Do household businesses not registered for business have to pay PIT in Vietnam?

Do household businesses not registered for business have to pay PIT in Vietnam?

Based on Article 2 of Circular 40/2021/TT-BTC, it is stipulated that household businesses and individuals must pay value-added tax and personal income tax as follows:

Applicable subjects

1. household businesses, individual business persons who are residents engaged in the production, trading of goods, services in all fields, industries as prescribed by law, including the following cases:

a) Practicing independently in fields, industries licensed or certified to practice according to the law;

b) Acting as agents selling at face value for lottery agents, insurance agents, multi-level sales agents directly signing contracts with lottery businesses, insurers, multi-level selling enterprises;

c) Cooperating in business with organizations;

d) Producing, doing agricultural, forestry, salt production, aquaculture, fishing which do not meet conditions for tax exemption under the provisions of VAT law, PIT law;

đ) E-commerce activities, including cases where individuals earn income from digital content products, services according to e-commerce laws.

2. household businesses, individuals engaging in production and trading at border markets, border gate markets, markets in border economic areas on Vietnamese territory;

3. Individuals leasing assets;

4. Individuals transferring Vietnam national Internet domain names “.vn”;

5. Organizations cooperating in business with individuals;

6. Organizations, individuals declaring, paying taxes on behalf of individuals;

7. Lottery enterprises, insurers, multi-level selling enterprises paying income directly to agents selling at face value for lottery, insurance, multi-level sales;

8. Tax authorities, state agencies, organizations, and individuals involved.

Simultaneously, based on Article 4 of Circular 40/2021/TT-BTC regarding tax calculation principles as follows:

Tax calculation principles

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2. household businesses, individual business persons with annual calendar year revenue from production and trading under 100 million VND are not subject to VAT and PIT as stipulated by VAT and PIT law. household businesses, individuals are responsible for accurately, truthfully, and fully declaring taxes and submitting tax documents on time; they are accountable to the law for the accuracy, truthfulness, and completeness of tax documents as prescribed.

3. For household businesses, individuals organized as a group or family, the revenue level under 100 million VND/year to determine that an individual is not subject to VAT, not subject to PIT is established for one (01) unique representative of the group or family during the tax year.

Hence, household businesses not registered for business must still pay PIT, except in the following cases:

- household businesses with annual calendar year revenue from production, trading under 100 million VND.

- household businesses organized as a family with revenue level under 100 million VND/year to determine that an individual is not subject to PIT is established for 01 unique representative of the group or family during the tax year.

Do household businesses not registered for business have to pay PIT in Vietnam? (Image from the Internet)

What is the basis for calculating PIT for household businesses in Vietnam?

Based on Clauses 1 and 2, Article 10 of Circular 40/2021/TT-BTC, the basis for calculating PIT for household businesses is taxable revenue and tax rate computed on revenue.

In detail:

- Taxable revenue for household businesses includes:

+ Revenue including taxes (if subject to tax) of the entire selling price, processing fees, commissions, service provision arising during the tax period from production, trading activities, including bonuses, support for achieving sales, promotions, trade discounts, payment discounts, support in cash or non-cash.

+ Price supports, surcharges, extra fees received as per regulations.

+ Compensation for breaches of contract and other compensations.

+ Other revenues entitled to by the household business, irrespective of whether money is collected or not.

- The tax rate on revenue is the PIT tax rate applied in detail to each field, profession as guided in Appendix 1 issued with Circular 40/2021/TT-BTC.

In cases where household businesses engage in multiple fields, industries, the household shall declare and calculate taxes according to the tax rate on revenue applicable to each field, industry. When a household business cannot determine taxable revenue for each field, industry or determines it inaccurately according to actual business conditions, the tax authority shall impose taxable revenue for each field, industry as prescribed by tax administration law.

What is the formula for calculating PIT for household businesses in Vietnam?

Based on Clause 3, Article 10 of Circular 40/2021/TT-BTC, the formula for calculating PIT that household businesses must pay is determined as follows:

In which:

- Taxable Revenue is guided according to Clause 1, Article 10 of Circular 40/2021/TT-BTC.

- PIT Rate is guided in Appendix 1 issued together with Circular 40/2021/TT-BTC.