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 for work. As a result, I am making a plan to online sales in an individual business form to earn extra income. Let me ask, do online businesses need to pay tax? And is it mandatory to set up a company? Hope to receive answer from lawyer soon. Thank you.

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

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

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

The basic rule is 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 household business and individual business with turnover from production and business activities in the calendar year of VND 100 million or less, they do not have to pay VAT and PERSONAL INCOME TAX (PIT) in accordance with the Law on Value Added Tax and Personal Income Tax.

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

Specifically, 03 types of taxes to be paid include:

1. License tax.

This fee is paid annually. The license fee level of an individual doing online business 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 tax for the first year from the date of official commencement of production/business. From the second year (02) from the establishment year, the annual license tax 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 tax rates applicable to individuals is the total assessable turnover in the preceding year of the production/business activities.
  • Individuals business are not required to submit license tax 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 tax and notify taxpayers to implement regulations in 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 tax, individuals business with 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

In which:

  • 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 is 1% and 0.5% respectively.
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