How to calculate payable personal income tax (PIT) and value added tax (VAT) for individual businesses in Vietnam?
How to calculate payable personal income tax (PIT) and value added tax (VAT) for individual businesses in Vietnam?
Based on Clause 3, Article 10 of Circular 40/2021/TT-BTC, the formula for calculating payable PIT and VAT for household businesses and individual businesses is as follows:
(1) Payable VAT = VAT Taxable Revenue x VAT Tax Rate
(2) Payable PIT = PIT Taxable Revenue x PIT Tax Rate
How to calculate payable personal income tax (PIT) and value added tax (VAT) for individual businesses in Vietnam? (Image from the Internet)
What is the taxable revenue for PIT and VAT regarding individual businesses in Vietnam?
According to Clause 1, Article 10 of Circular 40/2021/TT-BTC, the taxable revenue for VAT and PIT concerning household businesses and individual businesses includes:
Tax Calculation Basis
The tax basis for household businesses and individual businesses is the taxable revenue and the tax rate applied to the revenue.
1. Taxable Revenue
The taxable revenue for VAT and PIT for household businesses and individual businesses is the revenue inclusive of tax (if liable) of the total sales, manufacturing revenue, commissions, service provision revenue generated during the tax period from production, business activities, including bonuses, incentives, promotions, trade discounts, payment discounts, support in cash or kind; subsidies, surcharges, additional fees as required; compensation for contract breaches, other compensations (only counted towards PIT taxable revenue); other revenue that household businesses and individual businesses receive, regardless of whether it is collected.
Thus, the taxable revenue for PIT and VAT in terms of household businesses and individual businesses includes the following items:
- Total sales revenue, manufacturing revenue, commissions, service provision revenue arising during the tax period.
- Bonuses, incentives achieved from sales, promotions.
- Trade discounts, payment discounts.
- Support payments (in cash or in kind).
- Price subsidies, surcharges, additional fees entitled as per regulations.
* Special items only counted towards PIT taxable revenue: Breach of contract compensation or other compensations.
What is the tax rate for VAT and PIT on individual businesseship revenue in Vietnam?
According to Clause 1, Article 10 of Circular 40/2021/TT-BTC, it is guided that:
- The tax rate applied to revenue includes VAT tax rate and PIT tax rate specifically applied for each sector, according to Appendix I issued with Circular 40/2021/TT-BTC.
- In case of engaging in multiple sectors:
+ individual businesses must declare and calculate taxes separately for each sector according to corresponding tax rates.
+ If unable to determine the taxable revenue for each sector or if it is inaccurately determined compared to actual business, the tax authority will fix the revenue in accordance with legal provisions.
Appendix I issued with Circular 40/2021/TT-BTC specifies the list of sectors for calculating VAT and PIT as a percentage on the revenue of household businesses, individual businesses as follows:
| No. | List of Sectors | VAT Rate % | PIT Rate % |
|---|---|---|---|
| 1. | Distribution, provision of goods | ||
| - Wholesale, retail activities of various goods (excluding the value of goods sold on commission basis); - Bonuses, sales incentives, promotions, trade discounts, payment discounts, cash or in-kind support for commissioned households; |
1% | 0.5% | |
| - Distribution, provision of goods not subject to VAT, not required to declare VAT, under 0% VAT according to VAT law; - Business cooperation activities with organizations in these sectors where the organization is responsible for declaring VAT for all revenue of the cooperative business according to regulations; - Bonuses, sales incentives, promotions, trade discounts, payment discounts, cash or in-kind support for households linked to purchasing goods, services not subject to VAT, not required to declare VAT, under 0% VAT according to VAT law; - Compensation for contract breaches, other compensations. |
- | 0.5% | |
| 2 | Services, construction without supply of materials | ||
| - Accommodation services include: Providing short-term accommodation for tourists, other transient guests; providing long-term accommodation that is not apartments for students, workers and similar subjects; providing accommodation with food services or recreational facilities; - Goods handling services and other supporting activities related to transportation such as yard operations, ticket sales, vehicle watch keeping; - Postal and courier services; - Brokerage services, auction and agency commissions; - Legal consultancy services, financial consulting, accounting, auditing; services on tax procedures, customs; - Data processing services, renting of information portals, IT equipment, telecommunications; advertising on digital content products, services; - Office support services and other business support services; - Sauna, massage, karaoke, discos, billiards, internet, games services; - Tailoring, laundry; haircutting, hairdressing, shampooing services; - Other repair services include: repair of computers and household goods; - Consulting, design, construction supervision services; - Other services subject to VAT under the deduction method at a 10% VAT rate; - Construction, installation without supply of materials (including the installation of industrial machinery and equipment); |
5% | 2% | |
| - Provision of services not subject to VAT, not required to declare VAT, under 0% VAT according to VAT law; - Business cooperation activities with organizations in these sectors where the organization is responsible for declaring VAT for all revenue of the cooperative business according to regulations; - Compensation for contract breaches, other compensations; |
- | 2% | |
| - Leasing assets includes: + Leasing houses, land, stores, workshops, yards excluding accommodation services; + Leasing means of transport, machinery, equipment without operators; + Leasing other assets without accompanying services |
5% | 5% | |
| - Lottery agents, insurance agents, multi-level marketing; - Compensation for contract breaches, other compensations. |
- | 5% | |
| 3. | Manufacturing, transport, services associated with goods, construction with supply of materials | ||
| - Manufacture, processing, production of products; - Mining, processing of minerals; - Goods transportation, passenger transportation; - Services associated with selling products such as training services, maintenance, technology transfer with product sales; - Food and beverage services; - Repair and maintenance services of machinery, equipment, vehicles, cars, motorcycles, and other motor vehicles; - Construction, installation with the supply of materials (including the installation of industrial machinery and equipment); - Other activities subject to VAT under the deduction method with a 10% VAT rate; |
3% | 1.5% | |
| - Activities not subject to VAT, not required to declare VAT, under 0% VAT according to VAT law; - Business cooperation activities with organizations in these sectors where the organization is responsible for declaring VAT for all revenue of the cooperative business according to regulations. |
- | 1.5% | |
| 4. | Other business activities | ||
| - Production of products subject to VAT under the deduction method with a 5% VAT rate; | 2% | 1% | |
| - Provision of services subject to VAT under the deduction method with a 5% VAT rate; | 2% | 1% | |
| - Other activities not listed in the above groups 1, 2, 3; | 2% | 1% |
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