How much is the revenue of household businesses and individual businesses that are exempt from paying VAT and PIT in Vietnam?

Which entities are household businesses and individual businesses in Vietnam?

According to Clause 1, Article 2 Circular 40/2021/TT-BTC, household businesses and individual businesses are defined as follows:

Subjects of Application

1. household businesses and individual businesses are resident individuals engaged in the production and trading of goods and services in all fields and industries in accordance with the law, including the following specific cases:

a) Practicing independently in fields and industries that require licenses or professional certificates according to the law;

b) Acting as agents selling at the right price for lottery agents, insurance agents, multi-level marketing agents directly signing contracts with lottery companies, insurers, multi-level marketing companies;

c) Cooperating in business with organizations;

d) Engaging in agricultural, forestry, salt production, aquaculture, and seafood harvesting activities that do not meet the conditions for tax exemption as stipulated by VAT and PIT laws;

e) Engaging in e-commerce activities, including individuals earning income from digital content product and service information in accordance with e-commerce laws.

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Thus, according to the above regulation, household businesses and individual businesses are resident individuals engaged in the production and trading of goods and services in all fields and industries in accordance with the law.

How much is the revenue of household businesses and individual businesses that are exempt from paying VAT and PIT in Vietnam? (Image from the Internet)

How much is the revenue of household businesses and individual businesses that are exempt from paying VAT and PIT in Vietnam?

According to Article 4 Circular 40/2021/TT-BTC, the principles for calculating VAT and PIT for household businesses and individual businesses are defined as follows:

Tax Calculation Principles

1. The tax calculation principles for household businesses and individual businesses are implemented according to the current laws on VAT, PIT, and related legal documents.

2. household businesses and individual businesses with annual revenue from production and trading activities in the calendar year of 100 million VND or less are not subject to VAT and PIT as stipulated by VAT and PIT laws. household businesses and individual businesses must declare taxes accurately, honestly, and fully and submit tax dossiers on time; they are responsible before the law for the accuracy, truthfulness, and completeness of the tax dossiers according to regulations.

3. For household businesses and individual businesses operating as a group of individuals or household, the revenue of 100 million VND/year or less to determine individuals not paying VAT or PIT is calculated for a single representative of the group of individuals or household in the tax year.

Thus, in cases where household businesses or individual businesses have an annual revenue from production and business activities in the calendar year of 100 million VND or less, they are not subject to VAT and PIT according to the provisions of VAT and PIT laws.

In addition, for household businesses and individual businesses operating as a group of individuals or household, the revenue of 100 million VND/year or less to determine individuals not paying VAT and PIT is calculated for a single representative of the group of individuals or household in the tax year.

* Note: household businesses and individual businesses are responsible for declaring taxes accurately, honestly, and fully and submitting tax dossiers on time; they are responsible before the law for the accuracy, truthfulness, and completeness of the tax dossiers according to regulations.

How to calculate VAT and PIT for household businesses and individual businesses paying taxes by the declaration method in Vietnam?

The method of calculating VAT and PIT for household businesses and individual businesses paying taxes by the declaration method is stipulated in Article 5 Circular 40/2021/TT-BTC as follows:

- The declaration method applies to large-scale household businesses and individual businesses; and household businesses and individual businesses not meeting large-scale criteria but opting to pay taxes by the declaration method.

- household businesses and individual businesses paying taxes by the declaration method declare taxes monthly, except for newly established household businesses and individual businesses and those meeting quarterly tax declaration criteria and choosing to declare taxes quarterly as stipulated in Article 9 Decree 126/2020/ND-CP.

- household businesses and individual businesses paying taxes by the declaration method, if determining tax revenue inconsistently with practical conditions, the tax authority shall determine the taxable revenue according to Article 50 Law on Tax Administration 2019.

- household businesses and individual businesses paying taxes by the declaration method must comply with policies on accounting, invoices, and receipts. In cases where household businesses and individual businesses in fields or industries can determine revenue according to confirmation from competent authorities, they are exempt from complying with accounting policies.

- household businesses and individual businesses paying taxes by the declaration method are not required to finalize taxes.