The activity of leasing personal assets is quite popular, the assets for lease are mostly houses, land, cars, processing factories. When these assets are leased with revenue, they also need to be considered for paying taxes according to state regulations. So how is the tax declaration for personal workshop rental? Please refer to the content of the article of Viet My Accounting below for detailed content.

1. How much revenue must be taxed for leasing personal factories?

According to the law, individuals leasing personal factories must pay business license fees, value added tax and personal income tax. When there is an activity with revenue of over 100 million VND in a year (calendar year), individuals leasing personal factories must pay all the above taxes.

It can be seen that individuals renting out their own workshops is an activity that brings in a large source of revenue for individuals without requiring labor, so they must pay the same taxes as a business entity even though they are not registered with a state agency. These tax rates are all based on the revenue that the individual earns within 1 year.

2. Revenue level for tax calculation based on contract signing time

According to the provisions stated in section 1, it can be seen that depending on each case of signing a rental contract, it brings in different sources of revenue for the individual renting out the workshop, so there are two cases as follows:

– For individuals renting out workshops for less than 1 year: Revenue earned under 100 million VND does not have to declare business license fees and value added tax or personal income tax. As for revenue over 100 million VND, individuals must pay business license tax, value added tax and personal income tax.

For example: Company B leases a factory from Mr. A to use as its own factory, the rental period is 5 months (August 1, 2019 to December 31, 2019) with a rental price of 10 million VND/month.

Total revenue per year is 50 million, less than 100 million, there is no need to declare business license fees and VAT, personal income tax is still allowed to be accounted for in reasonable expenses.

In the case that Company B leases for a full 12 months but rents for 6 months of 2019 and 6 months of 2020, it does not have to pay tax because the tax basis is based on the calendar year.

– For individuals who lease factories for many years, the revenue is also based on the calendar year, over 100 million VND per year, they must pay tax to state agencies and vice versa.

For example: Mr. A leases the factory to Party B for 6 months (January 1, 2020 – June 30, 2020) with a revenue of 70 million VND and leases the factory to Party C for 6 months from (July 1, 2020 – December 31, 2020) with a revenue of 66 million VND. Mr. A’s total revenue in 2020 from the factory rental is 136 million VND, so he is required to pay taxes, business license fees, value added tax and personal income tax.

3. Regulations on tax declaration for personal workshop rental

3.1 Tax declaration for personal workshop rental with revenue under 100 million

Individuals with revenue under 100 million do not need to declare to the tax authority and do not have to pay 5% VAT and personal income tax on that rental revenue.

Specifically, according to the provisions of law on business license tax, personal income tax and value added tax as follows:

In Clause 2, Article 1 of Circular 119/2014/TT-BTC stipulates:

“Households and individuals with rental assets are subject to declaration, 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 100 million or less or the average monthly rental income in the year is 8.4 million VND or less, they are not required to declare and pay VAT and personal income tax, and the tax authority will not issue retail invoices in this case”.

At Point b, Article 4 of Circular 92/2015/TT-BTC stipulates:

“b) For individuals who rent properties, the revenue level of 100 million VND/year or less to determine whether an individual is required to pay VAT and personal income tax is the total revenue arising in the calendar year of the property rental contracts”

At Article 3 of Decree 139/2016/ND-CP stipulates:

“Cases exempted from business license fees include: Individuals, groups of individuals, households engaged in production and business activities with annual revenue of 100 million VND or less”.

Article 3 of Circular 302/2016/TT-BTC stipulates:

“Individuals, groups of individuals, and households engaged in production and business activities with annual revenue of VND 100 million or less. The revenue level of VND 100 million or less to determine individuals, groups of individuals, and households exempted from business license fees is the total revenue for calculating personal income tax according to the provisions of the law on personal income tax”.

3.2 Tax declaration for individual workshop rental with revenue over 100 million

For individuals renting out individual workshops, who will pay the tax?

Clause 1, 2, Article 8 of Circular 92/2015/TT-BTC stipulates

“Individuals who rent out assets directly declare to the tax authority. Or the lessee declares and pays taxes on behalf of the lessee if the contract has an agreement that the lessee is the taxpayer”.

Thus, if the contract has an agreement on tax declaration and payment, the lessee will pay the tax, in addition to the monthly rental fee for the asset, the tax will also be added to the rent and expenses when finalizing the tax at the end of the year. For contracts without an agreement, the lessor must pay the tax himself.

Types of taxes incurred.

• The first is the Business License Tax (also known as the Business License Fee)

Note: If the factory lease contract is only for half a year (such as from July 1, 20xx to December 31, 20xx), the business license fee will only be paid half of the above prescribed level.

• Second, VAT and personal income tax.

According to Article 4 of Circular 92/2015/TT-BTC:

“Taxable revenue for asset leasing activities is determined as follows:

VAT-taxable revenue for asset leasing activities is the revenue including tax (in case of taxable) of the amount the lessee pays periodically according to the lease contract and other revenues including fines and compensation that the lessor receives according to the agreement in the lease contract

Personal income taxable revenue for asset leasing activities is the revenue including tax (in case of taxable) of the amount the lessee pays periodically according to the lease contract and other revenues including fines and compensation that the lessor receives according to the agreement in the lease contract.

In case the lessee pays the asset rental in advance for many years, the revenue for VAT and personal income tax is determined according to the revenue paid in one lump sum”.

VAT and personal income tax rates are applied to rental revenue as follows:

• VAT: 5% on taxable revenue.
• Personal income tax: 5% on taxable revenue.

Thus: If an individual’s factory rental revenue is over 100 million/year, the total amount of tax and fees payable to the state agency is: Total tax and fees payable = (Total taxable revenue x 10%) + Business license fee.

For example: Company H rents a factory from Mr. A to use as a factory for the company, the rental period is 2 years (January 1, 2020 to December 31, 2022) with a rental price of 15 million/month, the above rental price does not include taxes and fees. The lessor (Mr. A) will directly declare the above revenue to the tax authority.

• Total revenue for the calendar year: 180 million/year. So the business license fee that Mr. A must pay to the tax authority is 300,000 VND/year.
• Taxable revenue = 180,000,000 / 0.9 = 200,000,000 VND/year
• VAT and personal income tax payable are 20,000,000 VND/year

=> The total amount of tax and fees that Mr. A must pay in the calendar year for tax calculation is: 20,300,000 VND/year.

For example: Company T rents a factory from Mr. A to use as a factory for the company, the rental period is 2 years (January 1, 2021 to December 31, 2023) with a rental price of 16.5 million/month, this rental price includes taxes and fees incurred. The lessor (Mr. A) will directly declare the above revenue to the tax authority.

Specifically:

• Total revenue in the calendar year: 198 million/year. So the business license fee that Mr. A must pay to the tax authority is 300,000 VND/year.
• Taxable revenue = 198,000,000 VND
• VAT and personal income tax payable are: 19,800,000 VND

=> The total amount of taxes and fees that Mr. A must pay in the calendar year is: 20,100,000 VND/year.

Documents for renting a personal workshop include:

• A copy of the house rental contract
• The owner’s ID card.
• Form 05 is issued with Circular 95/2016/TT of the Ministry of Finance (for individuals who do not have a tax code for renting assets).
• Declaration of business license fees according to Decree 139/2016 of the Government
• Property rental tax declaration Form 01/TTS issued with Circular 92/2015 of the Ministry of Finance
• Form 01 (For the first tax declaration of the rental contract)

The procedure is as follows:

First, the individual contacts the tax authority at the place where the production workshop is rented to make a declaration. For individuals who do not have a tax code for renting assets, they need to contact the inter-ward tax team where the rental workshop is located to carry out the procedure for granting a tax code.

After having the tax code, submit the above documents to the ward manager where the workshop is for rent so that the tax officer can issue the tax records. Once the tax declaration is completed, then pay the tax to the state budget agency based on the declaration.

Note that you only declare once until the end of the lease contract. If there are any changes during the lease, you must contact the tax agency to make an adjustment immediately.

The deadline for tax declaration is calculated from the date of signing the contract to the last day of the month of signing the contract. (That is, the deadline will depend on the time of signing the contract in that month)

In short, declaring tax for renting a personal workshop is also declaring tax for renting a personal house with revenue, so you must pay full tax when meeting the conditions. In addition, the tax calculation and related activities also need to be based on the correct time according to the calendar year to determine the correct taxable revenue.

Above are some findings about the Regulations on tax declaration for personal workshop rental. Hopefully, the above useful information has helped readers better understand the tax procedures when renting personal workshops, or you can contact VIET MY LAW AND ACCOUNTING when you have questions about taxes and related tax procedures.