Instructions for calculating personal income tax for online businesses in Vietnam

Households and individuals selling products online must pay personal income tax and value added tax if the turnover in the calendar year is over VND 100 million in Vietnam. So how is personal income tax calculated in this case?

Instructions for calculating personal income tax for online businesses in Vietnam (illustration)

According to Clause 2, Article 4 of Circular 40/2021/TT-BTC stipulating that 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 in Vietnam

In the case of business households and individuals doing business in the form of groups of individuals or households, the turnover rate of 100 million VND/year or less is used to determine that the individual does not have to pay value added tax and does not have to pay tax. Personal income is determined for a single representative of a group of individuals or households in the tax year in Vietnam.

Thus, households and individuals doing online business must pay personal income tax and value added tax if the turnover in the calendar year is over VND 100 million.

The way to calculate personal income tax for online businesses is as follows:

Pursuant to Clause 3, Article 10 of Circular 40/2021/TT-BTC, the amount of personal income tax and value added tax payable by households and individuals doing online business is determined by the following formula:

PIT payable amount = PIT taxable turnover x PIT rate

Amount of VAT payable = Taxable turnover x VAT rate

In which:

- Revenue subject to VAT and revenue subject to PIT for business households and individuals is revenue, including:

+ Tax (in cases where it is taxable) of all sales, processing, commissions, and service payments arising in the tax period from the production and trading of goods and services, including bonuses, sales support, promotion, trade discount, payment discount, cash or non-cash support;

+ Subsidies, surcharges, extras, and additional fees are entitled to according to regulations;

+ Compensations for breach of contract and other compensation (only included in the revenue subject to PIT);

+ Other revenues that business households and individuals are entitled to, regardless of whether money has been collected or not.

- Rate of VAT and PIT rate according to the guidance in Appendix I issued with Circular 40/2021/TT-BTC.

Note:

+ If business households and individuals operate in multiple fields and lines of business, they must declare and calculate tax at the rate of tax calculated on turnover that is applicable to each field or industry. profession.

If business households and individuals fail to determine the taxable turnover of each field or line or determine that it is not suitable for business reality, the tax authority shall determine the taxable revenue of each business line and profession in accordance with the law on tax administration in Vietnam.

+ Business establishments (including business households and business individuals) that calculate value-added tax according to the percentage method on turnover are entitled to a reduction of 20% of the percentage rate to calculate value added tax when issuing invoices for goods and services eligible for value added tax reduction (according to Point b, Clause 2, Article 1 of Decree 15/2022/ND-CP).

Bao Ngoc

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