Tax policies for individuals and households implementing the rooftop solar power projects

 Date: 12 August 2021

Writer: Linh Nguyen

Currently, Vietnam Electricity (“EVN”) has implemented a program to purchase rooftop solar power (“RSP”) from individuals and households for excess electricity during non-use periods. This policy has facilitated citizens to develop their electricity production. Therefore, when implementing the electricity purchase and sale contract with EVN, citizens also need to understand the regulations on tax policies, invoices, and documents to ensure compliance with laws. Through this article, BLawyers Vietnam would like to provide an overview of tax policies for individuals and business households for RSP projects with an installed capacity of less than 50KW.

1. Tax registration

Individuals and households (“Business Households”) implementing RSP projects are taxpayers for the business of electricity production and sale, thus they must register their business and tax code.

After obtaining a business registration certificate and a tax registration certificate, taxpayers may purchase a retail invoice at the tax office to present to EVN when finalizing the electricity purchase and sale at the end of the year.

2. Tax declaration and payment

Based on tax registration, Business Households implementing RSP projects shall declare and pay taxes following regulations. Taxes to be paid include:

(i) License Fee

The license fee is an annual amount payable based on the year’s turnover for Business Households. The deadline for paying the fee is 30 January every year.

(ii) Value-added tax (“VAT”) and personal income tax (“PIT”)

Electricity sales revenue is subject to VAT and PIT for Business Households implementing RSP projects with a turnover of over VND 100 million/ year, and the tax-to-revenue ratio is applied to production activities. Specifically, the tax rate is calculated based on revenue:

  • The VAT rate is 3%;
  • The PIT rate is 1.5%.

Therefore, with a VAT rate of 3% and a PIT rate of 1,5%, the total payable tax amount is 4.5%/ total electricity sales revenue.

Accordingly, Business Households implementing RSP projects must issue sales invoices to buyers in compliance with legislation, as well as declare and pay taxes on each arising. Making a payment is carried out at the individual’s local tax department. The deadline for submitting dossiers on a case-by-case basis is the 30th day of the quarter following the quarter in which taxable revenue is established.

Electricity sales revenue is exempt from VAT and PIT for Business Households implementing RSP projects with a turnover of VND 100 million/ year or less. That Business Households are not required to declare, pay taxes, or use invoices.

If the revenue from the RSP project is less than VND 100 million/ year and the total revenue from other businesses is greater than VND 100 million/ year, the revenue from RSP must still be declared and paid tax.

3. Notes

To protect the Business Households’ interests when implementing RSP projects, it is necessary to register the business, register for tax, and purchase invoices from tax authorities assigned to EVN when calculating annual electricity sales.

RSP Business Households are responsible for the accuracy, truthfulness, and completeness of tax declaration dossiers in accordance with the regulations.

In conclusion, understanding the above regulations on tax declaration and payment will help readers understand the taxable subjects correctly and accurately when implementing RSP projects. Thereby ensure legal compliance when executing those projects.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

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