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Taxes of individual business households in Vietnam

According to the current business trend, besides large enterprises such as joint stock companies, limited liability companies, private enterprises, partnerships, etc. The business household is still a popular choice. With a small and medium scale, individual business households, although not a type of business, still have to fulfill the tax declaration and payment obligations, but the law on taxes of individual business households as well as the procedures are somewhat simpler and faster than other forms of business.

Taxes of individual business households in Vietnam

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    Legal basis

    • Law on Enterprise 2020.
    • Law on Tax Administration 2019.
    • Law on Value Added Tax 2008, as amended in 2013, 2014, 2016.
    • Decree No. 139/2016/ND-CP, as amended and supplemented by Decree No. 22/2020/ND-CP and Decree 126/2020/ND-CP regulating license fees.
    • Circular No. 92/2015/TT-BTC guiding the implementation of value-added tax for resident individuals conducting business activities; guiding the implementation of a number of amendments and supplements to personal income tax specified in the law amending and supplementing a number of articles of the tax law and Decree No. 12/2015/ND-CP regulating expenditures on personal income tax. detailing the implementation of the law amending and supplementing a number of tax laws and amending and supplementing a number of articles of tax decrees, as amended and supplemented from time to time.

    License fee (tax)

    According to Article 4.2 of Decree 139/2016/ND-CP and Point c, Article 1.1 of Decree 22/2020/ND-CP, the license fee for individual business households is calculated according to the average revenue annually in the following cases:

    Revenue License tax rate
    Revenue over 100-300 million VND/year 300,000 VND/year
    Revenue over 300-500 million VND/year 500,000 VND/year
    Revenue over 500 million VND/year 1,000,000 VND/year

    However, business households in the following cases may still be exempt from paying license fees:

    • Revenue from 100 million VND/year or less
    • Individuals and households doing business infrequently, without a fixed location
    • Household business in salt production, aquaculture, fishing, fisheries logistics services
    • Commune cultural post office, press agency.
    • Branches, representative offices and business locations of cooperatives provide technical services directly serving agricultural production.

    Time to determine license taxable revenue

    Business household established in 2023, exempt from license fee for the first year such business is also exempted from license fees for the period of time together with the household business. Therefore, the time to determine the taxable turnover is from January of the year following the year of establishment.

    In case a business household is newly established and is granted a tax registration and tax identification number, in the first 6 months of the year, the license tax must be paid for the whole year. pay 50% license tax for the whole year. However, according to Decree 139/2016/ND-CP, individual business households that do not declare and pay this tax when detected by the agency will have to pay the license tax rate for the whole year.

    Presumptive Tax (Value Added Tax and Personal Income Tax)

    Presumptive tax is a fixed tax for each month/quarter that individual business households are obliged to perform. This tax is assigned by the Tax Authority based on the declared information or the revenue from the actual business activities of the business household.

    As the presumptive tax is called, value added tax and personal income tax are calculated according to the presumptive method.

    Special cases for individual business households to pay these two taxes:

    • Individuals who pay presumptive tax for less than 12 months according to the calendar year, including: individuals who have just started doing business, individuals who do business on a regular basis according to seasons, individuals who have stopped doing business, shall calculate tax according to the number of months/years of actual business operation.
    • An individual who pays tax and is notified by the tax authority of the payable tax amount but has been in business for less than 12 months may be entitled to a reduction in the tax amount corresponding to the number of months of cessation or cessation of business.

    According to Article 3 of Circular 92/2015/TT-BTC, individual business households can also be exempted from paying this tax when they are business households, individuals who have just started doing business, individuals doing regular seasonal business, individuals who stop or stop doing business with a turnover of 100 million VND/year or less.

    Formula for calculating presumptive tax for individual business households

    The presumptive tax for individual business households is calculated according to the following formula:

    • Value-added tax payable = Value-added taxable turnover × Value-added tax rate.
    • Personal income tax payable = Personal income taxable turnover × Personal income tax rate.

    For individual business households using invoices:

    Taxable revenue = Presumptive revenue + Invoice revenue.

    For individual business households without using invoices:

    Taxable revenue = Presumptive revenue.

    Note:

    • The revenue for the calculation of the above two taxes includes tax of all sales, processing fees, commissions and service provision fees incurred in the tax period.
    • If the individual cannot determine the taxable revenue or determine incorrectly, the revenue level will be determined by the tax authority in accordance with the law on tax administration.
    • Tax percentages based on presumptive sales, including value-added tax and personal income tax rates for each industry sector are as follows:
    List of business lines Value added tax rate Personal income tax rate
    Distribution and supply of goods 1% 0.5%
    Service

    ·    Accommodation services include: Activities of providing short-term accommodation facilities for tourists and other visitors; the activity of providing long-term accommodation for students, workers and the like; activities that provide accommodation, food service and/or recreational facilities. Accommodation activities do not include: Activities of providing long-term accommodation facilities that are considered as permanent establishments such as monthly or annual apartment rentals are classified in the real estate industry in accordance with the law on the economic system of Vietnam.

    ·    Loading and unloading services and other supporting services related to transportation such as yard business, ticketing, vehicle maintenance;

    ·    Postal services, delivery of letters and parcels;

    ·    Brokerage, auction and agency commission services;

    ·    Legal consulting services, financial consulting, accounting, auditing; tax and customs administrative services;

    ·    Data processing services, portal rental, information technology and telecommunications equipment;

    ·    Office support services and other business support services;

    ·    Services of sauna, massage, karaoke, discotheque, billiards, internet, games;

    ·    Tailoring and laundry services; Haircut, hairdressing, hair washing;

    ·    Other repair services include: repair of computers and household appliances;

    ·    Consulting services, design, supervision of basic construction;

    ·    Other services;

    5% 2%
    Construction, installation excluding raw materials (including installation of industrial machinery and equipment) 5% 5%
    Lease of property, including:

    ·    Lease of houses, land, shops, factories, warehouses, except accommodation services

    ·    Leasing means of transport, machinery and equipment without operator

    ·    Lease other property without service

    5% 5%
    Producing, processing and processing products and goods;

    ·    Mining and processing of minerals;

    ·    Cargo and passenger transport;

    ·    Services attached to the sale of goods such as training, maintenance and technology transfer services accompanied by the sale of products;

    ·    Food Service;

    ·    Repair and maintenance services for machinery, equipment, means of transport, automobiles, motorcycles, motorbikes and other motor vehicles;

    ·    Construction and installation including raw materials (including the installation of industrial machinery and equipment).

    3% 1.5%
    Production, transportation, services associated with goods, construction including raw materials 3% 1.5%
    Other business activities 2% 1%

    Time to determine taxable revenue

    • The time to determine presumptive taxable revenue is from November 20 to December 15 of the year before the tax year.
    • If an individual business household has just started business or changes its business size or lines during the year, the time to determine taxable turnover is within 10 days from the date of starting its business or changing business scale and/or lines.
    • Individual business households that use invoices, the time of determining taxable revenue is calculated as follows:
      • Sale of goods: the time of transfer of ownership, the right to use royal goods or the time of making sales invoices (in case the time of invoicing occurs before the time of transfer of ownership or use rights).
      • Transport and service provision: the time of completion of the service provision to the buyer or the time of issuing the service provision invoice (in case the service provision invoice is made before the completion of the service provision).
      • Construction and installation activities: time of acceptance, handover of works, work items, completed construction and installation volumes.

    Customers who need advice on taxes for individual business households to pay, tax declaration advice, tax reporting services, tax accounting services, please contact Viet An Tax Agent to best supported.

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