AUTHORIZATION FOR HOUSE LEASE AND PAYMENT FOR PERSONAL INCOME TAX FROM THE HOUSE LEASE CONTRACT
I. Authorization for house lease
*Legal basis: + Civil Code No. 91/2015 / QH13 (hereinafter referred to as Civil Code 2015): Article 562; Point c Article 141.1, Article 138.
Pursuant to Article 138 Civil Code 2015, individuals may authorize other individuals to enter into and perform a civil transaction
Point c Article 141.1 Civil Code 2015 stipulates that “Each representative may only enter into and/or perform civil transactions within his/her scope of representation according to any of the following bases: …c) Contents of authorization…”.
Article 195 Civil Code 2015 stipulates that “A non-owner of property shall only have the right to dispose of the property pursuant to authorization from the owner or in accordance with provisions of the law”
→ Therefore, in case that the owner of the house (hereinafter referred to as Party A) authorizes another individual (hereinafter referred to as Party B) to conduct the hose lease with an organization (hereinafter referred to as Party C), Party B has the right to represent and act on behalf of Party A in carrying out the procedures prescribed by laws to lease the house, in which Party B can directly sign the Leasing Contract as a lessor to a lessee that is Party C.
According to Article 194 Civil Code 2015, owners shall have the right to sell, exchange, give, loan, bequeath, renounce of ownership rights, right to use, destruct or implement other forms of disposal in conformity with the law on property.
→ Therefore, based on the content of auhorization, if Party A authorizes Party B to represent Party A receiving the income arising from the Lease Contract with Party C and so on allows Party B to take such income, Party B will have the right to own and enjoy the income given by Party A. This is the situation where the agreement between parties to give a property (particularly the money in this case) is in-corporated into an Authorization Contract for house lease.
Note: Party A’s authorization for Party B to perform the lease and allow Party B to take the income arising from the Lease Contract with Party C does not affect the ownership of the house of Party A. Party A is still the owner of the house.
(i) For that the owner of the house authorizes an individual to lease the house, the authorized party has the right to directly sign the Lease Contract as a lessor.
(ii) Income arising from the Lease Contract is the legal income of the owner of the house. However, when the owner gives this income to another individual, it is considered as a money-giving transaction between the owner of the house and that individual. That individual has the ownership right to the said income.
II.Tax payment for income arising from the Lease Contract established and performed through an authorized representative of the house owner.
+ Law on Personal Income Tax No. 04/2007/QH12 (hereinafter referred to as the Law on Personal Income Tax 2007): Article 2.1
+ Circular 92/2015/TT-BTC: Point a Article 4.1
+ Dispatch 2994/TCT-TNCN
Pursuant to Point a Article 4.1 of Circular 92/2015/TT-BTC, persons leasing property (hereinafter referred to as lessors) are those who earn revenue from the lease of their property, including: housing.
Pursuant to Official Letter 2994 / TCT-TNCN of the General Department of Taxation amending and supplementing Circular No. 92/2015 /TT-BTC, in the above case, with persons leasing property:
- Persons leasing property directly declare tax with tax offices, or
- The lessee shall declare and pay taxes on behalf of the leasor if there is an agreement between the two parties on this conduct
In this above case, because Party A has authorized Party B to establish and perform the house lease contract on behalf of Party A, and also agrees for Party B to take the income arising from the Lease Contract, Party B does become a lessor and owns the income arising from the Lease Contract with Party C as agreed with the owner of the house.
Pursuant to Article 2.1 of the Law on Personal Income Tax 2007, personal income taxpayer means any resident individual with taxable income as stipulated in article 3 of this Law arising either within or outside the territory of Vietnam, or any non-resident individual with taxable income as stipulated in article 3 of this Law arising within the territory of Vietnam.
→ Thus, although Party A is the owner of the rental house, but it is agreed that Party B will take and own the income generated from the Lease Contract. Then, Party B shall be considered as the individual that has income arising from the leasing of house. Therefore, Party B is the party who is responsible for paying PIT on the income arising from the Lease Contract.
If the owner of the house authorizes an individual to lease that house and allow that authorized individual to own such income arising from the lease contract, the authorized party is obliged to pay personal income tax on the income arising from the lease contract.
Contact for further information
- Dong Du Business Development & Researching Center , DBDRC
- Nguyen Khanh Ngoc – Preparer – Legal Consultant
- Toni Tran – Center Director
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