Understanding the Changes in Vietnam’s Tax Registration: Circular 86/2024/TT-BTC

Effective February 6, 2025, Circular 86/2024/TT-BTC (“Circular 86”) will replace Circular 105/2020/TT-BTC (“Circular 105”), significantly altering tax registration procedures in Vietnam. A notable shift is the introduction of citizen identification numbers as personal tax codes, impacting households, business households, and individual business operators.

The Role of Tax Codes in Vietnam

In Vietnam, tax codes, also known as Tax Identification Numbers (TINs), are essential for both individuals and businesses, acting as unique identifiers for defining tax obligations. These codes facilitate compliance with the country’s stringent accounting and financial regulations and are critical for maintaining Vietnam’s attractiveness to investors. The Tax Administration Law (Law No. 38/2019/QH14) serves as the backbone of Vietnam’s tax system, providing guidelines for tax registration.

Who Needs a Tax Code?

Every business operating in Vietnam is required to register for a tax code or TIN. This unique identifier is fundamental for determining tax liabilities and ensuring compliance with local regulations. Tax identification numbers are issued to compliant individuals and businesses, with exceptions for those solely responsible for specific taxes, like housing tax or agricultural land-use tax.

Key Changes Under Circular 86

Previously, Circular 105 was the primary governing document for tax registration processes. With the impending implementation of Circular 86, businesses and individuals will face several key changes that mainly include:

• Use of Citizen ID Numbers: Individuals, including dependents under the Personal Income Tax (PIT) Law, will now utilize their Citizen ID numbers instead of separate tax codes.

• Unified Tax Code Structure: Circular 86 introduces a new tax code structure for enterprises, organizations, households, and individuals, which now emphasizes the use of ID numbers, particularly for non-business tax obligations.

Understanding the Tax Code Structure

The tax identification number structure introduced by Circular 86 comprises:

• N1N2: The first two digits indicating the province of issuance.
• N3N4N5N6N7N8N9: A sequential number ranging from 0000001 to 9999999.
• N10: A control number.
• N11N12N13: A three-digit sequence from 001 to 999, designated for dependent units and other specified subjects.

The Registration Process for Tax Codes

Taxpayers are mandated to register and obtain their TINs before commencing business or incurring state financial obligations. The procedure involves:

• Enterprise Registration: Enterprises, organizations, and individuals must register through the interconnected single-window system and adhere to relevant regulations delineated by the Ministry of Finance.

• First-Time Registration: Applicants must submit the registration form alongside other necessary documents, including specific required forms as specified under Circular 86.

Required Forms for First-Time Taxpayer Registration

For first-time registration, several forms are necessary, such as:

• Tax Registration Form for Organizations: Form 01-DK-TCT
• Tax Registration Form for Individuals Running a Business: Form 03-DK-TCT
• Various Lists: Including subsidiaries, dependent units, and business locations.

In addition to the forms, businesses may need to provide notarized copies of various licenses, establishment decisions, and investment certificates, depending on their specific circumstances.

Specific Procedures for Other Registrations

Circular 86 outlines procedures for other tax-related actions such as:

• Changing Tax Registration Information
• Temporary Suspension of Business Activities
• Tax Code Termination and Restoration
• Tax Registration Following Structural Changes

Timelines

Tax registration applications must be submitted within 10 working days following events such as:

• Business registration or establishment licenses.
• Commencement of business activities.
• Obligations to withhold taxes on behalf of others.

Government authorities must process the registration documents within three working days if the submission is complete. In case of an incomplete submission, notification must be provided within two working days.

Utilizing the Tax Code

Tax codes are essential for determining how foreign contractors and entities are treated under Vietnam’s tax system. Correct usage ensures compliance in various operations, such as contracts and payment obligations. For businesses relocating or expanding, updates to tax registrations are necessary, while invalidation of tax codes occurs in cases of bankruptcy or inactivity.

A Look at Vietnam’s Tax Structure

Vietnam’s tax system is federally governed, lacking state or local taxes. Tax incidence can be classified into:

• Corporate Income Tax (CIT): Applicable to both domestic and foreign businesses.
• Personal Income Tax (PIT): Determined based on residency criteria and income categories.

Corporate and Personal Income Tax Details

• CIT: The standard rate is 20%, though rates could vary depending on the specific sector, particularly in oil and gas operations.
• PIT: Defined by the residency criteria, which determine an individual’s income tax obligations and applicable deductions.

Conclusion

Vietnam’s transition to Circular 86 marks a significant reform in tax registration processes, impacting individuals and businesses alike. The introduction of citizen ID numbers as tax codes, alongside a refreshed tax code structure and registration processes, reflects the country’s ongoing efforts to streamline compliance and enhance its investment environment. Keeping abreast of these changes is crucial for all taxpayers navigating Vietnam’s evolving tax landscape.