What Types of Taxes Must a Household Business Pay in 2023? Methods for Calculating Various Taxes a Household Business Must Pay in 2023?
What is a Household Business? Who is the Representative of the Household Business?
Currently, there is no specific regulation regarding the concept of a household business; however, based on Article 79 of Decree 01/2021/ND-CP, it is regulated as follows:
Household Business
1. A household business is registered by an individual or family members and is responsible for all assets for the business activities of the household. In the case where family members register a household business, they authorize one member to represent the household business. The individual who registers the household business, the person authorized by the family members to represent the household business, is the head of the household business.
2. Households engaged in agricultural, forestry, fishery production, salt making, and those who sell street goods, snacks, itinerant trade, mobile business, seasonal business, and service businesses with low income are not required to register for a household business, except for businesses in conditional investment areas. The Provincial People's Committee and centrally managed cities shall specify the low-income level applicable within the local area.
A household business can be registered by an individual or family members and is responsible for all the assets for the household's business activities.
The head of the household business can be the individual who registers the household business or the person authorized by the family members to represent the household business.
What taxes are household businesses required to pay in 2023? How to calculate the taxes that household businesses must pay in 2023?
What taxes are household businesses required to pay in 2023? How to calculate the taxes that household businesses must pay?
There are 3 main types of taxes that household businesses must pay: License fees, Value Added Tax (VAT), and Personal Income Tax (PIT). In addition, households may also need to pay other taxes depending on the taxable goods and services they are dealing with.
License fees that household businesses must pay:
Based on Clause 2, Article 4 of Decree 139/2016/ND-CP (supplemented by Point a, Clause 2, Article 1 of Decree 22/2020/ND-CP), which regulates as follows:
License Fee Levels
License fee levels for individuals, groups of individuals, and households engaged in production, trading of goods, and services are as follows:
a) Individuals, groups of individuals, households with annual revenue over 500 million VND: 1,000,000 (one million) VND/year;
b) Individuals, groups of individuals, households with annual revenue over 300 to 500 million VND: 500,000 (five hundred thousand) VND/year;
c) Individuals, groups of individuals, households with annual revenue over 100 to 300 million VND: 300,000 (three hundred thousand) VND/year.
Depending on their revenue, households will pay an appropriate license fee according to the law.
Value Added Tax and Personal Income Tax that household businesses must pay:
The basis for calculating tax for household businesses is taxable revenue and the tax rate on revenue.
- Taxable revenue
Based on Clause 1, Article 10 of Circular 40/2021/TT-BTC, which regulates the taxable revenue as the basis for VAT for enterprises as follows:
Taxable VAT and taxable PIT revenue for household businesses and individual businesses include:
+ Taxes (in cases subject to taxation) on all money received from sales, processing money, commission, money from service provision arising during the tax period from the production, business of goods, services, including bonuses, support for achieving sales, promotions, commercial discounts, payment discounts, and monetary or non-monetary support;
+ Subsidies, surcharges, additional fees received according to regulations;
+ Compensation for contract violations, other compensations (only included in taxable PIT revenue);
+ Other revenues that household businesses and individual businesses are entitled to, regardless of whether the money has been collected or not.
- Tax rate on revenue.
Based on Clause 2, Article 10 of Circular 40/2021/TT-BTC, which regulates the tax rate on revenue as the basis for VAT for enterprises as follows:
+ The tax rate on revenue includes the VAT rate and the PIT rate applicable in detail to each sector and industry.
+ In cases where household businesses or individual businesses operate in multiple sectors, they must declare and calculate taxes based on the tax rate on revenue applicable to each sector.
In cases where household businesses, individual businesses cannot determine the taxable revenue of each sector, or the determination is not consistent with the actual business, the tax authority will determine the taxable revenue of each sector according to the law on tax administration.
Thus, the amount of tax that household businesses must pay is regulated in Clause 3, Article 10 of Circular 40/2021/TT-BTC:
VAT payable = Taxable VAT revenue x VAT rate
PIT payable = Taxable PIT revenue x PIT rate
Under what circumstances in 2023 can household businesses be exempted from license fees?
According to Article 3 of Decree 139/2016/ND-CP (amended and supplemented by Points a, b, c, Clause 1, Article 1 of Decree 22/2020/ND-CP), license fees for household businesses are recorded as follows:
Exemptions from License Fees
Cases exempted from license fees include:
1. Individuals, groups of individuals, households engaged in production and business activities with annual revenue of 100 million VND or less.
2. Individuals, groups of individuals, households engaged in irregular production and business activities; not having a fixed business location as guided by the Ministry of Finance.
3. Individuals, groups of individuals, households engaged in salt production.
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8. Exemption from license fees in the first year of establishment or engagement in production and business activities (from January 1 to December 31) for:
a) Newly established organizations (issued a new tax code, new business code).
b) Households, individuals, groups of individuals engaging in production and business activities for the first time.
c) During the license fee exemption period, if organizations, households, individuals, groups of individuals establish branches, representative offices, business locations, these entities are exempt from license fees during the period the organizations, households, individuals, and groups of individuals are exempt from license fees.
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Households with an annual revenue of 100 million VND or less, irregular business activities, salt-producing households, and those starting business activities for the first time are exempt from license fees.
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