How to calculate personal income tax for business households and business individuals in Vietnam?
What are principles of calculation of personal income tax for business households and business individuals in Vietnam?
Based on Article 4 of Circular 40/2021/TT-BTC, the principles for calculating PIT for business households and business individuals are as follows:
- The principles for calculating PIT for business households and business individuals shall be implemented in accordance with the current law on PIT and related legal documents.
- Business households and business individuals with an annual revenue of 100 million VND or less from production and business activities in a calendar year are exempt from PIT according to the PIT Law. Business households and business individuals are responsible for declaring taxes accurately, honestly, and fully, and submitting tax documents on time; and are liable before the law for the accuracy, honesty, and completeness of the tax documents as prescribed.
- For business households and individuals engaged in business in the form of a group of individuals or households, the annual revenue threshold of 100 million VND or less for determining non-taxable individuals is allocated to a single representative of the group of individuals or household in the tax year.
How to calculate personal income tax for business households and business individuals in Vietnam? (Image from the Internet)
How to calculate personal income tax for business households and business individuals in Vietnam?
Based on Article 10 of Circular 40/2021/TT-BTC and Appendix 1, PIT for business households and business individuals is calculated using the following formula:
PIT payable by business households and individuals = Taxable revenue x PIT rate
In which:
- The taxable revenue for PIT for business households and business individuals is the revenue including taxes (in case of taxable subjects) of the entire money received from sales, processing, commissions, services provided during the tax period from production and business activities of goods and services, including rewards, support for achieving sales, promotions, trade discounts, payment discounts, and financial or non-financial support; subsidies, surcharges, additional fees that are enjoyed in accordance with regulations; other revenues that business households and individuals engaged in business enjoy, regardless of whether money has been received.
- PIT rates are as follows:
| Business category | PIT rate |
| Distribution, supply of goods | |
| - Wholesale, retail of various types of goods (excluding the value of goods sold by agents at a fixed price earning commission); - Rewards, sales achievement support, promotions, trade discounts, payment discounts, financial or non-financial support for lump-sum households; |
0.5% |
| - Distribution, supply of goods not subject to VAT, not required to declare VAT, subject to 0% VAT according to the VAT Law; - Business cooperation activities with organizations in this category where the organization is responsible for declaring VAT for the entire revenue of the business cooperation activities according to regulations; - Rewards, sales achievement support, promotions, trade discounts, payment discounts, financial or non-financial support for lump-sum households associated with the purchase of goods or services not subject to VAT, not required to declare VAT, subject to 0% VAT according to the VAT Law; - Compensation for contract breaches, other compensations. |
0.5% |
| Services, construction not involving materials | |
| - Hospitality services including: Providing short-term accommodation for tourists and other transient guests; providing long-term accommodation not in apartments for students, workers, and similar subjects; providing accommodation with dining or recreational services; - Loading and unloading goods and other support services related to transportation such as terminal operation, ticket sales, vehicle parking and keeping; - Postal and courier services, letters, and parcels; - Brokerage and auction services and agency commissions; - Legal advisory, financial advisory, accounting, auditing services; administrative procedures for taxation, customs; - Data processing, renting portals, information technology, telecommunications equipment; advertising on digital content services; - Office support services and other business support services; - Sauna, massage, karaoke, dance halls, billiards, internet, games; - Tailoring, laundry services; hair cutting, hairstyling, shampooing; - Repair services, including: repair of computers and household goods; - Advisory, design, construction supervision services; - Other services subject to VAT calculated by the deduction method with the VAT rate of 10%; - Construction, installation without materials (including installation of machinery and industrial equipment); |
2% |
| - Services not subject to VAT, not required to declare VAT, subject to 0% VAT according to the VAT Law; - Business cooperation activities with organizations in this category where the organization is responsible for declaring VAT for the entire revenue of the business cooperation activities according to regulations; - Compensation for contract breaches, other compensations; |
2% |
| - Asset leasing including: + Leasing houses, lands, shops, workshops, and storage except accommodation services; + Leasing transportation vehicles, machinery, and equipment without operators; + Leasing other assets without accompanying services; |
5% |
| - Acting as lottery agents, insurance agents, multi-level marketing; - Compensation for contract breaches, other compensations. |
5% |
| Production, transportation, services attached to goods, construction involving materials | |
| - Producing, processing, manufacturing goods; - Extracting, processing minerals; - Goods transportation, passenger transportation; - Services provided with goods such as training, maintenance, technology transfer attached to product sales; - Dining services; - Repair and maintenance services for machinery, transport vehicles, cars, motorcycles, and other motor vehicles; - Construction, installation involving materials (including installation of machinery and industrial equipment); - Other activities subject to VAT calculated by the deduction method with the VAT rate of 10%; |
1.5% |
| - Activities not subject to VAT, not required to declare VAT, subject to 0% VAT according to the VAT Law; - Business cooperation activities with organizations in this category where the organization is responsible for declaring VAT for the entire revenue of the business cooperation activities according to regulations. |
1.5% |
| Other business activities | |
| - Production activities subject to VAT calculated by the deduction method with the VAT rate of 5%; | 1% |
| - Providing services subject to VAT calculated by the deduction method with the VAT rate of 5%; | 1% |
| - Other activities not listed in the above categories; | 1% |
Note: In cases where business households and individuals engaged in multiple fields and industries, they must declare and calculate taxes based on the tax rate on revenue applicable to each field and industry. If business households and individuals cannot determine the taxable revenue for each field and industry or determine it inaccurately, the tax authority will determine the taxable revenue for each field and industry according to the provisions of the Law on Tax Administration.
What are responsibilities of the General Department of Taxation of Vietnam in managing taxes for business households and individuals?
Based on Article 17 of Circular 40/2021/TT-BTC, supplemented by clause 4 Article 1 of Circular 100/2021/TT-BTC, the responsibilities of the General Department of Taxation in managing taxes for business households and individuals are as follows:
- Develop a set of risk criteria indicators for business households and individuals.
- Provide detailed guidance on the process of updating the database on business households and individuals at the Tax Department and Tax Branch.
- Direct the implementation of inspections and urge tax authorities and taxpayers to comply with tax policies and tax management for business households and individuals.
- Organize the implementation of e-invoices with the tax authority's code for business households and individuals according to the prescribed schedule. Cooperate with the provincial and city People’s Committees to implement the e-invoice project generated from a cash register connected to the tax authority. Develop a database on invoices with the tax authority’s code to ensure the management of taxes based on risks for business households, individuals, and related organizations and individuals.
- Develop solutions and a roadmap for providing information electronically from e-commerce platforms to the tax authority to build a database on tax management based on risks, ensuring information confidentiality as regulated, and facilitating the operation of e-commerce platforms. The General Department of Taxation guides the sharing and provision of information between the tax authority and e-commerce platforms.
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