How to determine tax payable for individuals and household businesses in Vietnam?

How to determine tax payable for individuals and household businesses in Vietnam?

Pursuant to Clause 3, Article 10 of Circular 40/2021/TT-BTC regulating as follows:

Tax Calculation Basis

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3. Determining the Tax Payable

Tax Payable for VAT = Revenue for VAT Calculation x VAT Rate

Tax Payable for Personal Income Tax (PIT) = Revenue for PIT Calculation x PIT Rate

In which:

- Revenue for VAT calculation and revenue for PIT calculation are guided in Clause 1 of this Article.

- VAT rate and PIT rate are guided in Appendix I issued with this Circular.

Thus, the tax payable for individuals and household businesses is determined as follows:

Tax Payable for VAT = Revenue for VAT Calculation x VAT Rate

Tax Payable for PIT = Revenue for PIT Calculation x PIT Rate.

How to determine tax payable for individuals and household businesses in Vietnam? (Image from the Internet)

What are the principles for tax calculation for individuals and household businesses in Vietnam?

Pursuant to Article 4 of Circular 40/2021/TT-BTC, the principles for tax calculation for individuals and household businesses are regulated as follows:

Principles of Tax Calculation

1. The principle of tax calculation for household businesses and individuals is implemented according to the current legal provisions on VAT, PIT, and relevant legal documents.

2. household businesses and individuals with annual revenue from production and business activities not exceeding 100 million VND are not subject to VAT and PIT according to legal provisions on VAT and PIT. household businesses and individuals are responsible for declaring taxes accurately, truthfully, and fully, and for timely submission of tax files; they are responsible before the law for the accuracy, truthfulness, and completeness of the tax files as prescribed.

3. household businesses and individuals in the form of a group of individuals or household members, the revenue of 100 million VND/year or less to determine individuals not subject to VAT and PIT is determined for one (01) unique representative of the group of individuals or household members in the tax year.

household businesses and individuals calculate taxes based on the following principles:

- The principle of tax calculation for household businesses and individuals is implemented according to the current legal provisions on VAT, PIT, and relevant legal documents.

- household businesses and individuals with annual revenue from production and business activities not exceeding 100 million VND are not subject to VAT and PIT according to legal provisions on VAT and PIT. household businesses and individuals are responsible for declaring taxes accurately, truthfully, and fully, and for timely submission of tax files; they are responsible before the law for the accuracy, truthfulness, and completeness of the tax files as prescribed.

- household businesses and individuals in the form of a group of individuals or household members, the revenue of 100 million VND/year or less to determine individuals not subject to VAT and PIT is determined for one (01) unique representative of the group of individuals or household members in the tax year.

What is the basis for calculation of tax payable by household businesses and individual businesses in Vietnam?

According to Article 10 of Circular 40/2021/TT-BTC, the basis for calculating tax for household businesses (HHKD) and individual businesses (IKD) is taxable revenue and tax rates on revenue.

(1) Taxable Revenue

Taxable revenue for VAT and PIT for household businesses and individual businesses includes VAT (in applicable cases) covering total sales, processing fees, commissions, and service provision fees arising during the tax period from production, business activities, and services, including bonuses, support for achieving sales targets, promotions, trade discounts, payment discounts, support payments whether monetary or non-monetary; price subsidies, surcharges, additional fees received; compensation for contract violation, and other compensation (only included in taxable PIT revenue); other revenue that household businesses and individual businesses are entitled to, irrespective of whether the money has been received or not.

(2) Tax Rate on Revenue

- The tax rate on revenue includes VAT and PIT rates applied specifically for each field or industry as guided in Appendix I issued with Circular 40/2021/TT-BTC.

- In cases where household businesses and individual businesses operate in multiple fields or industries, they shall declare and calculate taxes based on the tax rate on revenue applied for each specific field or industry.

In cases where household businesses and individual businesses cannot determine the taxable revenue for each field or industry or if such determination does not match actual business conditions, the tax authority will prescribe the taxable revenue for each field or industry under the legal provisions on tax management.