What is the current basis for determining flat tax in Vietnam?

What is flat tax?

Based on Clause 1, Article 51 of the 2019 Law on Tax Administration, the regulations are as follows:

Determining tax amounts for household businesses and individual businesses paying tax by flat tax payment

1. The tax authority determines the amount of tax to be paid using the flat tax payment (hereinafter referred to as the flat tax) for household businesses and individual businesses that do not implement or incompletely implement accounting policies, invoices, and documents, except for the cases specified in Clause 5 of this Article.

2. The tax authority bases the determination of the flat tax on the declaration documents of household businesses and individual businesses, the tax authority's database, and the opinions of the commune-level Tax Advisory Council.

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According to Clauses 7 and 9, Article 3 of Circular 40/2021/TT-BTC, the regulations are as follows:

Definitions

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7. "flat tax payment" is the tax calculation method based on a percentage of the estimated revenue determined by the tax authority to calculate the flat tax as stipulated in Article 51 of the Law on Tax Administration.

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9. "flat tax" is the tax and other amounts payable to the state budget by household businesses and individual businesses paying tax by the flat tax payment, determined by the tax authority according to Article 51 of the Law on Tax Administration.

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Therefore, it can be understood that the flat tax is a type of flat tax applied to household businesses and individual businesses. Given the low and unclear determination of the tax amount, the tax authority will establish a tax amount based on the taxpayer's self-declared documents, the advisory opinion of the commune-level Tax Advisory Council, and the tax authority's database.

What is the current basis for determining flat tax in Vietnam? (Image from the Internet)

What is the current basis for determining flat tax in Vietnam?

According to Clause 1, Article 13 of Circular 40/2021/TT-BTC, the basis for determining the flat tax for household businesses includes:

- The tax declaration documents of household businesses self-declared based on expected revenue and flat tax amount for the tax year;

- The tax authority’s database;

- The advisory opinions of the commune-level Tax Advisory Council;

- The results of publicly disclosing information and receiving feedback from the Tax Advisory Council, the People's Committee, the People’s Council, the Fatherland Front committee of communes, wards, and commune-level towns, household businesses, and other individuals and organizations.

The public disclosure of household business information involves the tax authority organizing the disclosure and receiving feedback regarding revenue and flat tax amount as stipulated.

The first public disclosure of information to determine the flat tax according to Clause 5, Article 13 of Circular 40/2021/TT-BTC is to reference and consult on expected revenue and flat tax amount; and the second public disclosure according to Clause 9, Article 13 of Circular 40/2021/TT-BTC is to reference and consult on the official revenue and flat tax amount payable for the tax year.

Public disclosure of information to determine the flat tax includes: posting information on paper at the locality; directly sending to household businesses; directly sending to the People's Council, the People’s Committee, the Fatherland Front committee of districts, wards, and commune-level towns; and publicizing information on the Taxation Department's electronic portal.

Vietnam: What does the tax declaration dossier for household businesses include?

According to Clause 2, Article 13 of Circular 40/2021/TT-BTC, the regulations on the tax declaration dossier for household businesses are as follows:

- From November 20 to December 5 annually, the tax authority distributes the tax declaration forms for the following year to all household businesses.

- The tax declaration dossier for household businesses according to Point 8.1 of Appendix I - List of tax declaration dossiers issued with Decree 126/2020/ND-CP is the Tax Declaration Form for Household Businesses and Individual Businesses according to Form No. 01/CNKD issued with Circular 40/2021/TT-BTC.

- In case household businesses use invoices issued by the tax authority, selling retail items each time they arise, when declaring tax for revenue on individual invoices, household businesses declare tax for each occurrence and use the Tax Declaration Form for Household Businesses and Individual Businesses according to Form No. 01/CNKD issued with Circular 40/2021/TT-BTC and simultaneously present and submit with the tax declaration dossier the following documents:

+ A copy of the economic contract for providing goods and services of the same type as the household business's activity;

+ A copy of the contract acceptance or liquidation minutes;+ A copy of documents proving the origin of goods and services such as:

++ List of purchased agricultural products if they are domestic agricultural products;++ List of goods purchased and exchanged by border residents if they are imported by border residents;++ Invoices provided by the seller if they are imported goods purchased from domestic organizations and individuals;

++ Relevant documents to prove if the goods are self-produced and supplied by individuals; and so forth.

The tax authority has the right to request the presentation of the original documents to compare and verify the accuracy of the copies against the originals.