Unlicensed tutoring activities: Is tuition still subject to tax?
Many additional training centers are currently confused when issuing invoices for tuition fees. In a specific case, sending a question to the Ministry of Finance, a private company asked the Department of Education about applying for a teaching license, but was told that it does not need a license. However, when working with the tax authority, the unit received a warning: If there is no legal license, this fee may be subject to value-added tax (VAT).
According to the guidance from the Le Chan - Duong Kinh Inter-district Tax Team (Region III Tax Department), based on Clause 13, Article 4 of Circular 219/2013/TT-BTC of the Ministry of Finance, only vocational training and teaching activities established and operating in accordance with legal regulations are not subject to VAT.
In particular, the types of teaching exempted from tax include: teaching culture, teaching foreign languages, IT, talent, life skills and vocational training.
"In case the educational institution has registered a profession and is licensed according to the law, the tuition fee collection from learners is not subject to VAT" - quoted from the tax authority's answer.
In case of meeting the conditions, when making the invoice, the unit does not record the tax rate line, does not record VAT, and at the same time clearly notes: "The revenue is not subject to VAT according to Clause 13, Article 4 of Circular 219/2013/TT-BTC".
On the contrary, if the unit operates not in accordance with regulations for example: no legal education license, the tax authority can consider this an activity of providing services subject to VAT according to general regulations. In that case, the enterprise must declare and pay VAT at the common tax rate of 10%.
Operating license: Pre-required conditions for tax exemption
The key issue here is the educational activity license. The fact that a Department of Education replied "no need for permission" does not mean that the enterprise meets legal requirements for tax exemption. Depending on the locality and type of organization, there may be inconsistencies in guidance between the education sector and the financial sector.
The tax authority recommends that businesses fully review legal documents, training programs, lecturers and facilities to ensure teaching activities meet current regulations.
