Giáo trình Taxation - Chapter 2: License Fees

TAXATION Chapter 2: License Fees References • Law on fees and charges No.97/2015/QH13 issued by National Assembly on 25 November 2015, effective from January 01, 2017. • Decree 139/2016/ND-CP dated 04 October 2016 on regulations for license fees, effective from January 01, 2017. • Circular 302/2016/TT-BTC dated 15 November 2016 on guidelines for license fees, effective from January 01, 2017. Learning Objectives • LO 2-1: Explain concept, characteristics and role of license fees. • LO 2-2: Identify payers and exemption from license fees. • LO 2-3: Define bases and rates of license fees. • LO 2-4: Grasp declaration and payment of license fees. Concept and Characteristics of License Fees • Business license tax (converted to license fee from 2017) is a direct tax and usually quotas which are levied on the business license of enterprises and households. • License fee is collected annually. • Simplicity: ➢License fee is a specific amount. ➢Declare only one time at establishment. LO 2-1: Explain concept, characteristics and role of license fees. Role of License Fees • Help the state control over the whole of business entities at their establishment or at the beginning of the year. • Mobilize contributions of business entities from the beginning of the year in order to meet the state’s needs of expenditures while taxes have not generated revenue. • Support actively for business registration. License Fee Payers • License fee payers are organizations and individuals engaging in production and trade of goods/services, except for exemption cases, including: 1. Enterprises which are established under the regulations of law. 5. Other organizations which have their trade/production activities. 2. Organizations which are established under the Law on Cooperatives. 6. Branches, the representative offices of organizations specified in 1, 2, 3, 4 and 5 (if any). 3. Public service providers which are established under the regulations of law. 7. Individuals, groups of individuals and households that have their trade/production activities. 4. Business organizations of the political organizations, the social – political organizations, the occupational – social organizations and people's armed units. LO 2-2: Identify payers and exemption from license fees. Exemption from Licensing Fee 1. Individuals, groups of individuals and households engaging in business with annual revenues of less than or equal to VND 100 million. The annual revenue is the total assessable revenue with regard to personal income tax in accordance with regulations of law on personal income tax. 2. Individuals, groups of individual and households engaging in irregular business or business without fixed location. 3. Individuals, groups of individual and households producing salt. 4. Organizations, individuals, groups of individual and households doing the aquaculture, fisheries and fishing logistic services. Exemption from Licensing Fees (cont.) 5. Commune cultural post offices and press agencies (printed, radio, television and online newspapers). 6. Branches, representative offices and business locations of the cooperatives that have direct technical service activities in service of agriculture. 7. Communal people’s credit fund; cooperatives specialized in service business for agricultural production; branches, representative offices and business locations of cooperatives and private enterprises carrying on their business in the mountainous areas. License Fee Bases ▪ License fee bases of organizations: ➢ the charter capital written in the certificate of business registration; or in the certificate of enterprise registration; or in the charter of the cooperatives; ➢ the investment capital written in the certificate of investment registration or decision on investment policies (where there is no charter capital). ➢ If the economic organizations change their capital, the ground for determining the rate of licensing fees is their capital of the year preceding the year of calculation of licensing fees. ➢ In case the capital is in foreign currency, it shall be converted into VND applying the buying rate of banks or credit institutions where the payers open their accounts at the time they make payment to the state budget. LO 2-3: Define bases and rates of license fees. License Fee Bases (cont.) ▪ License fee bases of individuals, groups of individuals and households: ➢ total assessable revenues with regard to personal income tax in accordance with regulations of law on personal income tax. ➢ If their revenue is changed, the ground to determine the amounts of licensing fees is the revenue of the year preceding the year of calculation of licensing fees. ➢ In case these payers engaging new business within the year, the revenue used to determine the amount of license fees shall be the revenue of the tax year as prescribed in law on personal income tax. License Fee Rates ▪ Rates of annual licensing fees for organizations as follows: Charter capital / investment capital License fees for the whole year > VND 10 billion 3,000,000 VND / year ≤ VND 10 billion 2,000,000 VND / year Branches, representative offices, business premises, public service providers, other business entities 1,000,000 VND / year License Fee Rates (cont.) ▪ Rates of annual licensing fees for individuals, groups of individuals and households as follows: Annual revenues License fees for the whole year Revenues > VND 500 million 1,000,000 VND / year VND 300 million < Revenues ≤ VND 500 million 500,000 VND / year VND 100 million < Revenues ≤ VND 300 million 300,000 VND / year License Fee Rates (cont.) • Payers found their business within the first six months: pay license fees for the whole year. • Payers found their business within the last six months: pay 50% of license fees for the whole year. • Payers without declaration of license fees must pay the license fees for the whole year, irrespective of the time of detection which is in the first 6 months or the last 6 months. • When payers notifies a tax authority of their business suspension for the full calendar year, they are not required to pay the license fee for the year of business suspension. If the business is not suspended for the full calendar year, it must pay the license fee for the whole year. Example 1 Thanh Cong Corporation was established in Jan 10, 2017, having the head office in 10 Nguyen Trai, Dist. 1, HCMC, its charter capital VND 6 billion, its tax code: 0312251145. In Feb 15, 2017, the company opened two dependent branches: 1) Thanh Cong Corporation – Binh Duong Branch, located at 105 Tran Hung Dao, Thu Dau Mot, Binh Duong. 2) Thanh Cong Corporation – Cho Lon Branch, located at 15 Hai Thuong Lan Ong, Dist.5, HCMC. The company intends to increase its charter capital to VND 12 billion in August 2017 Required: Calculate the license fees Thanh Cong has to pay for 2017 and 2018. Solution of Example 1 • : Charter capital Rate License Fees Year 2017 Head office (established in 10 Jan 2017) 6 billion 2,000,000 2,000,000 Branch in HCMC 1,000,000 1,000,000 Branch in Binh Duong 1,000,000 1,000,000 Total license fees payable in 2017 4,000,000 Year 2018 Head office (capital increased) 12 billion 3,000,000 3,000,000 Branch in HCMC 1,000,000 1,000,000 Branch in Binh Duong 1,000,000 1,000,000 Total license fees payable in 2018 5,000,000 Declaration of License Fees ▪ Declaration of license fees of organizations: LO 2-4: Grasp declaration and payment of license fees. ➢ Declare only one time at establishment, no later than the last date of the month in which the business commences; ➢ Payers have dependent units in the same provinces with the taxpayers’ head offices then the taxpayers must submit license fee declaration dossiers; if in other provinces, the dependent units must submit themselves the license fee declaration dossiers to the direct taxation agencies. ➢ Payers have newly formed companies but having not engaged in business, they must submit the license fee declaration dossiers within 30 days from the date of registration certificate or certificate of registration for branch operation issued. ➢ Payers have changes of factors as the grounds for determining the rate of licensing fees to be paid, they must submit the license fee declaration no later than December 31 of the year of change. Declaration of License Fees (cont.) ▪ Declaration of license fees of organizations (cont.): • Form of License Fee Declaration: see the form attached. • Taxpayers can use the software HTKK of General Department of Taxation to complete the form. • Taxpayers can also make the License Fee Declaration online at the website: https://nhantokhai.gdt.gov.vn/ihtkk_nnt/ Declaration of License Fees (cont.) ▪ Declaration of license fees of individuals, groups of individuals, households: ➢ Payers which pay fixed taxes are not required to pay license fees. The tax authority shall determine the amount of license fee for each business premises according to database of their total revenues. ➢ Payers leasing real estate that declare only one time upon every lease contract: ✓ If the lease contract lasts multiple years, license fees shall be paid annually corresponding to number of years which the payers declare payments of value-added tax and personal income tax. ✓ If the payers declare lump-sum payments of value-added tax and personal income tax with respect to the lease contract which lasts multiple years, they shall pay the amount of license fee for one year. ➢ If a payer has an authorized entity to make tax statement and payment on its behalf, the authorized entity shall pay license fees in case where such payer fails to pay such license fee. Payment of License Fees • Deadline for license fee payment for both organizations and individuals / households is on 30 January every year; • For newly established organizations, it shall be the deadline for submitting license fee declaration dossier. • If a payer being an individual, group of individuals, or a household pays fixed tax, the deadline of payment is no later than the last date of the month succeeding the month in which the tax obligation arises in accordance with law on personal income tax. Example 2 Use data in Example 1. Required: 1) Prepare License Fee Declaration for Thanh Cong Corporation in 2017 and 2018. 2) Identify the deadlines to submit the declaration dossiers and amounts and deadlines to pay the fees. Solution of Example 2 1) Prepare License Fee Declaration for Thanh Cong Corporation in 2017 and 2018. 4 dossiers: ✓ Thanh Cong Corporation (Head office): First time Declaration dated 31 Jan 2017; ✓ Thanh Cong Corporation (Head office): First additional Declaration dated 28 Feb 2017; ✓ Thanh Cong Corporation – Binh Duong Branhch: First time Declaration dated 28 Feb 2017; ✓ Thanh Cong Corporation (Head office): Second additional Declaration dated 30 January 2016. (See the file attached) Solution of Example 2 2) Identify the deadlines to submit the declaration dossiers and amounts and deadlines to pay the fees. Deadlines to submit the dossiers Deadlines to pay the fees Amounts payable Year 2017 Thanh Cong Corporation (Head office), First time Declaration 31-Jan-17 31-Jan-17 2,000,000 Thanh Cong Corporation (Head office), First additional Declaration 28-Feb-17 28-Feb-17 1,000,000 Thanh Cong Corporation – Binh Duong Branch, First time Declaration 28-Feb-17 28-Feb-17 1,000,000 Year 2018 Thanh Cong Corporation (Head office), First time Declaration 30-Jan-18 30-Jan-18 4,000,000 Thanh Cong Corporation – Binh Duong Branch, No submission 30-Jan-18 1,000,000