What is individual business? What are the methods of tax declaration for individual businesses in Vietnam?
- What is an individual business in Vietnam?
- Do individual businesses in Vietnam have to pay personal income tax and value-added tax?
- How do individual businesses in Vietnam calculate tax?
- Method for calculating tax individual businesses under separate declarations
- Method and basis for calculating fixed tax payable by household businesses and individual businesses
What is an individual business in Vietnam?
Pursuant to the provisions of Clause 1, Article 2 of Circular 40/2021/TT-BTC, household businesses, individual businesses that are residents having activities manufacture, sale of goods and services (hereinafter referred to as “business operation”) in any of the business lines and sectors prescribed by law, including the following cases:
- Independent practitioners in the business lines or sectors under licenses or practice certificates as prescribed by law;
- Lottery agents; insurance agents, multi-level marketing (MLM) agents of individuals that directly sign commission agent contracts with lottery enterprises, insurers, MLM enterprises respectively;
- Business cooperation with organizations;
- Agricultural production and business, forestry, salt production, aquaculture that are not eligible for tax exemption as prescribed by value-added tax (VAT) laws and personal income tax (PIT) laws;
- E-commerce, including individuals earning incomes from provision of digital products or services as prescribed by e-commerce laws.
What is individual business? What are the methods of tax declaration for individual businesses in Vietnam?
Do individual businesses in Vietnam have to pay personal income tax and value-added tax?
According to the provisions of Article 4 of Circular 40/2021/TT-BTC, the payment of value-added tax and personal income tax by individual businesses is as follows:
Tax calculation rules
1. Rules for calculating tax payable by household businesses and individual businesses shall comply with applicable regulations of law on VAT, TIN and relevant legislative documents.
2. A household business or individual business whose revenue from business operation in the calendar year is not exceeding 100 million VND shall not be required to pay VAT and PIT as prescribed by VAT and PIT laws. Household businesses and individual businesses shall declare tax truthfully and accurately; submit tax documents punctually; take legal responsibility for the accuracy, truthfulness and adequacy of the tax documents submitted.
3. For household businesses and individual businesses in the form of groups of individuals or households, the revenue of not exceeding 100 million VND/year as the basis for exemption from VAT and PIT shall be determined for 01 representative of the group of individuals of household in the tax year.
Thus, the above regulation shows that if the revenue of not exceeding 100 million VND/year as the basis for exemption from VAT and PIT, they shall be determined for 01 representative of the group of individuals of household in the tax year.
How do individual businesses in Vietnam calculate tax?
Method and basis for calculating tax payable by household businesses and individual businesses under periodic declarations
Pursuant to Article 5 of Circular 40/2021/TT-BTC stipulating the method and basis for calculating tax payable by household businesses and individual businesses under periodic declarations as follows:
- Periodic declarations shall be prepared by large-scale household businesses and individual businesses or other household businesses and individual businesses that choose to pay tax under periodic declarations.
- Household businesses and individual businesses paying tax under periodic declarations shall declare tax monthly, except new businesses and businesses that satisfy the criteria for declaring tax quarterly prescribed in Article 9 of Decree No. 126/2020/ND-CP.
- If the revenue of a household business or individual business that is paying tax under periodic declarations is found to be false, the tax authority shall impose the taxable revenue as prescribed in Article 50 of the Law on Tax Administration.
- Household businesses and individual businesses paying tax under periodic declarations shall comply with on accounting, invoices and documents. A household business or individual business is not required to do accounting if their a business line has the basis for determination of revenue which is confirmed by a competent authority,
- Household businesses and individual businesses paying tax under periodic declarations are not required to finalize tax.
Method for calculating tax individual businesses under separate declarations
Method for calculating tax individual businesses under separate declarations according to Article 6 of Circular 40/2021/TT-BTC is as follows:
- Individual businesses who have casual business operation and do not have fixed business locations shall pay tax separately. The individual shall determine whether his/her business is “casual” according to its characteristics in each business line. Fixed business location means the place where the individual’s business operation is carried out such as: transaction location, store, factory, warehouse, depot or a similar location.
- Individual businesses paying tax under separate declarations include:
+ Travelling traders;
+ Individuals that are private construction contractors;
+ Individuals transferring Vietnam’s top-level domains “.vn”;
+ Individuals earning incomes from digital information products and/or services that do not choose to pay tax under periodic declarations.
- Individual businesses paying tax under separate declarations are not required to do accounting but must retain invoices, contracts, documents proving the legality of their goods and services and enclose them with the separate tax declarations.
- Individual businesses paying tax under separate documents shall declare tax whenever taxable revenue is earned.
Method and basis for calculating fixed tax payable by household businesses and individual businesses
According to the provisions of Article 7 of Circular 40/2021/TT-BTC (amendment to Clause 1, Article 1 of Circular 100/2021/TT-BTC) stipulating the method and basis for calculating fixed tax payable by household businesses and individual businesses as follows:
- Fixed tax shall be paid by household businesses and individual businesses other than those paying tax under periodic declarations and separate declarations prescribed in Article 5 and Article 6 of this Circular.
- Household businesses and individual businesses paying fixed tax (hereinafter referred to as “fixed tax payers”) are not required to do accounting. Fixed tax payers shall retain and present to tax authorities the invoices, contracts, documents proving the legality of their goods and services when applying for issuance or sale of separate invoices. Fixed tax payers having business operation at bordering markets, checkpoint markets, markets within border-gate economic zones in Vietnam shall retain invoices, contracts, documents proving the legality of their goods and present them at the request of competent authorities.
- In case household business (fixed tax payer) has received a notice of fixed tax payable in the beginning of the year from the tax authority, this household business shall pay tax according to the notice. In case the household business has received a notice of fixed tax in the beginning of the year, but its business operation is terminated or suspended during the year, the tax authority shall adjust the tax payable according to the guidelines in Point b.4 and Point b.5 Clause 4 Article 13 of this Circular. A new household business that has been doing business for less than 12 months in the calendar year must pay VAT and PIT if its revenue is over 100 million VND in the year; does not have to pay VAT and PIT if its revenue does not exceed 100 million VND in the year.
- Fixed tax payers shall declare tax annual as prescribed in Point c Clause 2 Article 44 of the Law on Tax Administration, pay tax by the deadline specified in the tax notices issued by tax authorities as prescribed in Clause 2 Article 55 of the Law on Tax Administration. In case a fixed tax payer uses invoices issued or sold by the tax authority, tax on these invoices shall be separately declared and paid.
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