Which entities are regulated in the Circular 40/2021/TT-BTC in Vietnam?

What does Circular 40/2021/TT-BTC in Vietnam regulate?

According to Article 1 of Circular 40/2021/TT-BTC on the scope of regulation, Circular 40/2021/TT-BTC is a Circular guiding value-added tax, personal income tax, and tax management for business households and individual businesses.

Which entities are regulated in the Circular 40/2021/TT-BTC in Vietnam?

According to Article 2 of Circular 40/2021/TT-BTC, the subjects of application of Circular 40/2021/TT-BTC include:

- Business households, individual businesses that are resident individuals engaged in the production and business of goods and services in all fields, industries according to the provisions of law, including the following cases:

+ Practicing independently in fields and industries requiring licenses or practicing certificates according to the provisions of law;

+ Acting as agents selling at the correct price for lottery agents, insurance agents, multi-level marketing agents who directly sign contracts with enterprises dealing in lottery, insurance, multi-level marketing;

+ Cooperating in business with organizations;

+ Engaging in agriculture, forestry, salt production, aquaculture, fishery activities not meeting the conditions for tax exemption under the provisions of the law on VAT, personal income tax;

+ E-commerce activities, including cases where individuals earn income from digital product and content services according to the law on e-commerce.

- Business households, individual businesses engaged in production and business activities at border markets, border gate markets, and markets in border-gate economic zones within the territory of Vietnam;

- Individuals leasing out properties;

- Individuals transferring Vietnam's national internet domain name “.vn”;

- Organizations cooperating in business with individuals;

- Organizations, individuals declaring and paying taxes on behalf of individuals;

- Lottery enterprises, insurance enterprises, multi-level marketing enterprises paying income to individuals directly signing contracts acting as agents selling at the correct price for lottery, insurance, multi-level marketing;

- Tax authorities, state agencies, other organizations, and individuals involved.

Which entities are regulated in the Circular 40/2021/TT-BTC in Vietnam?​ (Image from the Internet)

What is meant by business households, individual businesses in Vietnam under Circular 40/2021/TT-BTC?

Based on Article 3 of Circular 40/2021/TT-BTC, business households, individual businesses are defined as follows:

- A business household is a production and business establishment registered for establishment by an individual or members of a family and takes responsibility with all their assets for the household’s business activities according to Article 79 of Decree 01/2021/ND-CP regarding business registration and its guiding documents or amendments, supplements, or replacements (if any).

In cases where family members register a business household, they authorize one member to act as the representative of the business household. The individual registering the business household, the person authorized by the family members to act as the representative, is the head of the business household.

Families engaged in agriculture, forestry, fishery, salt production, and those selling street food, snacks, seasonal business, mobile business, low-income service providers do not need to register as a business household, except where they engage in conditional business lines or investment sectors. The Provincial People's Committees set the low-income threshold applicable within the locality.

- Large-scale business households and individual businesses are those with revenue and labor meeting the highest criteria for micro-enterprises or above. Specifically:

+ Business households, individual businesses in agriculture, forestry, fishery, and industry, construction sectors with the average number of employees participating in social insurance from 10 or more per year or a total revenue of the preceding year from 3 billion VND or more;

+ Business households, individual businesses in the trade, service sectors with the average number of employees participating in social insurance from 10 or more per year or a total revenue of the preceding year from 10 billion VND or more.

- Business households, individual businesses paying taxes by declaration method are large-scale business households and individual businesses; business households, individual businesses not meeting large-scale criteria but choosing to pay taxes by declaration method.

The declaration method is a method of tax declaration, tax calculation based on the actual revenue generated monthly or quarterly.

- Individual businesses paying taxes by arising-time method involve irregular business activities without fixed business locations.

The arising-time method is a method of tax declaration, tax calculation based on the actual revenue generated each time.

- Business households, individual businesses paying taxes by the presumption method are those not implementing or inadequately performing accounting, invoicing, and documentation policies, except for those eligible for the declaration method or individual businesses paying taxes by arising-time method.

The presumption method is the method of tax calculation based on the revenue preset by the tax authority to calculate the presumption tax amount per Article 51 of Tax Administration Law 2019.