How to calculate the taxable revenue of household businesses and individual businesses in Vietnam?
How to calculate the taxable revenue of household businesses and individual businesses in Vietnam?
According to Clause 1, Article 10 of Circular 40/2021/TT-BTC, the taxable revenue for VAT and PIT for household businesses and individual businesses is regulated as follows:
Taxation Basis
The taxation 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 includes the revenue (in case it is taxable) from the entire amount generated from sales, outsourcing, commissions, and service provisions during the tax period from activities in production, trading goods, and services, including bonuses, incentives for achieving sales targets, promotions, trade discounts, payment discounts, support in cash or in kind; subsidies, surcharges, extra fees received as regulated; compensation for contract violations, other compensations (only considered in the taxable revenue for PIT); other revenue the household business or individual business is entitled to, regardless of whether the money is collected or not.
Accordingly, the taxable revenue for household businesses and individual businesses includes all amounts collected or yet to be collected from production, business activities, and service provisions, such as:
- Sales revenue, outsourcing, service provision, commissions.
- Support and promotional amounts:
+ Bonuses, incentives for achieving sales targets.
+ Promotions, trade discounts, payment discounts.
+ Support in cash or in kind.
- Subsidies, surcharges, extra fees received as regulated;
- Compensation for contract violations, other compensations (only considered in the taxable revenue for PIT);
- Other revenues: Amounts the household business or individual business is entitled to, regardless of whether the money is collected or not.
Taxable revenue is determined for the tax period, independent of whether the money has been collected or not.
How to calculate the taxable revenue of household businesses and individual businesses in Vietnam? (Image from the Internet)
How to calculate the tax payable by household businesses and individual businesses in Vietnam?
Based on Clause 3, Article 10 of Circular 40/2021/TT-BTC, the determination of the tax payable by household businesses and individual businesses is as follows:
(1) VAT payable = Taxable VAT revenue x VAT rate
(2) PIT payable = Taxable PIT revenue x PIT rate
In which:
- Taxable VAT and PIT revenue as guided in clause 1 of this Article.
- VAT rate and PIT rate as guided in Annex I issued with this Circular.
What are the VAT rate and the PIT rate applied to individual and household businesses in Vietnam?
The VAT rate and the PIT rate applied to individual and household businesses, according to Annex I issued with Circular 40/2021/TT-BTC, regulates the list of industries for calculating VAT and PIT by percentage on revenue for household businesses and individual businesses as follows:
| No. | Industry List | % VAT Calculation Rate | PIT Rate |
|---|---|---|---|
| 1. | Distribution, Supply of Goods | ||
| - Wholesale, retail activities for various goods (excluding the real value of goods agency sold at a fixed price enjoying commission); - Bonuses, incentives for achieving sales targets, promotions, trade discounts, payment discounts, support in cash or in kind for contract households; |
1% | 0.5% | |
| - Distribution, supply activities for goods not subject to VAT, not required to declare VAT, subject to VAT at 0% as per VAT law; - Cooperation business activities with organizations from this industry group where the organization is responsible for declaring VAT for the entire revenue from the cooperation business activity as per regulations; - Bonuses, support for achieving sales targets, promotions, trade discounts, payment discounts, support in cash or in kind for contract households linked with goods and services not subject to VAT, not required to declare VAT, subject to VAT at 0% as per VAT law; - Compensation for contract violations, other compensations. |
- | 0.5% | |
| 2 | Services, Construction Without Supply of Raw Materials | ||
| - Lodging service includes: Providing short-term accommodation for tourists, other transient guests; providing long-term accommodation not being apartments for students, workers, and similar entities; providing accommodation with catering services or entertainment facilities; - Freight handling services and other support services related to transportation such as station operation, ticket sales, vehicle storage; - Postal services, mailing and parcel delivery; - Brokerage, auction, and agency commission services; - Legal consultancy, financial consultancy, accounting, auditing services; services for administrative procedures in tax, customs; - Data processing services, information portal leasing, IT equipment, telecommunications; advertising on products, digital content services; - Office support services and other business support services; - Sauna, massage, karaoke, disco, billiards, internet, game services; - Tailoring, laundry services; hairdressing, barber services, shampooing services; - Other repair services including: computer repair and household goods repair; - Basic construction consultancy, design, supervision services; - Other services subject to VAT calculation by deduction method with a VAT rate of 10%; - Construction, installation without supply of raw materials (including installation of machinery, industrial equipment); |
5% | 2% | |
| - Service provision activities not subject to VAT, not required to declare VAT, subject to VAT at 0% as per VAT law; - Cooperation business activities with organizations from this industry group where the organization is responsible for declaring VAT for the entire revenue from the cooperation business activity as per regulations; - Compensation for contract violations, other compensations; |
- | 2% | |
| - Leasing assets includes: + Leasing houses, land, shops, factories, warehouses except lodging services; + Leasing means of transport, machinery, equipment without operators; + Leasing other assets without services attached |
5% | 5% | |
| - Lottery agency, insurance agency, multi-level sales agency; - Compensation for contract violations, other compensations. |
- | 5% | |
| 3. | Manufacturing, Transportation, Services with Goods Attached, Construction With Supply of Raw Materials | ||
| - Manufacturing, processing, and fabricating products; - Exploitation and processing of minerals; - Freight and passenger transportation; - Services attached with merchandise like training, maintenance, technology transfer attached with product sales; - Catering services; - Repair and maintenance services for machinery, vehicles, cars, motorcycles, and other motor vehicles; - Construction, installation with supply of raw materials (including installation of machinery, industrial equipment); - Other activities subject to VAT calculation by deduction method with a VAT rate of 10%; |
3% | 1.5% | |
| - Activities not subject to VAT, not required to declare VAT, subject to VAT at 0% as per VAT law; - Cooperation business activities with organizations from this industry group where the organization is responsible for declaring VAT for the entire revenue from the cooperation business activity as per regulations. |
- | 1.5% | |
| 4. | Other Business Activities | ||
| - Manufacturing activities of products subject to VAT calculation by deduction method with a VAT rate of 5%; | 2% | 1% | |
| - Provision of services subject to VAT calculation by deduction method with a VAT rate of 5%; | 2% | 1% | |
| - Other activities not listed in groups 1, 2, 3 above; | 2% | 1% |
Simultaneously, at Clause 2, Article 10 of Circular 40/2021/TT-BTC, it guides how to apply the tax rate on revenue as follows:
- The tax rate on revenue comprises the VAT rate and the PIT rate applied in detail to each field, industry according to the table above.
- In cases where household businesses or individual businesses engage in multiple fields or industries, they are required to declare and calculate tax according to the applied tax rate on revenue for each field or industry.
In cases where household businesses or individual businesses are unable to determine the taxable revenue from each field or industry, or if the determination is not consistent with actual business conditions, the tax authority imposes taxable revenue for each field or industry as per legal regulations on tax management.
- What are latest guiding documents on the Law on Personal Income Tax of Vietnam?
- What is a Tax Treaty? What are the responsibilities and powers of the tax authority in Vietnam in managing transfer pricing?
- What are cases eligible for 100% health insurance coverage in Vietnam from July 1, 2025? Do foreigners receive a personal income tax reduction when paying health insurance?
- What is the working regime of the General Department of Taxation of Vietnam?
- What is the method for calculating environmental protection fees for emissions in Vietnam from 2025?
- How many Deputy Directors does the General Department of Taxation of Vietnam have?
- What is the fireworks schedule for New Year's Eve 2025 in Ho Chi Minh City? Are fireworks subject to environmental protection tax?
- What are conditions for issuing an electricity license in Vietnam from February 1, 2025? Are revenues from electricity trading eligible for corporate income tax incentives in Vietnam?
- What are bases for formulation of medium-term and annual public investment plans in Vietnam from January 01, 2025? What are conditions for application of CIT incentives in Vietnam?
- Vietnam: What does the application for amendments to tax registration together with alternation of supervisory tax authority include?
