The level of tax exemption when renting out private houses, rooms or apartments often depends on the level of revenue earned. Some cases may be exempt from house rental tax, while others will be subject to value-added tax and personal income tax. This applies depending on the tax regulations of the specific country or region. In this article, VIET MY LAW AND ACCOUNTING will outline the cases of house rental tax and how to calculate this tax!

1. According to the law, what types of house rental taxes are there?

According to the provisions of Circular 40/2021/TT-BTC, individuals renting houses must pay the following taxes:

• Personal income tax (PIT); ​​
• Value-added tax (VAT).

2. How much income is subject to house rental tax?

Pursuant to Clause 7, Article 1 of Circular 119/2014/TT-BTC Amending and supplementing a number of articles of Circular No. 156/2013/TT-BTC issued on November 6, 2013, Circular No. 111/2013/TT-BTC dated August 15, 2013, Circular No. 219/2013/TT-BTC dated December 31, 2013, Circular No. 08/2013/TT-BTC dated January 10, 2013, Circular No. 85/2011/TT-BTC dated June 17, 2011, Circular No. 39/2014/TT-BTC dated March 31, 2014 and Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance to reform and simplify a number of procedures The tax administration stipulates:

“Households and individuals with rental properties are subject to declaration and payment of VAT, personal income tax and business license tax according to the notice of the tax authority. In particular, for households and individuals with rental properties whose total rental income in the year is VND 100 million or less or the average monthly rental income in the year is VND 8.4 million or less, they are not required to declare and pay VAT, personal income tax and the tax authority will not issue individual invoices in this case”

According to the provisions of Article 4 of Circular 40/2021/TT-BTC, individuals with income from renting houses in the calendar year. With a revenue of VND 100 million or less, will be exempt from value added tax and personal income tax according to the provisions of the law on value added tax and personal income tax.

These individuals must comply with the obligation to declare rental tax correctly, honestly and completely, as well as submit tax records on time, and must be legally responsible for the accuracy, honesty and completeness of tax records as prescribed. Therefore, individuals with income from rental activities in the calendar year with an income of over VND 100 million will be responsible for paying value added tax and personal income tax as prescribed by law.

3. Methods of calculating rental tax that tenants need to apply

Tax for individuals with rental activities is determined based on revenue and applicable tax rates. The amount payable for value added tax (VAT), personal income tax (PIT), and business license tax is calculated according to the following formula:

3.1. How to calculate business license tax

The process of calculating business license tax depends on the charter capital recorded on the business license and the average annual revenue of the business household. Specifically, this regulation is clearly stated in Article 4, Clause 2 of Decree 139/2016/ND-CP:

• Revenue exceeding VND 500 million/year will have to pay a fee of VND 1 million/year.
• Revenue from VND 300 to VND 500 million/year will have to pay a fee of VND 500,000/year.
• Revenue from VND 100 to VND 300 million/year will have to pay a fee of VND 300,000/year.

Note that if this revenue arises from leasing in the first 6 months of the year, the business household still has to pay tax for the whole year. For lease contracts from the last 6 months of the year (from July 1), the business license tax payable is only half of the business license tax for the entire year.

To determine the business license fee based on revenue, according to Circular 302/2016/TT-BTC and Circular 65/2020/TT-BTC, revenue will be calculated as follows:

If a business household has multiple lease contracts at the same location, the revenue for calculating the business license fee will be the total revenue from the lease contracts in the year.

If a business household leases houses at multiple locations, the revenue for determining the business license fee for each location will be the total revenue from the lease contracts at those locations in the year.

In the case of a lease contract lasting for many years, the business license fee will be paid annually and corresponds to the number of years for which value added tax and personal income tax have been declared.

If a business household only pays VAT and personal income tax once for a long-term rental contract, the business household only has to pay the business license fee for one year.

3.2. How to calculate personal income tax (PIT) and value added tax (VAT)

The process of calculating rental tax based on personal income (PIT) and value added tax (VAT) is carried out according to the following formulas:

• PIT payable = (Revenue) x (5%)
• VAT payable = (Revenue) x (5%)

For example, Ms. Hoa rents out an entire house in Tan Binh, Ho Chi Minh City from October 2023 to the end of December 2024, with a rental price of VND 9 million/month. Total revenue from renting out the house as well as the personal income tax and VAT that Ms. Hoa must pay are calculated as follows:

• In 2023, Ms. Hoa rented out the house for 3 months (from October to the end of December), with a total revenue of: (3 months) x (9 million) = 27 million (<100 million). Therefore, in 2020, Ms. Hoa does not have to pay personal income tax and VAT for her house rental activities.
• In 2024, Ms. Hoa rented out the house for 12 months (from January to the end of December), with a total revenue of: (12 months) x (9 million) = 108 million (>100 million). Therefore, in 2021, Ms. Hoa will have to pay personal income tax and VAT to the tax authority for her house rental activities.

4. House rental tax declaration period

According to the provisions of Point b, Clause 1, Article 9 of Circular 40/2021/TT-BTC, individuals who rent out large-scale houses or houses that do not meet the large scale, but choose to pay taxes by declaration method and make tax declarations for each occurrence of a payment period. Each occurrence of a payment period is determined based on the starting time of the rental period for each payment period, or tax declaration based on the calendar year.

The deadline for submitting house rental tax declarations for taxes declared and paid for each occurrence of tax obligations will be the 10th day from the date of tax obligations. For individuals who declare taxes once a year, the latest deadline for submitting tax declarations will be the last day of the first month of the following calendar year.

The deadline for tax payment is also determined to be the latest date of the deadline for submitting tax declarations. In case of wanting to supplement the tax declaration, the tax payment deadline will be the deadline for submitting the tax declaration of the tax period with errors or supplements.

5. Rental tax declaration period

To start a rental business, individuals must declare the business license fee and submit the declaration to the direct tax authority before January 30 of the following year. Individuals who rent out houses can also choose to pay taxes in the form of a lump sum without having to declare the business license fee. The deadline for paying the business license fee is determined to be January 30 of each year.

6. How to pay rental tax

To pay rental tax, first, the homeowner needs to complete the tax declaration form and send it to the Tax Department in the locality where the real estate (RE) is located. This set of documents includes:

• Tax declaration for property rental activities (applicable to individuals or organizations that directly declare taxes to the tax authority or organizations that declare on behalf of individuals).
• Appendix to the detailed list of property lease contracts (applicable if this is the first time to declare tax or appendix to the contract).
• Copy of the property lease contract and appendix to the contract (if this is the first time to declare tax or appendix to the contract).
• Copy of the power of attorney as prescribed by law (if the individual leasing the property authorizes a legal representative).

Deadline for submitting the rental tax declaration dossier:

• If the landlord pays the tax once a year, the deadline is the 90th day after the end of the calendar year (usually March 31).
• If the landlord pays the tax according to the payment period, the deadline is the 30th day of the following quarter of the quarter in which the rental activity begins.

In the case of a business or organization renting a house and the contract has a provision that the tenant is responsible for paying taxes on behalf of the landlord. Then that business or organization will be responsible for deducting, declaring and paying taxes on behalf of the homeowner (including VAT and personal income tax).

7. Penalties for late payment of rental tax

The provisions on penalties for late declaration of rental tax are adjusted in Decree 125/2020/ND-CP as follows:

• Warning for late submission of tax declaration from 1 to 5 days and with mitigating circumstances.
• A fine of VND 2,000,000 to VND 5,000,000 for late submission of tax declaration from 1 to 30 days, unless otherwise specified.
• A fine of VND 5,000,000 to VND 8,000,000 for late submission of tax declaration from 31 to 60 days.
• A fine of VND 8,000,000 to VND 15,000,000 in the following cases: late submission of tax declaration from 61 to 90 days;
• Submitting a tax declaration 91 days or more after the deadline but without any tax payable; failing to submit a tax declaration even though there is no tax payable; failing to submit the appendices as prescribed for enterprises with related-party transactions, attached to the corporate income tax finalization dossier.
• A fine of VND 15,000,000 to VND 25,000,000 shall be imposed for submitting a tax declaration 90 days or more after the deadline, with tax payable, and the taxpayer has paid the full amount of tax and late payment to the state budget before the tax authority announces the decision to conduct a tax audit, tax inspection, or before the tax authority makes a record of the act of late submission of a tax declaration as prescribed in Clause 11 of Article 143 of the Law on Tax Administration.

The above article has provided answers to many questions from business households about whether they need to pay tax when renting out a house and how to calculate the latest types of tax fees. Hopefully, through this article of VIET MY LAW AND ACCOUNTING, readers will better understand information related to business license tax, personal income tax and value added tax, thereby being able to be more proactive in declaring and paying rental tax in accordance with regulations.