Many individuals currently rent out their personal cars for another individual to drive and use, so many individuals do not know whether they have to pay taxes and declare taxes to state agencies or not. For the most accurate answer, please refer to the content of the article below to better understand the regulations on tax declaration for personal car rental.

1. Do you have to pay taxes to state agencies when renting out a personal car?

Based on Clause 1, Article 9 of Circular No. 40/2021 of the Ministry of Finance, which stipulates that individuals who rent out assets and have revenue from leasing those assets must pay full taxes to state agencies.

Cars are also considered personal property, like houses, real estate, shops, factories, warehouses, etc. Therefore, individuals who rent out cars must also pay full taxes to state agencies even if they are not registered for business.

In addition, many individuals wonder whether they need to register a business when renting a self-driving car? The answer is no, because according to the 2020 investment law, people who rent a self-driving car do not have to register a business with a state agency but still have to pay taxes.

We also know that individuals who rent assets also receive revenue from that activity, and this activity can bring in a large amount of income for that individual, from this income, individuals may have to pay personal income tax or related value added tax.

Individuals who rent assets such as cars with revenue of 100 million VND or more must pay tax, but those with revenue of 100 million VND or less do not need to pay tax. Therefore, many private car rental units are currently quite concerned about whether they have to pay tax or not, and if they do, what they need to do to avoid late payment or tax arrears. Below is more detailed information on tax calculation for individuals who rent out personal cars without registering a business.

2. What types of taxes must individuals who rent out personal cars pay?

Individuals who rent out personal cars must pay a number of taxes as prescribed by law. Specifically, based on the provisions of Circular No. 40/2021 of the Ministry of Finance, individuals who rent out must pay the following taxes:

– Personal income tax: This type of tax is calculated directly based on the income earned by the individual in a month or a year, the tax rate will depend on the income earned and after deducting related deductions.

– Value added tax is a type of tax calculated on the added value of goods and services arising from the production and circulation process until they reach consumers, this is a fairly common type of tax that consumers must pay.

How to calculate VAT and personal income tax

The basis for calculating tax for individuals with car rental activities as well as house rental activities is taxable revenue and tax rate based on revenue. The amount of VAT payable and the amount of personal income tax payable are calculated according to the following formula:

VAT payable = VAT taxable revenue x VAT rate

PIT payable = PIT taxable revenue x PIT rate

Individuals engaged in car rental business should note the following issues:

– Individuals who rent cars when declaring tax for each payment period (each payment period is determined by the starting time of the rental period of each payment) or declare tax according to the calendar year (from January 1 to December 31 of a year)

Individuals can declare tax for each contract or declare tax for multiple contracts on one declaration if the car is rented in the same locality under the management of the same tax authority.

– If an individual only has car rental activities and the rental period is not a full year, when the rental revenue is 100 million VND or less in a year, he/she is not required to pay value added tax or personal income tax.

In case the lessee pays the car rental in advance for many years, the revenue to determine whether the individual must pay tax or not is the revenue of a single payment allocated according to the calendar year. That is, if the individual pays the rental for many years, it is necessary to divide the one-time payment by the number of rental years to know whether the annual revenue exceeds the taxable amount or not.

– In case the lessee pays the car rental in advance for many years, the individual renting the car declares and pays tax at one time for the entire prepaid revenue. The amount of tax payable at one time is the total amount of tax payable for each calendar year in which the money has been received. That is, the individual can pay tax at one time based on that one-time revenue and pay for many years.

In case there is a change in the content of the lease contract leading to a change in taxable revenue and payment period, the lease term, the individual shall make an adjustment and supplementary declaration according to the provisions of the Law on Tax Administration for the tax period with the change.

However, the subject of the above value-added tax will depend on the agreement between the lessee and the lessor. Specifically, if the lessor has stipulated that the lessee must pay the above taxes along with the rent, the lessee must fulfill the tax payment obligation. In case the car lease contract does not agree on this point, the lessor must pay tax when meeting all requirements. As for personal income tax, the lessor must pay the full tax when reaching the monthly or annual income level subject to tax, this is not the tax level that the lessee must pay. Therefore, the car lease contract must clearly state the points on related taxes and fees before performing the lease to avoid confusion.

Thus, individuals who rent cars must also pay attention to paying full taxes when their revenue exceeds the prescribed level. For each rental case, the corresponding tax must be paid specifically as above.

3. Regulations on tax declaration for personal car rental

To declare tax for personal car rental activities, it is necessary to prepare tax declaration documents, find out the location to submit tax declaration documents, the deadline for submitting documents, and the deadline for paying taxes. Specifically, each item will be stated below by Viet My Accounting:

First, prepare tax declaration documents for individuals renting cars with the following necessary documents:

According to Clause 1, Article 14 of Circular No. 40/2021 of the Ministry of Finance, it is necessary to prepare documents including:

• Tax declaration for car rental activities according to the statutory form;
• Appendix with detailed list of car rental contracts according to the statutory form;
• Copy of car rental contract and contract appendix;
• A copy of the power of attorney if the individual authorizes a legal representative to carry out the tax declaration procedure (the agency may request the original power of attorney for comparison and confirmation)

The second is the location for submitting the application for individuals renting cars. For individuals renting out assets such as cars, the tax declaration must be submitted to the directly managing Tax Department where the individual resides.

The third is the deadline for submitting the tax declaration for individuals renting cars.

The deadline for submitting the tax declaration for individuals renting cars who directly declare taxes to the tax authority is prescribed in Point a, Clause 2, 3, Article 44 of the Law on Tax Administration 2019, specifically:

– The deadline for submitting the tax declaration for individuals declaring taxes for each payment period is no later than the 10th day from the start date of the rental period of the payment period.

– The deadline for submitting tax declarations for individuals declaring taxes once a year is no later than the last day of the first month of the following calendar year.

Fourth is the tax payment deadline for individuals renting cars.

The tax payment deadline for individuals renting cars who directly declare taxes to the tax authority is implemented according to the provisions of Article 55 of the 2019 Law on Tax Administration, specifically:

– The tax payment deadline for individuals renting cars is no later than the last day of the tax declaration submission deadline.

– In case of supplementary tax declaration, the tax payment deadline is the deadline for submitting the tax declaration of the tax period with errors or omissions.

Individuals renting assets should pay attention to the tax payment deadline. If they do not pay within the time prescribed by law, they may be subject to administrative penalties and tax arrears many times higher than the amount of tax previously paid.

Thus, for individuals renting cars, they need to pay taxes and declare taxes according to the law when their revenue reaches the prescribed level. When necessary, individuals who rent cars can hire a unit specializing in tax declaration to do the procedure on their behalf without having to go to a state agency to do the procedure. Currently, there are many units and organizations that undertake tax declaration procedures on their behalf. This is one of the quick and time-saving services for individuals who do not fully understand tax documents.

Above is Viet My’s research regulations on tax declaration for personal car rental. Hopefully, with the useful information above, it has helped readers better understand the tax procedures when renting personal cars, or you can contact VIET MY LAW AND ACCOUNTING when you have questions about taxes, related tax procedures, or you can contact Viet My Accounting when you want to do tax declaration procedures for car rental activities on behalf of individuals.