Taxes to be paid for online sales

Question: Dear lawyer, due to staying at home to take care of my children, I am not able to go to work. As a result, I am making a plan to sell online in an individual business form to earn extra income. I am wondering if online businesses need to pay tax. And is it mandatory to set up a company? Hope to receive answers from you soon. Thank you.

Answer: PL&Partners would like to thank you for trusting and sending questions to us. For your questions, we would like to reply as follows:

Online business in the form of business households, individual doing business does not need to set up an enterprise.

DO HOUSEHOLDS AND INDIVIDUALS DOING BUSINESS ONLINE HAVE TO PAY TAX?

Basically, when doing business, paying taxes is required and there is no exception for online business. However, not all cases are subject to tax payment.

  • For business households and individuals doing business having turnover from production and business activities in the calendar year of VND 100 million or less, they do not have to pay Value Added Tax (VAT) and Personal Income Tax (PIT) in accordance with the Law on VAT and PIT.

Thus, for doing business online, you are obliged to pay tax if your turnover from selling online is GREATER THAN VND 100 million/ calendar year.

More specifically, 03 types of taxes to be paid include:

1. License fee.

This fee is paid annually. The fee payment level of an individual doing business online is determined based on the total turnover in a calendar year.

Pursuant to Clauses 2 and 3, Article 1 of Circular 65/2020/TT-BTC, individuals are exempt from license fee for the first year from the date of official commencement of production/business. From the second year (2nd) from the establishment year, the annual license fee payment rate of individuals business is regulated as follows:

No Turnover Payment rate
1 From VND 100,000,000/year or less Exemption
2 Over VND 100,000,000 to 300,000,000/year VND 300.000/year
3 Over VND 300,000,000 to 500,000,000/year VND 500.000/year
4 Over VND 500,000,000/year VND 1.000.000/year
  • The turnover serving as the basis for determining license fee rates applicable to individuals is the total assessable turnover in the preceding year of the production/business activities.
  • Individuals doing business are not required to submit license fee declaration dossier. Tax authority shall base on tax declaration dossier and tax administration databases to determine the turnover as a basis for payment of license fee and notify payers to implement Article 13 of Decree 126/2020/ND-CP (according to point b, Clause 1, Article 10 of Decree 126/2020/ND-CP).

2. Personal Income Tax (PIT) and Value Added Tax ( VAT)

Similar to license fee, individuals doing business having turnover of over VND 100,000,000/year are obliged to pay PIT and VAT.

Pursuant to Clause 3, Article 10 of Circular 40/2021/TT-BTC, the tax payable is determined as follows:

VAT payable = Turnover subject to VAT x VAT rate

PIT payable = Turnover subject to PIT x PIT rate

Where:

  • VAT rate and PIT rate are applied according to Circular 40/2021/TT-BTC. Specifically, your online sales are considered as distribution and supply activities, therefore, the VAT rate and the PIT rate are 1% and 0.5% respectively.
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