Administrative procedures today have been significantly streamlined compared to five years ago, allowing individuals to handle them independently. However, in practice, we still encounter difficulties in distinguishing legal terminology. In the following article, Luật Kim Bảng will help you differentiate between Taxes, Fees, and Charges.

1. Concepts

• Tax: A compulsory contribution required by law from individuals and legal entities to the State, which is non-reciprocal and not directly refundable.
• Charge (Lệ phí): A collection that serves both as a fee for performing certain administrative procedures for the payer and as a contribution to the State budget.
• Fee (Phí): A collection aimed at offsetting regular or irregular costs—such as construction, maintenance, or preservation by the State—for activities that serve the fee payers.

Taxes, fees, and charges are all sources of revenue for the State budget and possess legal status, but they have the following differences:

2. Legal Validity

Taxes hold higher legal validity than fees and charges. Taxes are issued as legislative documents, such as Laws or Ordinances, approved by the National Assembly and the Standing Committee of the National Assembly. The process of enacting a Tax Law follows a very strict procedure. In contrast, fees and charges are issued in the form of Decrees or Decisions by the Government; Decisions by Ministries, ministerial-level agencies, or Government-attached agencies; or Resolutions by Provincial People’s Councils.

3. Purpose and Socio-Economic Impact

Taxes have three major functions:

• Generating primary revenue for the State budget.
• Regulating production, business, management, and economic orientation.
• Ensuring equality among business entities and social justice. Taxes significantly impact a nation’s overall socio-economic development and are a crucial component of national financial policy.

Fees and charges do not have the aforementioned effects; their purpose is simply to generate revenue. Furthermore, this revenue is primarily used to cover the operating costs of agencies providing public services, such as notary services, property registration, or customs services. Additionally, taxes are ensured by State coercion and lack direct material benefits (non-reciprocity), while fees and charges are generally voluntary. The obligation to pay only arises when a subject directly utilizes services provided by the State. Taxes are non-refundable directly. While taxpayers benefit from public services, the value of those services is not necessarily proportional to the amount of tax paid.

4. Naming and Objectives

The purpose of each type of charge is very clear and usually matches its name (e.g., the name reflects the specific service). Each Tax Law has its own objective. however, most tax names do not reflect the specific purpose of use but rather the taxable object. Generally, tax revenue is used to fund the State budget to fulfill social management functions.

5. Scope of Application

• Tax:
  • No limits; no distinction between different subjects or territories.
  • Applies to almost all individuals and organizations.
• Fees and Charges:
  • Have a clear local and regional nature.
  • Apply only to individuals and organizations that request a specific service from a State agency.

The above information has been synthesized by LUẬT KIM BẢNG. We hope this article proves helpful for your future needs. You can contact our lawyers via Hotline/Zalo: 034.540.6523 for specific consultation.