Is online cosmetics business subject to VAT in Vietnam?

Is online cosmetics business subject to VAT in Vietnam?

Based on the provisions of Clause 1, Article 2 of Circular 40/2021/TT-BTC regarding subjects liable for value-added tax (VAT) as follows:

Subjects of Application

1. Household businesses and individual businesses that are resident individuals engaged in the production and business of goods and services in all fields and sectors as stipulated by law, including the following cases:

a) Independent practice in fields and sectors for which a license or practicing certificate is required as stipulated by law;

b) Agencies selling at the correct price for lottery agents, insurance agents, multi-level sales agents who directly sign contracts with lottery companies, insurers, multi-level sales companies;

c) Business cooperation with organizations;

d) Agricultural, forestry production, salt production, aquaculture, or fishing that do not meet the conditions for tax exemption under the law on VAT and personal income tax (PIT);

đ) E-commerce activities, including cases where individuals earn income from digital content products or services as stipulated by law on e-commerce.

2. Household businesses, individual businesses carrying out production and business activities at border markets, border-gate markets, markets within the border-gate economic zones in Vietnam's territory;

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According to Article 4 of Circular 40/2021/TT-BTC regarding the principles of tax calculation:

Principles of Tax Calculation

1. The principles of tax calculation for household businesses and individual businesses are performed according to the current legal regulations on VAT, PIT, and related legal documents.

2. Household businesses and individual businesses with revenue from production and business activities in a calendar year of 100 million VND or less are not required to pay VAT and PIT according to tax laws. Household businesses and individual businesses must accurately and fully declare taxes and submit tax dossiers on time; they are responsible before the law for the accuracy and completeness of the tax dossiers as stipulated.

3. For household businesses and individual businesses operating as a group of individuals or a family, the revenue of 100 million VND per year or less to determine those not required to pay VAT and PIT is determined for one (01) sole representative of the group or family for the tax calculation year.

Therefore, online cosmetics business with a revenue of 100 million VND or more must pay value-added tax (VAT). However, if the revenue is below 100 million VND, it is not subject to value-added tax (VAT).

Is online cosmetics business subject to VAT in Vietnam? (Image from the Internet)

What is the basis for VAT calculation for online cosmetics business in Vietnam?

Based on Clauses 1 and 2 of Article 10 Circular 40/2021/TT-BTC, the basis for VAT calculation for online cosmetics business includes:

Basis for Tax Calculation

The basis for tax calculation for household businesses and individual businesses is taxable revenue and the tax rate on revenue.

1. Taxable Revenue

The taxable revenue for VAT and PIT for household businesses and individual businesses is the revenue including tax (in case it is subject to tax) of all sales, commissions, service provision arising during the tax period from production and business activities, including bonuses, support for sales achievement, promotions, trade discounts, payment discounts, support in cash or kind; price support, surcharges, surcharges not stipulated in commercial contract acceptances; including compensation for breach of contract, other compensation (only calculated in PIT taxable revenue); other revenue that household businesses and individual businesses are entitled to, regardless of whether money has been collected or not.

2. Tax Rate on Revenue

a) The tax rate on revenue includes VAT and PIT rates applied specifically to each field, sector according to the guidance in Appendix I issued with this Circular.

b) In case household businesses and individual businesses operate in multiple fields or sectors, they must declare and calculate taxes according to the tax rate on revenue applied to each field or sector. If household businesses and individual businesses cannot determine the taxable revenue for each field or sector, or if it is inconsistently determined with actual business, the tax authority imposes the taxable revenue for each field or sector according to the tax management laws.

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Thus, according to the above provisions, the basis for VAT calculation for online cosmetics business is determined based on:

- Taxable revenue.

- Tax rate on revenue.

What are responsibilities of online cosmetics businesses on e-commerce platforms in Vietnam?

Based on Article 37 of Decree 52/2013/ND-CP, online cosmetics business on e-commerce platforms have the following responsibilities:

- Provide full and accurate information as stipulated in Article 29 of Decree 52/2013/ND-CP to the business entity, organization providing the e-commerce trading platform services when registering to use the service.

- Provide complete information about goods and services as regulated from Article 30 to Article 34 of Decree 52/2013/ND-CP when selling goods or supplying services on the e-commerce trading platform.

- Ensure the accuracy and truthfulness of the information about goods and services provided on the e-commerce trading platform.

- Comply with the regulations in Section 2, Chapter II of Decree 52/2013/ND-CP when utilizing the online ordering function on the e-commerce trading platform.

- Provide information about their business situation when requested by the competent state authorities for the purpose of e-commerce statistics.

- Comply with the regulations of law on payment, advertising, promotions, protecting intellectual property rights, consumer rights, and other related legal provisions when selling goods or providing services on the e-commerce trading platform.

- Fully fulfill tax obligations according to legal regulations.