In recent years, the demand for supplementary education has surged, prompting regulatory bodies to establish clearer guidelines for those offering such services. The Ministry of Education and Training in Vietnam has introduced regulations that require individuals and organizations involved in supplementary teaching to officially register their business activities. This move aims to ensure the quality of education, maintain oversight, and facilitate appropriate tax collection.
- Business Registration Options for Supplementary Teaching
The recent regulations emphasize the necessity for individuals and organizations conducting supplementary teaching outside of formal educational institutions to register their business activities. This requirement is stipulated in Clause 1, Article 6 of Circular 29/2024/TT-BGDĐT, which states:
“Organizations or individuals conducting supplementary teaching activities outside of school and charging fees to students (hereinafter referred to as supplementary teaching establishments) must comply with the following requirements:
…a) Register their business as per legal regulations;…”
As such, starting from February 14, 2025, all supplementary teaching activities must comply with the business registration requirements outlined in the law. The registration serves to clearly define the scope and nature of the activities and facilitates tax authorities in monitoring and collecting taxes from these business operations.
The methods for registering a supplementary teaching business include:
- Establishing a household business in accordance with Decree 01/2021/NĐ-CP at the local business registration authority where the business is located.
- Establishing a company under the 2020 Enterprise Law at the Business Registration Office within the provincial Department of Planning and Investment where the business is based.
Generally, the household business model is suitable for individuals or organizations wishing to conduct small-scale supplementary teaching, typically involving one or a few students, with limited operational locations. For those looking to expand their supplementary teaching services, establishing a limited liability company or joint-stock company would be more appropriate.
- Tax Obligations for Supplementary Teaching Businesses
When a household business registers for supplementary teaching, it is generally required to pay various taxes and fees, including:
- License Tax
- Personal Income Tax (PIT)
Note: There is no requirement to pay Value Added Tax (VAT).
- License Tax for Supplementary Teaching Businesses
- Taxpayer Identification
According to Article 2 of Decree 139/2016/NĐ-CP, amended by Decree 22/2020/NĐ-CP, individuals, groups of individuals, and households engaged in production and business activities are subject to the license tax. Therefore, supplementary teaching establishments are also liable for this tax. - Tax Rates
The license tax rates for supplementary teaching businesses, as outlined in Clause 2 of Circular 302/2016/TT-BTC (amended by Circular 65/2020/TT-BTC), are as follows:
- Businesses with annual revenue over 500 million VND: 1,000,000 VND/year
- Businesses with annual revenue between 300 and 500 million VND: 500,000 VND/year
- Businesses with annual revenue between 100 and 300 million VND: 300,000 VND/year
To determine the revenue for license tax purposes, one must refer to Clause 2, Article 4 of Circular 302/2016/TT-BTC, which specifies that the taxable revenue is the total revenue for personal income tax from the previous year.
- Exemptions from License Tax
According to Clause 8, Article 3 of Decree 139/2016/NĐ-CP, amended by Decree 22/2020/NĐ-CP, new organizations (those issued a new tax code) and individuals or groups engaging in business activities for the first time are exempt from the license tax during their first year of operation.
Additionally, if the household’s annual revenue is 100 million VND or less, they are also exempt from this tax.
- Personal Income Tax Obligations for Supplementary Teaching Businesses
- Taxpayer Identification
According to Clause 2 and Clause 3, Article 4 of Circular 40/2021/TT-BTC, amended by Circular 100/2021/TT-BTC:
“2. Household businesses and individual businesses with annual revenues from production and business activities of 100 million VND or less are exempt from VAT and PIT. They must accurately declare and submit tax documents on time and are responsible for the accuracy of their tax declarations.
…3. For groups of individuals or families, the revenue threshold of 100 million VND is determined for one designated representative within the group for the tax year.”
Thus, household businesses with revenues of 100 million VND or more are liable for personal income tax.
Note: From January 1, 2026, the revenue threshold for personal income tax will increase to 200 million VND according to the 2024 Value Added Tax Law. Consequently, household businesses with revenues of 200 million VND or less will not be subject to personal income tax.
- Calculating Personal Income Tax
According to Clauses 3, 5, and 7 of Article 3 of Circular 40/2021/TT-BTC, personal income tax is calculated using the following methods:
- Declaration method: Tax is calculated based on a percentage of actual revenue generated monthly or quarterly.
- Fixed method: Tax is calculated based on a predetermined percentage of revenue set by tax authorities.
Using the declaration method, personal income tax for household businesses is calculated as follows:
Personal Income Tax Payable = Taxable Revenue x Tax Rate
Where:
- Taxable Revenue includes total revenue (including tax) from sales, processing, commissions, and services during the tax period.
The tax rate for supplementary teaching activities is set at 1%.
- Exemption from Value Added Tax
According to Article 4 of Circular 40/2021/TT-BTC, amended by Circular 100/2021/TT-BTC, the principles for taxation of household businesses adhere to current VAT and PIT regulations.
Specifically, as per Clause 13, Article 4 of Circular 219/2013/TT-BTC, the following activities are exempt from VAT:
“Exemptions include educational activities such as foreign language teaching, vocational training, and other activities aimed at enhancing knowledge and professional skills.”
Therefore, supplementary teaching activities are not subject to VAT, meaning these businesses are exempt from this tax.
In conclusion, the requirement for business registration for supplementary teaching outside of formal education is crucial for regulatory compliance and tax accountability. Understanding the tax obligations and exemptions can help educators navigate their responsibilities effectively. By adhering to these regulations, supplementary teaching establishments can operate legally and contribute to the educational landscape.
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