The parties in the office lease contract  can agree to terminate the lease contract before the deadline, however, it is necessary to pay attention to handling the tax liability of the issued lease invoice.

This article was consulted by Lawyer Nguyen Quang Trung

Legal grounds:

• Law on Tax Administration 2019;
• Decree No. 126/2020/ND-CP;
• Official Dispatch No. 3975/TCT-CS dated 28/10/2022 of the General Department of Taxation.

We receive the following questions:

My company signed a 1-year office lease contract and paid in advance for the entire rental period. The lessor has also issued an invoice. But after only 6 months of renting, the director wanted to move the office to another address, and the leasing company also agreed to return part of the money. So how should we handle the invoice that the lessor has issued and the company has also declared taxes?

An office lease contract is a civil contract, the parties to the contract have the right to freely agree to terminate the lease contract ahead of time, as well as refund a part of the paid rent.

For invoices that have been issued for the entire rental period, if the rental contract is terminated before the deadline, the parties can issue a new invoice corresponding to the rental period and actual payment amount to replace the previously established invoice.

Pursuant to Clause 4, Article 7 of Decree No. 126/2020/ND-CP as follows:

Article 7. Tax declaration documents

4. Taxpayers may submit additional declarations for each tax declaration containing errors or omissions according to the provisions of Article 47 of the Law on Tax Administration and according to the form prescribed by the Minister of Finance. Taxpayers make additional declarations as follows:

a) In case the additional declaration does not change the tax liability, only the Additional Declaration Explanation and related documents must be submitted, not the Additional Declaration.

In case the annual tax finalization declaration has not been submitted, the taxpayer shall additionally declare the monthly or quarterly tax declaration dossier with errors or omissions, and also synthesize the additional declaration data into the annual tax finalization dossier.

In case the annual tax finalization declaration has been submitted, only declare additional annual tax finalization dossier; Particularly in the case of additional declaration of personal income tax finalization declaration for organizations and individuals that pay income from salaries and wages, they must also declare additional monthly and quarterly declarations with corresponding errors or omissions.

b) Taxpayers who make additional declarations that lead to an increase in the tax amount payable or a decrease in the tax amount that has been refunded by the state budget must pay the full amount of the increased tax amount payable or the excess tax amount refunded and late payment interest into the state budget (if any).

In case the additional declaration only increases or decreases the amount of value-added tax that is still deductible for the next period, it must be declared in the current tax period. Taxpayers can only make additional declarations to increase the value-added tax amount requested for refund when they have not yet submitted the tax declaration for the next tax period and have not submitted the tax refund request.

Pursuant to Official Dispatch No. 3975/TCT-CS dated October 28, 2022 of the General Department of Taxation, the instructions are as follows:

In case Nam Thang Long Urban Area Development Company Limited and Vietnam Joint Stock Commercial Bank for Industry and Trade agree to terminate (liquidate) the lease contract ahead of time for Land Lot TM1, the General Department of Taxation agrees with the opinion on handling Hanoi Tax Department stated in official dispatch No. 46108/CTHN-TTHT: Nam Thang Long Urban Area Development Company Limited issues electronic invoices according to the actual value incurred according to the provisions of Clause 1, Article 4. Decree No. 123/2020/ND-CP, replacing previously issued invoices. Nam Thang Long Urban Area Development Company Limited, based on the newly created replacement electronic invoice, declares VAT and corporate income tax according to current regulations; Based on previously issued invoices (2009, 2010), to declare a reduction in taxable revenue and tax obligations (VAT, CIT) respectively in the period when the replacement electronic invoice arises (2022), Do not make additional tax declarations for the previous tax period.

According to the regulations and instructions above, for invoices issued for the entire rental period, if the rental contract is terminated before the deadline:

• The parties issue a new invoice corresponding to the rental period and actual payment amount to replace the previously issued invoice;
• Regarding additional tax declaration: The lessor and the lessee have different tax obligations, so each party bases on the actual situation of their tax obligations and applies Clause 4, Article 7 of Decree No. 126/2020/ ND-CP for additional declaration:
  • In case the tax liability does not change, only the Additional Declaration Explanation and related documents must be submitted, not the Additional Declaration;
  • In case the additional declaration only increases or decreases the amount of value-added tax that is still deductible for the next period, it must be declared in the current tax period;
  • In other cases, additional declaration must be made in the previously declared tax period.