Who is responsible for paying taxes if a household business ceases business operation before its tax liability is fulfilled in Vietnam?

Who is responsible for paying taxes if a household business ceases business operation before its tax liability is fulfilled in Vietnam?

Based on Clause 4, Article 67 of the Law on Tax Administration 2019 which stipulates as follows:

Completion of Tax Obligations upon dissolution, bankruptcy, shutdown

1. The completion of tax obligations in the case of a company dissolution is carried out in accordance with the law on enterprises, law on credit institutions, law on insurance business, and other related legal provisions.

2. The completion of tax obligations in the case of a company bankruptcy is conducted according to the procedures stipulated in the Law on Bankruptcy.

3. Companies that cease operations or abandon their registered business address without completing tax obligations shall have their remaining tax debts paid by the owner of the private enterprise, the owner of the one-member limited liability company, contributing shareholders, capital-contributing members, or partnership members according to each type of enterprise as stipulated in the Law on Enterprises.

4. If a household business or individual business ceases its business operations without fulfilling its tax obligations, the remaining tax debt shall be paid by the head of the household or the individual responsible.

5. Taxpayers with branches or dependent units that cease operations but still owe taxes and other payables to the state budget shall inherit the debts of the branches or dependent units.

Thus, when a household business ceases its business operations without fulfilling its tax obligations, the remaining tax debt will be the responsibility of the head of the household business.

Who is responsible for paying taxes if a household business ceases business operation before its tax liability is fulfilled in Vietnam? (Image from the Internet)

What are the tax calculation principles for household businesses in Vietnam?

Based on Article 4 of Circular 40/2021/TT-BTC, the principles for tax calculation for household businesses are stipulated as follows:

(1) The tax calculation principles for household businesses are implemented in accordance with the prevailing legal provisions on VAT, personal income tax (PIT), and other related legal documents.

(2) Household businesses with an annual revenue from production and business activities during the calendar year not exceeding 100 million VND are exempt from paying VAT and PIT according to the legal provisions on VAT and PIT. Household businesses must accurately, honestly, and fully declare taxes and submit tax dossiers on time; they are accountable under the law for the accuracy, honesty, and completeness of their tax dossiers as prescribed.

(3) For household businesses operating as a group of individuals, families, the annual revenue threshold of 100 million VND or less to determine individuals exempt from VAT and PIT is identified for one (01) sole representative of the group of individuals or families in the tax year.

How is tax calculated for household businesses declaring taxes using the declaration method in Vietnam?

According to Article 5 of Circular 40/2021/TT-BTC, the tax calculation for household businesses declaring taxes using the declaration method is determined as follows:

- The declaration method applies to large-scale household businesses; and smaller-scale household businesses that choose to declare taxes using the declaration method.

- Household businesses declaring taxes using the declaration method must file taxes monthly, except for new household businesses and those meeting criteria for quarterly tax declarations and opting for quarterly tax filings as specified in Article 9 of Decree 126/2020/ND-CP.

- If the declared revenue for tax purposes is inconsistent with actual revenue, the tax authority will determine the taxable revenue in accordance with Article 50 of the Law on Tax Administration 2019.

- Household businesses declaring taxes using the declaration method must adhere to accounting policies, invoices, and documents. However, in industries or sectors where revenue can be determined based on verification by competent authorities, compliance with accounting policies is not required.

- Household businesses declaring taxes using the declaration method are not required to finalize taxes.

How to calculate the VAT payable by household businesses in Vietnam?

Based on Clause 3, Article 10 of Circular 40/2021/TT-BTC, the formula for calculating VAT payable by household businesses is as follows:

VAT Payable = VAT Taxable Revenue x VAT Rate

Where:

- VAT Taxable Revenue for household businesses is total revenue, including tax (in cases subject to tax), from all sales, processing fees, commission fees, service provision arising during the tax period from production, business activities, and services, including bonuses, performance support, promotions, trade discounts, payment discounts, and support in cash or in-kind; subsidies, additional charges, surcharges, fees that can be collected as per regulation; contract violation compensations, and other compensations (only counted for PIT); other revenue that household businesses are entitled to, regardless of whether the money has been collected.

- The VAT rate is stipulated in Appendix I issued with Circular 40/2021/TT-BTC