The latest way to calculate VAT and PIT for individual business households in 2022

Below is the information on how to calculate VAT and PIT for business households and individuals according to the latest current regulations. If you still have other tax questions, please contact TASCO Tax Agent for a free consultation.

1. What is the tax rate for individual business households?

According to the information you provided, the tax payable for your business household has not been calculated accurately, so we give the following advice:

️⛳ Business-license tax

According to Clause 1, Article 3 and Clause 2, Article 4 of Decree 139/2016/ND-CP regulating license fees:

1. Individuals, groups of individuals, households engaged in production and business activities with annual revenue of 100 million VND or less.

If the revenue is less than 100 million VND/year, it is eligible for license fee exemption.

2. License fee rates for individuals and households engaged in the production and trading of goods and services are as follows:

a) Individuals, groups of individuals, households with revenue of over 500 million VND/year: 1,000,000 VND/year;

b) Individuals, groups of individuals, households with revenue from 300 to 500 million VND/year: 500,000 VND/year;

c) Individuals, groups of individuals, households with revenue of over 100 to 300 million VND/year: 300,000 VND/year.

️⛳ Value-added tax

The objects subject to value-added tax:

💢 The objects subject to value-added tax are specified in Article 3 of the Law on Value-Added Tax 2008 (amended over the years 2013, 2014, 2016) as follows:

💢 Goods and services used for production, business, and consumption in Vietnam are subject to value-added tax, except for objects not subject to value-added tax.

Value-added tax calculation method:

a. Business households and individuals pay tax according to the declaration method

▪️ The Law on Tax Administration (2019) stipulates that large-scale business households and individuals will have to apply the declaration method but does not stipulate the monthly/quarterly declaration form, Article 5 of Circular 40/2021 /TT-BTC has requested that large-scale business households and individuals only make monthly declarations.

▪️ In addition to large-scale individual households, other business households and individuals who have not yet met this condition but voluntarily choose to do, they can register to pay tax according to the declaration method.

▪️ For business households and individuals paying tax according to the declaration method: must declare tax on a monthly basis, except for households and individuals who have just started doing business and those individuals who meet the requirements for declaring tax according to the tax declaration method quarterly and choose to declare quarterly.

▪️  Business households and individuals that pay tax according to the declaration method are not required to make tax finalization.

b. Business individuals pay tax according to each time it is incurred

Circular 40/2021/TT-BTC also specifies the tax payment method for each time it is incurred, applicable to business individuals, including:

▪️ Personal mobile business.

▪️ Individuals are private construction contractors.

▪️ Individuals transfer Vietnamese national internet domain name “.vn”.

▪️ Individuals earning income from digital information content products and services, if they do not choose to pay tax according to the declaration method, may pay tax each time it is incurred.

c. Business households and individuals pay tax by the presumptive method

A new point in Circular 40/2021/TT-BTC related to business households and individuals paying tax by the presumptive method:

▪️ Business households and individuals that satisfy the conditions for paying tax according to the declaration method if the tax authority has managed tax according to the presumptive method before the effective date of this Circular and there is no request to change the tax calculation method, continue to pay tax by the presumptive method until the end of the tax period of 2021.

⛳ Personal income tax

Tax for business individuals:

▪️ Business individuals pay personal income tax according to the ratio on revenue for each field and line of production and business.

▪️ Revenue is the entire amount of money from sales, processing, commissions, and service provision arising in a tax period from production and business activities of goods and services. In case the business individual cannot determine the revenue, the tax authority has the authority to determine the revenue according to the provisions of the law on tax administration.

Tax rate:

▪️ Distribution and supply of goods: items such as bonuses, sales support, sales promotion, trade discount, payment discount will now be subject to the PIT rate of 0.5%;

▪️ Services, construction excluding raw materials: 2%. Particularly for property leasing, insurance agents, lottery agents, multi-level sales agents: 5%;

▪️ Production, transportation, services associated with goods, construction including raw materials: 1.5%;

▪️ Other business activities: 1% (Article 4 Article 2 Law No. 71/2014/QH13 dated 26/11/2014).

2. Do individual business households have to pay tax?

From January 1, 2017, according to Decree 139/2016/ND-CP stipulating the subjects exempt from paying license tax and the rate of license tax payment in each case as follows:

Article 3. License fee exemption

Cases that are exempt 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, and households engaged in non-regular business and production activities; do not have a fixed location according to the guidance of the Ministry of Finance.

3. Individuals, groups of individuals, and households producing salt.

4. Organizations, individuals, groups of individuals, and households cultivating, catching aquatic products, and providing fisheries logistics services.

5. Commune cultural post office; press agencies (print press, audio press, video press, electronic press).

6. Branches, representative offices, and business locations of cooperatives provide technical services directly in service of agricultural production.

7. Commune People's Credit Fund; cooperatives specializing in providing services for agricultural production; branches, representative offices, business locations of cooperatives, and of private enterprises doing business in mountainous areas. Mountainous areas are determined according to the regulations of the Committee for Ethnic Minorities.

Article 4. License fee collection rate

1. License fee rates for organizations engaged in the production and trading of goods and services are as follows:

a) Organizations with charter capital or investment capital over 10 billion VND: 3,000,000 VND/year;

b) Organizations with charter capital or investment capital of 10 billion VND or less: 2,000,000 VND/year;

c) Branches, representative offices, business locations, non-business units, other economic organizations: 1,000,000 VND/year.

The level of license fee collection for organizations specified at Points a and b of this Clause is based on the charter capital stated in the business registration certificate; In case there is no charter capital, it shall be based on the investment capital stated in the investment registration certificate.

2. License fee rates for individuals and households engaged in the production and trading of goods and services are as follows:

a) Individuals, groups of individuals, households with revenue over 500 million VND/year: 1,000,000 VND/year;

b) Individuals, groups of individuals, households with revenue from 300 to 500 million VND/year: 500,000 VND/year;

c) Individuals, groups of individuals, households with revenue over 100 to 300 million VND/year: 300,000 VND/year.

3. Organizations, individuals, groups of individuals, production and business households or newly established, granted tax registration and tax identification numbers and enterprise identification numbers during the first 6 months of the year shall pay the license fees for the whole year; If established and granted tax registration and tax identification number and enterprise identification number within the last 6 months of the year, 50% of the annual license fee shall be paid.

▪️ Organizations, individuals, groups of individuals, production, and business households that do not declare license fees must pay license fees for the whole year, regardless of the time of detection is in the first 6 months of the year or the last 6 months of the year.

4. If an organization specified at Points a and b, Clause 1 of this Article changes its charter capital or investment capital, the basis for determining license fee collection is the charter capital or investment capital of the year preceding the year license fee is calculated.

▪️ In case the charter capital or investment capital stated in the business registration certificate or investment registration certificate is in a foreign currency, it shall be converted into Vietnamese dong to serve as a basis for determining the license fee level at the buying rate of the commercial bank or credit institution where the license fee payer opens an account at the time the license fee payer makes a payment to the state budget.

5. Individuals, groups of individuals, and households specified in Clause 2 of this Article have a change in their revenue, the basis for determining the license fee collection rate is the revenue of the year preceding the year in which the license fee is calculated.

According to point c, clause 1, Article 1 of Decree 22/2020/ND-CP, from February 25, 2020, there will be 03 more cases of license fee exemption, specifically:

▪️  Exemption of license fees in the first year of establishment or production and business activities (from January 1 to December 31) for:

+ Newly established organization (granted a new tax code, new enterprise code).

+ Households, individuals, and groups of individuals starting production and business activities for the first time.

▪️ Small and medium-sized enterprises that move from household businesses (as prescribed in Article 16 of the Law on Supporting Small and Medium Enterprises) are exempt from license fees for 3 years from the date of the first issuance of the Business Registration Certificate.

▪️  Public schools and public preschools.

+ During the license fee exemption period, if the above-mentioned organizations, households, individuals, groups of individuals, small and medium-sized enterprises establish branches, representative offices, or business locations, these locations are also exempted from license fees.

The objects are individuals, groups of individuals, and business households that must pay personal income tax and value-added tax specified in Circular 92/2015/TT-BTC as follows:

Article 1. Taxpayers

1. Taxpayers as guided in Chapter I of this Circular are resident individuals, including individuals, groups of individuals, and households engaged in production and trading of goods and services in all fields, production, and business lines as prescribed by law (hereinafter referred to as business individuals). Production and business fields and lines include some of the following cases:

a) Independently practice in the fields for which a license or practice certificate is granted as prescribed by law.

b) Acting as a selling agent at the right price for lottery agents, insurance agents, multi-level sales agents who directly sign contracts with lottery companies, insurance enterprises, and multi-level marketing enterprises. grant.

c) Doing business with the organization.

d) Agricultural production and business, forestry, salt making, aquaculture, and fishing do not satisfy the conditions for tax exemption guided at Point e, Clause 1, Article 3 of Circular No. 111/2013/TT -BTC dated 15/8/2013 of the Ministry of Finance.

2. Taxpayers mentioned in Clause 1 of this Article do not include business individuals with a revenue of 100 million VND/year or less.

3. What tax do individual business households have to pay?

💢 Individual business households with annual revenue of 100 million VND or less will be exempt from tax.

💢 Tax calculation for individual business households according to the latest Law includes the following taxes: License tax, value-added tax (VAT), personal income tax (PIT).

3.1 How to calculate license tax

Pursuant to Clause 2, Article 4, Decree 139/2016/ND-CP has the following provisions:

2. License fees for individuals and households engaged in the production and trading of goods and services are as follows:

a) Individuals, groups of individuals, households with revenue over 500 million VND/year: 1,000,000 VND/year;

b) Individuals, groups of individuals, households with revenue from 300 to 500 million VND/year: 500,000 VND/year;

c) Individuals, groups of individuals, households with revenue over 100 to 300 million VND/year: 300,000 VND/year.

Summary:

Average annual revenue	License tax for the whole year
Revenue over 500 million VND/year	1,000,000 VND/year
Revenue over 300 to 500 million VND/year	500,000 VND/year
Revenue over 100 to 300 million VND/year	300,000 VND/year

3.2 Calculation of VAT and PIT

✨ Taxable revenue:

▪️ Revenue subject to VAT and revenue subject to PIT for business households and individuals is the tax-inclusive revenue (in taxable cases) of all sales, processing fees, commissions, money for service provision arising in the tax period from the production and trading of goods and services, including bonuses, sales support, sales promotion, trade discount, payment discount, payment and support payments in cash or non-cash; price subsidies, surcharges, extras, and additional fees are entitled to according to regulations; compensation for breach of contract and other compensations (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.

▪️  In case flat taxpayers use invoices of tax authorities, the taxable revenue is based on the flat revenue and the revenue on the invoice.

▪️ In case business individuals cannot determine flat taxable revenue or determine that it is not realistic, the tax authority is competent to determine flat taxable revenue according to the provisions of the law on tax administration.

✨ Tax rate on revenue:

a) The tax rate on revenue includes the VAT rate and the personal income tax rate applied in detail to each field and business line according to the guidance in Appendix I issued together with Circular 40/2021/TT- BTC.

b) In case business households and individuals operate in many fields and lines of business, business households, and individuals shall declare and calculate tax at the rate of tax calculated on revenue applicable to each field, line. In case business households or individuals cannot determine the taxable revenue 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, field, and profession according to the provisions of the law on tax administration.

✨ Determine the amount of tax to be paid:

The amount of VAT payable	=	VAT taxable revenue	VAT rate
The amount of PIT payable	=	PIT taxable revenue	PIT rate

This is information about VAT and PIT calculation for business households and individuals according to the latest regulations. If you still have other questions about tax, please contact TASCO Tax Agent for a free consultation.

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