Distinguishing between fees and charges is crucial knowledge for accountants and business owners to ensure accurate accounting and compliance with government regulations. According to the 2015 Law on Fees and Charges, the current system includes 323 fees and 197 charges, directly impacting business expenses and cash flow. Understanding the nature of these two types of revenue helps businesses avoid errors during tax settlements, while also ensuring proper administrative procedures and more effective financial management.
In reality, in Vietnam, confusion between these two types often leads to incorrect account entries or the application of incorrect rates. Value Added Tax (VAT) rates Regarding public services, the following article by MAN – Master Accountant Network will provide a comprehensive overview, helping you scientifically distinguish between fees and charges based on the highest legal grounds currently in place, such as: Law on Fees and Charges No. 97/2015/QH13. Let's follow along to grasp the most up-to-date knowledge for your accounting work.
Current legal framework on fees and charges in Vietnam
To accurately distinguish between fees and charges, we need to refer to currently effective legal documents. Currently, the Law on Fees and Charges of 2015 is the central document, replacing the Ordinance on Fees and Charges of 2001, marking a turning point in public financial management.
Specifically, the guidance documents include:
- Law on Fees and Charges No. 97/2015/QH13 promulgated on November 25, 2015.
- Decree No. 120/2016/ND-CP Regulations detailing and guiding the implementation of certain articles of the Law on Fees and Charges.
- The specialized circulars of the Ministry of Finance specify the fee levels for each type of public service.
A proper understanding of legal regulations helps accountants answer the question of how fees and charges differ when conducting transactions with government agencies, thereby ensuring the validity of input documents.
Distinguishing between fees and charges: Concepts and legal nature
The first difference between fees and charges lies in their legal definitions. Although both are revenues belonging to the state budget, their purposes and nature of service are completely different.
What are fees?
According to Clause 1, Article 3 of the 2015 Law on Fees and Charges, a fee is an amount of money that organizations and individuals must pay to essentially compensate for costs and provide services when receiving public services from state agencies or authorized organizations. Simply put, fees and charges in this case represent a relatively equal exchange; you pay to receive a specific service value.
What are the fees?
Conversely, fees (Clause 2, Article 3 of the Law on Fees and Charges 2015) are fixed amounts of money that organizations and individuals must pay when receiving public services from state agencies to support state management. Here, fees are not intended to compensate for costs but rather to acknowledge a right or legal recognition of the payer (for example, registration fees, license fees).
Clarifying what fees are helps businesses correctly classify expenses that are not subject to VAT, as fees that are part of the state budget are generally not subject to this tax.
A detailed comparison table to differentiate between fees and charges.
For your convenience in auditing and reconciliation, MAN provides a summary table to help you differentiate between fees and charges based on the most important criteria in corporate financial management.
| Criteria | Fee | Fees |
| Nature | It is payment for public services that are directly received. | It is a fee paid for legal or administrative recognition. |
| Purpose of collection | Essentially, it covers the costs of investing in and operating public services. | It serves the purpose of state administration, not to offset costs. |
| Equivalent value | It is a reciprocal service (paying for a service that is commensurate with the price). | Not based on equal value (Revenue is set by the State). |
| Collection authority | State agencies, public service units, and authorized organizations. | The only competent authority is the State agency. |
| Use the collected funds. | A portion of the revenue may be retained to cover the costs of providing the service. | Normally, 100% is paid into the state budget (except in special cases). |
| Subjects subject to VAT | Some types of fees that have been converted to a service pricing mechanism are subject to VAT. | Not subject to VAT. |
The table above shows that fees and charges differ significantly in their structure and collection methods. While fees are calculated based on economic and technical standards, charges are fixed and predetermined according to a specific category.
Distinguish between fees and charges through practical examples.
To understand the difference between fees and charges, let's consider some real-world situations that businesses often encounter. Incorrect classification in tax reporting can lead to the risk of back taxes or administrative penalties.
Examples of common types of fees
- Driving test fee: You pay the fee for the relevant agency to organize the exam, rent the venue, and provide equipment for your use.
- Park and museum entrance fees: Pay to enter and use the museum's facilities.
- Fees for providing business information: Pay for the effort put into searching and extracting data from national databases.
Examples of common types of fees
- Registration fee: This fee is paid when registering ownership of property (cars, houses, land). The government does not provide you with any specific service corresponding to that large sum of money; you pay it to have your property rights recognized.
- Business license fee: An annual fee that businesses pay to maintain their operating status.
- Passport issuance fee: Submit to the State for a document certifying the right to international travel.
When comparing fees and charges, it's clear that fees are associated with "purchasing" a specific service, while charges are associated with "establishing" a legal status.
Distinguishing between Taxes, Fees, and Charges: Points of Intersection and Difference
In the financial system, many people not only want to distinguish between fees and charges but also confuse them with taxes. These are the three pillars of the state budget, but they have different binding natures.
Distinguishing taxes, fees, and charges based on their refundable nature:
- Tax: It is a mandatory payment, not a direct refund. You pay taxes, but you cannot demand that the government build a road specifically for you in front of your house.
- Fee: There is direct and clear return on investment through public services.
- Fees: It has direct legal/administrative reimbursement implications.
Businesses are often concerned about fees and charges because they are usually included in deductible expenses when determining tax liability. corporate income tax (CIT) if there is valid documentation Circular 78/2014/TT-BTC.
Principles for determining fee levels and authority for issuing regulations.
Understanding who has the authority to set fees will help you distinguish between proper charges and fees when dealing with revenue-generating public service entities.
- Regarding Fees: The revenue level is determined to cover costs, taking into account socio-economic development policies. The authority to regulate this level usually rests with the Government, the Ministry of Finance, or the Provincial People's Council.
- Regarding Fees: The fees are predetermined, without taking into account the cost of providing the service. Decision-making authority is usually concentrated at the central level to ensure uniformity nationwide.
This difference in authority reaffirms the distinction between fees and charges in the nature of state power. Fees represent a higher level of managerial authority compared to fees.
How to account for fees and charges in business accounting.
As a professional accountant, after distinguishing between fees and charges, you need to record them in the correct accounting system according to regulations.
Typically, these amounts are accounted for as follows:
- Account 642 (Business Management Expenses): Regarding fees and charges for general services such as business license fees, road tolls, etc.
- Account 241/211: Regarding registration fees when purchasing fixed assets (added to the original cost).
Note that some items that were previously considered fees have now been reclassified as service prices. In this case, we no longer call them fees but "service prices," and they are invoiced with VAT. Confusing fees and charges with service prices will lead to incorrect declarations of input VAT deductions.
Why do businesses need expert advice on Tax and Accounting?
Distinguishing between fees and charges may seem simple, but it carries significant tax risks if not properly advised. This is especially true in the context of ongoing regulations on electronic invoices and the shift from fees to service charges.
Businesses often face difficulties in:
- Determine whether fee/charge documents are considered valid when calculating deductible expenses.
- Classify the fees that are deductible for VAT and those that are not.
- Handling fees incurred abroad in import and export transactions.
To thoroughly address these issues, businesses need a partner with in-depth knowledge of Vietnamese law and international accounting standards.
Conclude
Distinguishing between fees and charges accurately is fundamental to building a transparent and legally compliant financial reporting system. Through this article, MAN hopes to have provided readers with valuable knowledge to confidently apply in practice, helping to optimize financial obligations and minimize legal risks for businesses.
If your business is struggling with tax settlements or needs a professional financial management solution, let us help you. MAN – Master Accountant Network Partnering with you. We are proud to offer solutions:
- Auditing services Independent, objective, and ethical.
- Tax accounting services A complete package, giving businesses peace of mind to focus on their operations.
- Tax consulting services, tax settlement and establish tax reporting In-depth.
With a team of experienced professionals, MAN is committed to delivering the highest practical value, helping businesses stand firm against any inspection. Contact us today to receive the most dedicated and professional support!
Service contact information at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about the Difference Between Fees and Charges
Although formerly known as Business License Tax, according to Decree 139/2016/ND-CP, it is now accurately classified as a fee. When distinguishing between fees and charges, the business license fee belongs to the group of fees paid to maintain administrative operations.
Fees included in the list of payments to the State Budget are not subject to VAT. However, if the revenue has been converted to a service pricing mechanism (such as wharf fees, sanitation fees, etc.), then it is subject to VAT.
The best way is to consult the List issued with the Law on Fees and Charges 2015. This is the only legal basis for accurately determining the nature of the revenue. Is the business license fee a fee or a charge?
Are these fees subject to VAT?
How can you tell if a payment is a fee or a charge?
