Is an individual business whose revenue from business operation in the calendar year is not exceeding 100 million VND required to pay VAT in Vietnam?

Is an individual business whose revenue from business operation in the calendar year is not exceeding 100 million VND required to pay VAT in Vietnam?

According to Article 4 of Circular 40/2021/TT-BTC, the regulations are as follows:

Tax Calculation Principles

1. Tax calculation principles for business households and individual businesses are implemented according to the current tax laws on VAT, personal income tax (PIT) and other related legal documents.

2. Business households and individual businesses with annual revenue from production and business activities within the calendar year of 100 million VND or less are not required to pay VAT and personal income tax according to the tax laws on VAT and PIT. household businesses and individual businesses have the responsibility to accurately, honestly, and fully declare taxes and submit tax documents on time; they are accountable for the accuracy, honesty, and completeness of tax documents as per the regulations.

3. For household businesses and individual businesses operating as a group of individuals or family households, the revenue threshold of 100 million VND per year for determining tax exemptions for VAT and PIT applies to a single representative of the group or household for the taxable year.

Thus, individual businesses whose revenue from business operation in the calendar year is not exceeding 100 million VND are not required to pay personal income tax.

Is an individual business whose revenue from business operation in the calendar year is not exceeding 100 million VND required to pay VAT in Vietnam? (Image from the Internet)

Who are the individual businesses paying personal income tax under separate declarations in Vietnam?

According to Clause 2, Article 6 of Circular 40/2021/TT-BTC, the regulations are as follows:

Tax Calculation Method for Individuals Paying Tax under separate declarations

1. The tax declaration method for each occurrence applies to individuals who do business irregularly and have no fixed business location. The irregular business nature is determined According to the characteristics of production and business activities in specific fields or professions, and individuals self-determine this to select the appropriate tax declaration method as guided in this Circular. A fixed business location is where an individual conducts production and business activities such as transaction venues, stores, shops, workshops, warehouses, docks, or other similar locations.

2. Individuals paying tax under separate declarations include:

a) Mobile individual businesses;

b) Private construction contractors;

c) Individuals transferring the ".vn" national internet domain name of Vietnam;

d) Individuals earning income from digital content products and services if not opting for the declaration method.

3. These individuals are not required to follow accounting policies but must keep invoices, documents, contracts, and records proving the legitimacy of goods and services and present them with the tax declaration documents under separate declarations.

4. They must declare taxes when there is taxable revenue.

Thus, individual businesses paying personal income tax under separate declarations apply to those who do business irregularly and have no fixed business location, including:

- Mobile individual businesses;

- Private construction contractors;

- Individuals transferring the ".vn" national internet domain name of Vietnam;

- Individuals earning income from digital content products and services if not opting for the declaration method.

What are the bases for calculating personal income tax for individual businesses in Vietnam?

According to Article 10 of Circular 40/2021/TT-BTC, the tax calculation bases for household businesses and individual businesses are taxable revenue and the tax rate applied on that revenue. Specifically:

- Taxable revenue includes revenue that encompasses taxes (if applicable) from all sales, processing fees, commissions, service provision fees accrued during the taxable period from production and business activities, including bonuses, support for reaching sales targets, promotions, trade discounts, payment discounts, monetary or non-monetary supports; price allowances, surcharges, excess fees obtained according to regulations; compensation for contract breaches and other compensations; other earnings enjoyed by the business household or individual, regardless of whether the money has been collected or not.

- The tax rate applied on revenue is specified for each field or sector as guided in Appendix 1 issued with Circular 40/2021/TT-BTC.

For individuals engaging in multiple fields or sectors, tax declarations and calculations will follow the tax rates applicable to each respective field or sector.

If the individual business cannot determine taxable revenue for each field or sector or inaccurately determines such revenue, the tax authority will impose taxable revenue for each field or sector according to tax management regulations.

- Determining payable tax:

Payable personal income tax = Taxable revenue x Personal income tax rate

Where:

- Taxable revenue is guided in Clause 1, Article 10 of Circular 40/2021/TT-BTC.

- VAT rate and personal income tax rate are guided in Appendix 1 issued with Circular 40/2021/TT-BTC.