On April 3, 2024, the General Department of Taxation issued Official Dispatch No. 1368/TCT-DNNCN (“Official Dispatch 1368”) on taxable revenue from Individuals leasing out their property.
According to regulations, individuals leasing out their property will be subject to value-added tax at a tax rate of 5% and personal income tax at a tax rate of 5% for all revenue from property rental activities.
Official Dispatch 1368 provides detailed instructions on the obligations of businesses in case of signing property lease contracts with business individuals, specifically:
1. How to calculate revenue for calculating value added-tax and personal income tax
According to the provisions in Clause 2, Article 4 of Circular 92/2015/TT-BT and Article 10 of Circular 40/2021/TT-BTC, revenue is subject to value-added tax (VAT), revenue is subject to personal income tax. Personal income (PIT) for individuals leasing out their property is tax-inclusive revenue (in case taxable).
In case the contract stipulates that the property rental price does not include tax, the tax authority will re-determine the revenue to calculate VAT and personal income tax, by taking the revenue excluding tax and dividing it by (:) 0.9.
2. Responsibility for submitting declarations and paying taxes
Official Dispatch 1368 stipulates: the responsibility for submitting declarations and paying taxes will be agreed upon by the two parties in the contract according to civil law.
This is completely consistent with the provisions in Clause 1, Article 8 of Circular 40/2021/TT-BTC:
"1. An organization or individual shall declare and pay tax on behalf of another individual in the following cases:
- a) The organization leases property from the individual under a lease contract which prescribes that the lessee is the taxpayer"
Accordingly, businesses renting property from individuals need to clearly stipulate in the lease contract the obligation to declare and pay taxes to determine and implement it in accordance with regulations.
Comment: