Which taxes do business households have to pay?

Business household is a production and business establishment registered to be established by an individual or members of a household and is responsible with all his/her assets for the household’s business activities. Because of simple policies, easier to manage than enterprises, suitable for individuals and small households to do business, businesses household are chosen by many people.

Determining whether a business household must pay tax is based on the household’s total revenue in a calendar year. Specifically:

  • If the revenue is NO MORE THAN VND100,000,000, there is NO TAX PAYMENT.
  • If the revenue is OVER VND100,000,000, they MUST PAY TAX.

Tax payable includes 03 main types: License Fee, Value Added Tax and Personal Income Tax (no corporate income tax as for enterprises). The payment amount for all three of these taxes are based on the annual revenue of the business household.

1. LICENSE FEES

License fee (formerly known as License Tax) is a fee that business households must pay by January 30 every year. This fee is determined based on the total revenue in a calendar year of the household, not based on the charter capital like enterprises.

Business households that are exempt from paying license fees in the first year of establishment, from the second (02) year onwards, the payment shall be as follows:

NO. Revenue Payment
1 More than VND100,000,000/year to VND300,000,000/year VND500,000/year
2 More than VND300,000,000/year to VND500,000,000/year VND300,000/year
3 More than VND500,000,000/year VND1,000,000/year

Where the revenue used as the basis for determining the collection rate is the total taxable revenue for personal income tax of the preceding year of production and business activities (excluding property leasing activities) of business locations.

2. VALUE ADDED TAX (VAT) AND PERSONAL INCOME TAX (PIT)

  • Unlike enterprises that must pay tax by the periodic declaration method, business households are entitled to pay presumptive tax (annually) and do not have to follow the accounting system.
  • However, business households of the following sizes must comply with the accounting, invoice and voucher regimes and shall declare and pay taxes according to the periodic declaration method (monthly or quarterly):
  • Business households in the fields of agriculture, forestry, fishery, industry and construction: having the average number of employees participating in social insurance per year is more than 10, or the total revenue of the preceding year is from 3 billion dongs or more;
  • Business households in the field of commerce and services: having the average number of employees participating in social insurance per year is more than 10, or the total revenue of the preceding year is 10 billion dongs or more.

Note: Business households that use the periodic declaration method are not required to conduct tax finalization.

2.1. Tax calculation formula:

VAT and PIT payable are calculated as follows:

VAT payable = Revenue subject to VAT x VAT rate
PIT payable = Revenue subject to PIT x PIT rate

Where:

– Revenue subject to VAT and revenue subject to PIT: is the tax-inclusive revenue (in taxable cases) of all sales, processing costs, commissions, and service fees arising in the tax period from the production and trading of goods and services, including bonuses, sales support, promotion, trade discount, payment discount, support in cash or in kind; price subsidies, surcharges, extras, and additional fees to which they are entitled according to regulations; compensation for breach of contract and other compensations (only included in the revenue subject to PIT); other revenue that the business household is entitled to, regardless of whether money has been collected or not.

– Applicable VAT and PIT rates in detail to each field and business line shall follow the guidance in Appendix I issued as an attachment to Circular 40/2021/TT-BTC (the minimum rate is 0.5%, the maximum rate is 5%).

Note:

In case a business household operates in many fields and business lines, it shall declare and calculate tax according to the applicable tax rate and the revenue of each field or business line. In case the taxable revenue of each field or business line cannot be determined or the determination is not suitable for the actual business, the tax authority shall determine the taxable revenue of each field or business line according to regulations on tax administration.

2.2. Tax returns submission due date:

For periodic declaration method:

  • Monthly declaration: no later than the 20th day of the month following the month in which the tax liability arises;
  • Quarterly declaration (applicable only to households that have just started doing business or households that meet the criteria for quarterly tax declaration and choose this method): no later than the last day of the first month of the consecutive quarter in which tax liability arises.

For presumptive tax: December 15 of the year preceding the tax year at the latest.

2.3. Tax payment due date:

For periodic declaration method: no later than the last day of the tax return due date. In case of additional declaration of tax declaration dossiers, the payment deadline shall be the due date for submitting tax returns of the tax period having errors.

For presumptive tax: pay tax according to the deadline on the Notice for Payment from tax authorities (which shall be sent no later than January 20 every year).

 ***Legal basis:

  • Law on Tax Administration 2019;
  • Decree No. 139/2016/ND-CP (amended and supplemented by Decree No. 22/2020/ND-CP);
  • Decree No. 126/2020/ND-CP;
  • Circular No. 92/2015/TT-BTC (amended and supplemented by Circular No. 40/2021/TT-BTC).

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The article is based on the current legal regulations at the time of writing, and it may no longer be valid or relevant at the time you are reading it due to changes of the law. The article, therefore, is seen as reference only.

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