Which individual businesses are required to declare VAT and PIT separately in Vietnam?

Which individual businesses declare VAT and PIT separately in Vietnam?

Based on Clause 1 Article 6 of Circular 40/2021/TT-BTC stipulating the cases where individual businesses declare VAT and PIT separately as follows:

Tax calculation method for individuals who pay taxes separately

1. The method of tax declaration separately is applied to individuals who do not conduct regular business and do not have a fixed business location. Irregular business is determined based on the characteristics of production and business activities in each sector, profession, and is self-determined by individuals to choose the tax declaration method according to the guidance in this Circular. A fixed business location is a place where individuals conduct production and business activities such as: transaction locations, stores, shops, factories, warehouses, wharves, yards, or other similar locations.

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Thus, the method of separate VAT and PIT declaration is applied to individuals who do not conduct regular business and do not have a fixed business location.

In which, irregular business and not having a fixed business location for individual businesses are guided as follows:

- Irregular business is determined based on the characteristics of production and business activities in each sector, profession, and is self-determined by individuals to choose the tax declaration method according to the guidance in Circular 40/2021/TT-BTC.

- A fixed business location is a place where individuals conduct production and business activities such as: transaction locations, stores, shops, factories, warehouses, wharves, yards, or other similar locations.

Which individual businesses pay VAT and PIT separately in Vietnam? (Image from the Internet)

Which individual businesses pay VAT and PIT separately in Vietnam?

According to Clause 2 Article 6 of Circular 40/2021/TT-BTC, the individuals who pay VAT and PIT separately include:

- Mobile individual businesses;

- Individuals who are private construction contractors;

- Individuals who transfer Vietnam national internet domain names ".vn";

- Individuals who earn income from digital information content products and services if they do not choose to pay taxes by declaration method.

Vietnam: Where to submit VAT and PIT tax declarations separately with individual businesses?

According to Clause 2 Article 12 of Circular 40/2021/TT-BTC, the place to submit tax declarations for individuals who pay taxes separately is stipulated in Clause 1 Article 45 of the Tax Administration Law 2019. Specifically:

- In the case of mobile business, submit the tax declaration at the Tax Department managing directly where the individual conducts business activities.

- In the case of individuals who earn income from digital information content products and services, submit the tax declaration at the Tax Department managing directly where the individual resides (permanent or temporary residence).

- In the case of individuals who transfer Vietnam national internet domain names ".vn", submit the tax declaration at the Tax Department where the individual resides. If the transferring individual is a non-resident, submit the tax declaration at the tax authority managing directly the organization managing Vietnam national internet domain names ".vn".

- In the case of individuals who are private construction contractors, submit the tax declaration at the Tax Department managing directly where the individual conducts construction activities.

What are bases for calculating VAT and PIT for household businesses and individual businesses in Vietnam?

According to Article 10 of Circular 40/2021/TT-BTC, the basis for calculating VAT and PIT for household businesses and individual businesses is taxable revenue and the tax rate on revenue. Specifically:

- Taxable revenue

Taxable revenue for VAT and PIT for household businesses and individual businesses is the revenue including tax (in the case of taxable items) of the total amount from selling goods, processing fees, commissions, service provision fees arising during the tax period from production and business activities of goods and services, including bonuses, support for achieving sales targets, promotions, commercial discounts, payment discounts, support in cash or in kind; subsidies, surcharges, extra charges, additional fees according to regulations; compensation for breach of contract, other compensations (only included in the taxable revenue for PIT); other revenue that the household business or business individual is entitled to, regardless of whether the amount has been collected or not.

- Tax rate on revenue

+ The tax rate on revenue includes the VAT rate and the PIT rate, applied in detail to each sector and profession according to the guidance in Appendix I issued with Circular 40/2021/TT-BTC.

+ In cases where household businesses and individual businesses operate in multiple sectors and professions, they shall declare and calculate taxes according to the tax rate on revenue applied to each sector and profession. If the household business or business individual cannot determine the taxable revenue of each sector and profession or determines it incorrectly with the actual business activities, the tax authority will impose the taxable revenue of each sector and profession according to the provisions of the tax administration law.

- Determining the payable tax amount

Payable VAT = Taxable revenue for VAT x VAT rate

Payable PIT = Taxable revenue for PIT x PIT rate

Where:

+ Taxable revenue for VAT and PIT is guided in Clause 1 Article 10 of Circular 40/2021/TT-BTC.

+ The VAT rate and PIT rate are guided in Appendix I issued with Circular 40/2021/TT-BTC.