall declare value added tax on business operation of the dependent units and business locations that are production facilities and submit tax declaration dossiers according to Form No. 01/GTGT and the value added tax distribution sheet according to Form No. 01-6/GTGT in Appendix II hereof to the supervisory tax authority; pay tax in the provinces where the factories are located in accordance with Clause 4 Article 12 of this Circular.

…

4. In case a dependent unit directly sells goods, uses invoices registered by the dependent unit or the taxpayer to the supervisory tax authority of the dependent unit, fully records input and output value added tax, the dependent unit shall declare and pay value added tax to its supervisory tax authority."

Therefore, if the branch directly sells goods and generates revenue, the branch must declare and pay Value Added Tax at its supervisory tax authority in Hanoi.

[4] About declaration of corporate income tax.

Pursuant to point c, Clause 3, Article 17 of Circular No. 80/2021/TT-BTC :

“Article 17. Declaring, calculating, finalizing, distributing and paying corporate income tax 

3. Declaring, finalizing, paying tax:

c) For dependent units and business locations that are factories:

c.1) Declaring, paying provisional tax quarterly:

The taxpayer is not required to submit tax declaration dossiers quarterly but have to pay provisional tax quarterly in the provinces where the factories are located, including those with units eligible for corporate income tax incentives, in accordance with Point b Clause 6 Article 8 of Decree No. 126/2020/ND-CP.

c.2) Tax finalization:

The taxpayer shall finalize corporate income tax on the entire business operation of the taxpayer according to Form No. 03/TNDN, submit the corporate income tax distribution sheet according to Form No. 03-8/TNDN in Appendix II hereof to the supervisory tax authority; pay corporate income tax in the provinces where the factories are located in accordance with Clause 4 Article 12 of this Circular.

… ”

Therefore, the dependent branch will not have to submit corporate income tax declaration dossiers, but instead, the head office of your company shall pay provisional tax quarterly in the provinces where the factories are located, including those with units eligible for corporate income tax incentives, in accordance with Point b Clause 6 Article 8 of Decree No. 126/2020/ND-CP.

Above is FDVN's legal advice regarding your inquiry on the basis of legal regulations. We hope our advice will be useful to you.

By Nguyen Thi Suong – FDVN Law Firm

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