Office rental tax rate 8 or 10? Can VAT be reduced?

In order to support, restore and develop socio-economics, the Government of Vietnam has issued Decree 15/2022/ND-CP. These include specific regulations on types of goods and services eligible for reduced value-added tax rates from 10% to 8%. So office rental tax rate is 8 or 10? Are office rental services eligible for VAT reduction? Join Maison Office to find out details in the article below!

1. Is VAT reduced for office rental?

Value added tax (also known as VAT) is an indirect tax levied on the added value of goods and services arising in the process from production, circulation to consumption (according to Article 2 of the Law Value Added Tax 2008).

Accordingly, individuals and organizations that produce and trade goods and services and import goods will be subject to VAT according to current law. Depending on the different types of production and business, the subjects required to pay tax, be exempt from tax, reduce tax and have VAT refunded will be different. So is office rental eligible for VAT reduction?

According to the Law on Value Added Tax 2008 (amended and supplemented in 2013) and Circular 219/2013/TT-BTC:

• The tax rate applied to cases of selling, renting and lease-purchasing social housing is 5%;
• The tax rate applied in other housing-related transactions is 10%;

According to the above regulations, office leasing does not fall into the cases of selling, leasing, or leasing social housing. In addition, according to Clause 11, Article 1 of Decree 15/2022/ND-CP, real estate business activities are not classified as goods and services eligible for reduced VAT rates. Thus, it can be concluded that office rental services are not eligible for VAT reduction.

2. Cases of VAT tax rate reduction

According to Article 1 of Decree 15/2022/ND-CP, regulations on reducing the VAT rate from 10% to 8% are applied to the following goods and services:

• Essential items such as food, pharmaceuticals, household appliances, catering services, transportation services, etc.
• Items serving the production and business activities of the enterprise, including: raw materials, machinery, equipment,…

3. Conditions for VAT tax rate reduction

To receive value added tax reduction, businesses, economic organizations or business individuals must meet the following conditions:

• Goods and services subject to VAT reduction;
• Comply with regulations on VAT declaration and payment;
• Prepare legal invoices and documents according to the provisions of law.

According to the provisions of Article 3 of Circular 32/2011/TT-BTC, VAT invoices must fully record the following contents:

• Quantity and value of goods and services eligible for VAT reduction;
  The applied VAT rate is reduced;
• Based on value-added invoices, businesses, organizations and individuals will receive a VAT reduction when declaring VAT.

4. Office rental tax rate is 8 or 10%?

“Office rental tax rate is 8 or 10%?” – To answer this question, let’s first look at the legal regulations on office rental tax rates.

Tax rate is the amount of revenue that individuals and organizations are required to pay to the state when they meet all conditions prescribed by law. Tax rates are expressed through percentage (%). Depending on the type of subject and related conditions, the applied tax rate will be different.

The current VAT rate is applied at 03 levels including:

• 0% tax rate applies to international transportation groups, exported goods, etc.
• The 5% tax rate applies to groups of important goods and necessities such as agricultural products, aquatic products, clean water,…
• Tax rate is 10% for most products and services (except for cases subject to tax rates of 0% and 5%).

Thus, the tax rate applied to office rental services is 10%.

Although the Government has issued Decree 15/2022/ND-CP on tax exemption and reduction to support socio-economic recovery and development, not all industries are eligible for VAT tax rate reduction. According to Article 1 of Decree 15/2022/ND-CP, the exclusion of VAT reduction applies to the following groups of goods and services:

• Telecommunications, banking, financial activities, insurance, securities, real estate business, metals, metal casting products, mining products, chemical products,…
• Goods and services are subject to special consumption tax.
• Information technology according to the law on information technology.
• The VAT reduction for each type of goods and services above is applied uniformly at all stages of import, production, processing and commercial business.

Office rental service belongs to the category of real estate business. Therefore, based on the provisions in Article 1 of Decree 15/2022/ND-CP, the VAT rate of office rental services cannot be reduced from 10% to 8% but remains at 10%.

>> DID YOU KNOW: When to issue office rental invoices [Latest regulations]

5. Basis for calculating VAT when leasing office space

According to the provisions of the 2008 Value Added Tax Law (amended and supplemented in 2013), the basis for calculating VAT includes tax rate and taxable price.

Regarding tax rates:

• In case the taxpayer is a business or economic organization providing office rental services, the taxpayer shall pay VAT at the tax rate of 10% and corporate income tax at 20%.
• In case the taxpayer is an individual or household renting an office, they must pay VAT at a rate of 5% and personal income tax (PIT) at 5% if they have revenue from business activities of over 100,000. 000 VND (according to Clause 2, Article 4 of Circular 111/2013/TT-BTC)

Regarding taxable price:

In case the taxable price includes surcharges and additional fees that the business unit is entitled to, the regulations are as follows:

• For property rental activities, the taxable price is the rental amount without value added tax. In case of leasing an office in the form of prepayment of rent or payment of rent by period, the taxable price is the prepaid rental amount for the rental period or payment of each period without VAT.
• For goods and services using payment documents stating the payment price is the price including VAT, the taxable price is determined as follows:

Price excluding VAT = Payment price / (1 + goods and service tax rate)

In addition, Article 10 of Circular 40/2021/TT-BT also clearly states that the tax basis for individuals and business households includes: taxable revenue and tax rate calculated on revenue. Specifically, it is determined as follows:

Tax rate calculated on revenue:

• The tax rate calculated on revenue includes the VAT rate and the personal income tax rate, applied in detail to each field and industry according to the instructions in Appendix I issued with this Circular.
• In case an individual or business household operates in many fields and industries, the individual or business household shall declare and calculate tax according to the tax rate calculated on revenue applicable to each field and industry. In case an individual or business household cannot determine or inappropriately determines the taxable revenue of each field or industry, the tax authority shall determine the taxable revenue according to the provisions of law.

Determine the tax amount payable:

• VAT amount payable = VAT taxable revenue x VAT rate
• Amount of personal income tax payable = Revenue subject to personal income tax x personal income tax rate

With the information shared above by Maison Office, you surely have the answer to the question “Is VAT reduced for renting a house?”. It can be seen that understanding and complying with tax regulations is very important to ensure office leasing activities take place legally. Don’t forget to follow Maison Office for more useful legal information in the field of office leasing!

Bui Duc Huy

Editor and content team manager at Maison Office.

With over 5 years of experience in consulting and extensive content editing in the real estate services and interior design field. Sharing valuable information with customers, partners, and attracting millions of views.