Overview On

Business Licence Tax In Vietnam

Overview On Business Licence Tax In Vietnam

In Vietnam, Business License Tax is an essential annual tax obligation for businesses. This tax applies to manufacturing and business establishments, spanning all economic sectors. It also encompasses organizations, individuals, branches, stores, factories, and manufacturers actively engaged in economic activities.

The determination of Business License Tax rates hinges on the registered capital stated in the business registration certificate. The tax rates are categorized based on the registered capital, ensuring that businesses contribute proportionately to their financial capacity. As such, businesses maintain consistent tax rates unless changes occur in their business registration or charter capital, which might necessitate adjustments to the applicable tax rates.

Business License Tax is a fundamental financial commitment for businesses operating in Vietnam. It applies to a wide range of economic entities and is determined based on the registered capital of the business. Compliance with the regulations governing this tax is crucial to avoid penalties and ensure smooth business operations. The tax is deductible when calculating corporate income tax, making it an essential consideration for businesses. As Vietnam continues to evolve its tax policies, staying informed about changes and ensuring compliance will remain key priorities for businesses operating in the country.

What is the Business License Tax and who is required to pay it?

The Business License Tax (officially called License Fee) is an annual fee imposed on individuals and organizations engaged in business activities in Vietnam. Entities subject to this fee include enterprises, cooperatives, branches, representative offices, business locations, and individual business households

What are the current License Fee rates?

According to Decree 139/2016/ND-CP (amended by Decree 22/2020/ND-CP), the License Fee is based on registered charter capital or investment capital:

Enterprises with capital over VND 10 billion: VND 3,000,000/year
Enterprises with capital of VND 10 billion or less: VND 2,000,000/year
Branches, representative offices, business locations: VND 1,000,000/year
For individuals and household businesses: fees range from VND 300,000 to 1,000,000/year, depending on annual revenue.

When must the License Fee be paid for the first time?

Enterprises and organizations must pay the License Fee no later than January 30 of their first operating year (unless exempted). If established in the second half of the year (from July 1 onward), they only pay 50% of the annual fee for that year.

When must the License Fee be paid for the first time?

Enterprises and organizations must pay the License Fee no later than January 30 of their first operating year (unless exempted). If established in the second half of the year (from July 1 onward), they only pay 50% of the annual fee for that year.

Are there any exemptions from the License Fee?

Yes. Exemptions include:

Newly established enterprises and affiliated units (branches, rep offices) are exempt for the first year from their business registration date.
Households and individuals with irregular or seasonal business and no fixed location.
Small and micro-enterprises converted from household businesses under the Law on SME Support are exempt for 3 consecutive years.
(Note: Even if exempt, businesses must still file the License Fee declaration if not using e-tax filing.)

What are the penalties for late payment of the License Fee?

According to the Law on Tax Administration and Decree 125/2020/ND-CP, late payment may result in:

Administrative fines from VND 1 million to VND 10 million, depending on the delay;
Interest for late payment at the rate of 0.03% per day on the outstanding amount.

Do branches and representative offices have to pay the License Fee separately?

Yes. Branches, representative offices, and dependent business locations that engage in business activities are subject to a separate License Fee of VND 1,000,000/year, unless they qualify for exemption in their first year.

General notes:

The above is summarised from the current legislations and practices for internal reference only.
This document cannot be relied upon by any other parties nor included in any submissions, reports, documents or letters required by the relevant regulatory bodies without our prior written consent and/or subject to our approval on the appropriate form and contents; and
Please kindly noted that SP&A is not a legal firm, our comments provided under this document may include reviewing regulatory documents to be identified as general management consultancy, therefore, should not be considered, nor intended to be, a legal advice.