Are sales on TikTok subject to personal income tax in Vietnam? What are the bases for calculating personal income tax for individual businesses in Vietnam?
Are sales on TikTok subject to personal income tax in Vietnam?
Based on Article 2 of the Law on Personal Income Tax 2007, the regulations regarding subjects liable to personal income tax are as follows:
Taxpayers
- Taxpayers are resident individuals who have taxable income generated within and outside the territory of Vietnam as stipulated in Article 3 of this Law, and non-resident individuals who have taxable income generated within the territory of Vietnam as stipulated in Article 3 of this Law.
- Resident individuals are those who meet one of the following conditions:
a) Being present in Vietnam for 183 days or more in a calendar year or in 12 consecutive months from the first day of presence in Vietnam;
b) Having a permanent residence in Vietnam, including a registered permanent residence or a leased house for living in Vietnam according to a term-based lease agreement.
- Non-resident individuals are those who do not meet the conditions stipulated in clause 2 of this Article.
Based on clause 1, Article 1 of the Law on Personal Income Tax 2007, as amended by Clause 1, Article 2 of the Law Amending Tax Laws 2014, income subject to personal income tax is defined as:
Income Subject to Tax
Income subject to personal income tax includes the following types of income, except for tax-exempt income stipulated in Article 4 of this Law:
- Income from business activities, including:
a) Income from the production and business activities of goods and services;
b) Income from the practice of independent professions of individuals with a permit or certificate of practice in accordance with the law.
Income from business activities stipulated in this clause does not include income of individual businesses with revenue of 100 million VND/year or less.
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Additionally, Clause 2, Article 4 of Circular 40/2021/TT-BTC states as follows:
Tax Calculation Principles
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- Business households and individuals with annual revenue from production and business activities of 100 million VND or less are not subject to VAT and personal income tax in accordance with the law on VAT and personal income tax. Business households and individuals are responsible for accurately, honestly, and fully declaring taxes and submitting tax records on time; they bear the responsibility before the law for the accuracy, honesty, and fullness of the tax records as stipulated.
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According to the above provisions, income from sales activities on TikTok is taxable as personal income. If an individual selling on TikTok has annual revenue exceeding 100 million VND, they must pay personal income tax. However, if the annual revenue is 100 million VND or less, they are not required to pay personal income tax.
Are sales on TikTok subject to personal income tax in Vietnam? (Image from the Internet)
What are the bases for calculating personal income tax for individual businesses in Vietnam?
According to Article 10 of Circular 40/2021/TT-BTC, the basis for calculating personal income tax for individual businesses are taxable revenue and the tax rate applied on revenue.
- Taxable Revenue
Taxable revenue for personal income tax for individual businesses includes revenue with tax (if subject to tax) from all sales, manufacturing, commissions, service offerings arising during the tax period from production, business activities, including bonuses, support for achieving sales targets, promotions, trade discounts, payment discounts, monetary or non-monetary support; subsidies, surcharge, extraordinary income, additional fees entitled to receive as per the regulations; contract violation compensations, other compensations; other income that the business individual receives regardless of whether the money has been collected or not.
- Tax Rate on Revenue
+ Tax rate on revenue, personal income tax rate applicable specifically to each domain, sector as guided in Appendix 1 attached to Circular 40/2021/TT-BTC.
+ In case a business individual operates in multiple fields, sectors, the individual must declare and calculate tax based on the tax rate on revenue applicable to each field, sector.
In cases where a business individual cannot determine the taxable revenue of each field, sector or determines it inaccurately compared to the actual business, the tax office will determine the taxable revenue of each field, sector according to legal provisions on tax management.
- Determining Tax Payable
Tax Payable = Taxable Revenue x Personal Income Tax Rate
Where:
- Taxable Revenue is as guided in Clause 1, Article 10 of Circular 40/2021/TT-BTC.
- Personal Income Tax Rate is as guided in Appendix 1 issued with Circular 40/2021/TT-BTC.
What are regulations on personal income tax calculation for individual businesses paying tax separately in Vietnam?
According to Article 6 of Circular 40/2021/TT-BTC, the method for calculating personal income tax for individual businesses paying tax separately is regulated as follows:
- The method of tax declaration separately applies to individual businesses who do not operate regularly and do not have a fixed business location.
Non-regular business activities are determined based on the characteristics of production and business activities of each field, sector, and as determined by individuals for opting tax declaration method according to the guidance in Circular 40/2021/TT-BTC.
Fixed business location is where individuals engage in production, business activities such as transaction venues, shops, workshops, warehouses, or similar locations.
- individual businesses paying tax separately include:
+ Mobile individual businesses;
+ Individuals who are private construction contractors;
+ Individuals transferring the ".vn" internet domain name;
+ Individuals with income from digital information content products and services if not opting to pay tax by declaration method.
- individual businesses paying tax separately are not required to implement accounting policies, but must retain invoices, records, contracts, documents proving legality of goods, services, and present them along with tax declaration records separately.
- individual businesses paying tax separately conduct tax declaration upon arising taxable revenue.
