How to calculate VAT for business households and individuals in Vietnam?
What are business households and individuals in Vietnam?
Pursuant to Clause 1, Article 2 of Circular 40/2021/TT-BTC, business households and individuals are resident individuals engaged in the production and trading of goods and services in all sectors and industries as stipulated by law, including the following cases:
- Practicing independently in professions and industries that are licensed or certified according to the provisions of law;
- Engaging in agency activities selling at fixed prices for lottery agents, insurance agents, and multi-level sales agents who have signed a direct contract with a lottery enterprise, insurer, or multi-level sales enterprise;
- Cooperating in business with organizations;
- Engaging in the production and trading of agriculture, forestry, salt making, aquaculture, and fishing activities that do not meet the tax exemption conditions as stipulated by the law on VAT and personal income tax;
- Operating e-commerce, including cases where individuals earn income from digital content products and services as stipulated by the law on e-commerce.
How to calculate VAT for business households and individuals in Vietnam? (Image from the Internet)
How to calculate VAT for business households and individuals in Vietnam?
Based on Article 10 of Circular 40/2021/TT-BTC and Appendix 1, VAT for household businesses and individuals is calculated as follows:
VAT payable by household businesses and individuals = Taxable VAT revenue x VAT rate
Where:
- Taxable VAT revenue is the revenue including tax (in case of taxable goods) of the total sale proceeds, processing fees, commissions, service provision proceeds during the tax period from production and trading activities of goods and services, including bonuses, support for achieving sales targets, promotions, commercial discounts, payment discounts, support in cash or in kind; subsidies, surcharges, extra charges, additional fees according to regulations; other revenue that household businesses and individuals are entitled to, regardless of whether the money has been collected or not.
- VAT rates are as follows:
| Industry section | VAT rate (%) |
| Distribution and supply of goods | |
| - Wholesale and retail trading of various goods (excluding the value of goods sold under fixed prices where commission is earned); - Bonuses, support for achieving sales targets, promotions, commercial discounts, payment discounts, support in cash or in kind for contracting households; |
1% |
| - Distribution and supply of goods not subject to VAT, not required to declare VAT, subject to 0% VAT according to tax laws; - Business cooperation with organizations in this industry section, where the organization is responsible for declaring VAT on the entire revenue from the business cooperation as prescribed; - Bonuses, support for achieving sales targets, promotions, commercial discounts, payment discounts, support in cash or in kind for contracting households associated with trading goods and services not subject to VAT, not required to declare VAT, subject to 0% VAT according to tax laws; - Contract violation damages, other compensations. |
- |
| Services and construction without raw materials | |
| - Accommodation services including short-term lodging for tourists, casual guests; long-term lodging services not apartments for students, workers and similar clients; lodging services with food and recreational facilities; | 5% |
| - Goods loading services and other support services related to transportation such as parking, ticket selling, vehicle care; - Postal services, express mail services and parcel delivery; - Brokerage, auction and agency commission services; - Legal, financial, accounting, auditing consultancy services; tax, customs clearance administrative services; - Data processing services, leasing of information portals, IT equipment, telecommunications; advertising on digital content services; - Office support services and other business support services; - Sauna, massage, karaoke, dance hall, billiards, internet, and gaming services; - Tailoring, laundry services; hairdressing and haircutting services; - Other repair services including computer and household appliance repairs; - Consulting, designing, construction supervision services; - Other services subject to VAT under the deduction method with a VAT rate of 10%; - Construction, installation without raw materials (including the installation of industrial machinery and equipment); |
5% |
| - Providing services not subject to VAT, not required to declare VAT, subject to 0% VAT according to tax laws; - Business cooperation with organizations in this industry section, where the organization is responsible for declaring VAT on the entire revenue from the business cooperation as prescribed; - Contract violation damages, other compensations; |
- |
| - Asset leasing including: + Leasing houses, lands, shops, factories, storage except accommodation services; + Leasing vehicles, machines, equipment without operator; + Leasing other assets without services; |
5% |
| - Lottery agency, insurance agency, multi-level sales agency; - Contract violation damages, other compensations. |
- |
| Manufacturing, transportation, services with goods, construction with raw materials | |
| - Manufacturing, processing of products and goods; - Mining, processing minerals; - Goods and passenger transportation; - Services accompanying the sale of goods like training, maintenance, technology transfer accompanying product sales; - Catering services; - Repair and maintenance services for machinery, equipment, transportation vehicles, cars, motorbikes, and other motor vehicles; - Construction, installation with raw materials (including the installation of industrial machinery and equipment); - Other activities subject to VAT under the deduction method with a VAT rate of 10%; |
3% |
| - Not subject to VAT, not required to declare VAT, subject to 0% VAT according to tax laws; - Business cooperation with organizations in this industry section, where the organization is responsible for declaring VAT on the entire revenue from the business cooperation as prescribed. |
- |
| Other business activities | |
| - Manufacturing activities of products subject to VAT under the deduction method with a VAT rate of 5%; | 2% |
| - Providing services subject to VAT under the deduction method with a VAT rate of 5%; | 2% |
| - Other activities not listed in sections 1, 2, 3 above; | 2% |
Note: In cases where household businesses and individuals operate in multiple fields, they must declare and calculate tax based on the tax rate applied to each specific field. If household businesses and individuals cannot determine the taxable revenue of each field or determine inaccurately, the tax authority will set the taxable revenue for each field according to the law on tax administration.
What are principles of calculating VAT for household businesses and individuals in Vietnam?
Based on Article 4 of Circular 40/2021/TT-BTC stipulating the principles of calculating VAT for household businesses and individuals:
- The principles of calculating tax for household businesses and individuals are implemented according to current regulations on VAT and related legal documents.
- Household businesses and individuals with annual revenue from production and business activities of 100 million VND or less are not required to pay VAT as stipulated by VAT laws. household businesses and individuals are responsible for declaring tax accurately, truthfully, fully, and submitting tax documents on time; they are accountable to the law for the accuracy, truthfulness, and completeness of tax documents.
- In case of household businesses and individuals operating in the form of groups of individuals or households, the revenue level of 100 million VND/year or less to determine individuals not required to pay VAT is determined for a single representative of the group of individuals or household within the tax year.
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