Tax calculation basic for household businesses and individual businesses in Vietnam

Tax calculation basic for household businesses and individual businesses in Vietnam (Internet image)

1. What are household businesses, individual businesses?

According to 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.

2. Tax calculation rules for household businesses, individual businesses in Vietnam

Principles of tax calculation for business households and individuals according to Article 4 of Circular 40/2021/TT-BTC are as follows:

- 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.

- 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.

- 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.

3. Tax calculation basic for household businesses and individual businesses in Vietnam

According to Article 10 of Circular 40/2021/TT-BTC, the basis for calculation of tax payable by household businesses and individual businesses in Vietnam shall be taxable revenue and tax rates.

- Taxable revenue

Revenue subject to VAT and revenue subject to PIT earned by household businesses and individual businesses are revenue inclusive of

+ Tax (if subject to tax) from sale of goods;

+ Processing payment;

+ Commissions;

+ Payment for provision of services earned during the tax period from manufacture, sale of goods, provision of services, including bonuses, sales compensation, promotions, commercial discounts, payment discounts, assistance in cash or not in cash;

+ Subsidies, surcharges, extra fees to which they are entitled;

+ Compensations for breach of contract, other compensations (only included in revenue subject to PIT);

+ Other revenues earned by household and individual businesses whether they are collected in reality.

- Tax rates

+ Tax rates include VAT rates and PIT rates which vary according to business lines as specified in Appendix I of Circular 40/2021/TT-BTC.

+ A household business or individual business that does business in multiple business lines shall declare and calculate tax at the tax rates that apply to each business line.

In case a household business or individual business that fails to determine or correctly determine the taxable revenue earned from each business line, the tax authority shall impose the taxable revenue earned from each business lines in accordance with tax administration laws.

- Determination of tax payable

VAT payable + Revenue subject to VAT x VAT rate

PIT payable + Revenue subject to PIT x PIT rate

Where:

- Revenue subject to VAT and revenue subject to PIT shall be calculated as instructed.

- VAT rates and PIT rates are specified in Appendix I of Circular 40/2021/TT-BTC.

Quoc Dat

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