Method for calculating tax payable by household businesses in Vietnam

Method for calculating tax payable by household businesses in Vietnam (Internet image)

1. What is household business?

According to Clause 1, Article 3 of Circular 40/2021/TT-BTC, household business means a business or manufacture facility the established by an individual or members of a household who take responsibility with all of their property for its business operation as prescribed in Article 79 of Decree 01/2021/ND-CP dated 04/01/2021 on enterprise registration and its guiding, amending or replacing documents (if any).

In case the household business is registered by household members, one of them shall be authorized as the household business’ representative.

The individual who registers the household business, the person authorized by household members as the household business’ representative shall be the household business owner.

Households doing agriculture, forestry, aquaculture, salt production, street vendors, peddlers, merchant traders, travelling vendors, seasonal traders, low-earners are not required to apply for household business registration, except in conditional business lines. The People’s Committees of provinces shall specify the levels of lower incomes in their provinces.

2. Method for calculating tax payable by household businesses in Vietnam

Method for calculating tax payable by household businesses include:

(1) Method for calculating tax payable by household businesses under periodic declarations in Vietnam

- 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.

(2) Method for calculating fixed tax payable by household businesses

- 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 Circular 40/2021/TT-BTC.

- 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 Circular 40/2021/TT-BTC.

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.

(Articles 5 and 7 of Circular 40/2021/TT-BTC, as amended by Clause 1, Article 1 of Circular 100/2021/TT-BTC)

Diem My

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