Household business tax-paying guideline in vietnam

We’ve heard a lot about the phrase “Household business (HB)” which is a common model in our country, a sufficient force in the Vietnamese economy. According to the General Statistics Office (2018), as of 2017, the whole country has over 5.14 million HB, the total number of HB has continuously increased over the following years. So, what is a Household business? What are the characteristics? And how to pay taxes on business households? In this article, Van Luat will answer those questions for you.

What is a household business?

According to Clause 1, Article 79 of Decree 01/2021/ND-CP: “A household business is registered to be established by an individual or members of the household and is responsible with all its assets for its activities. In case household members register business households, they have to authorize one member to act as the business household representative. The individual who registers as a household business, the person authorized by the household members to act as the business household representative is the owner of the business household.”

Households in agricultural, forestry, fishery, salt production, and those selling street goods, snacks, trips, mobile businesses, seasonal businesses, and service providers with low incomes are not required to register as household businesses. Except for business lines with conditional business investment, the People’s Committees of the provinces, central cities prescribe the low-income levels applicable in the locality.

Characteristics of business households.

Business households do not have a seal, cannot open branches or representative offices, do not exercise the rights enterprises have such as import-export activities, or apply the Bankruptcy Law when doing business at a loss.

When debts arise, individuals or members of households’ businesses are responsible for paying off all debts, regardless of the amount of business or civil assets; whether they are carrying on or have ceased their business.

Place of registration and application for business household registration

Business household registration is carried out at the business registration office of the district where the business household is located.

A business household registration dossier includes:

– Application for business household registration;

– Legal papers of the individual, for the head of the business household, the household member registering the business household in case the household members register the business household;

– A copy of household members meeting on the establishment of the business household in case the household members register as a household business;

– A copy of the household members authorizing one member to be the owner of the household business, in case household members register as a household business.

Business household taxes must be paid.

– Excise

According to Article 4 of Decree No. 139/2016/ND-CP, this clause is supplemented and amended at Point a, Clause 2, Article 1 of Decree 22/2020/ND-COST and Circular No. 302/TT-BTC dated 15/15 11/2016 of the Ministry of Finance guidance on license fees

Excise exemption: in the first year of establishment or operation of production and business (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.

+ During the license fee exemption period, organizations, households, individuals, groups of individuals establish branches, representative offices or business locations, the branch, representative office, business location license fees are exempted during the period when organizations, households, individuals, and groups of individuals are exempt from license fees.

Excise fee rate:

Excise fees for individuals, groups of individuals, and households engaged in the production and trading of goods and services are as follows:

1. a) Individuals, groups of individuals, households with a turnover of over 500 million VND/year: 1,000,000 (one million) VND/year;
2. b) Individuals, groups of individuals, households with a turnover of over 300 to 500 million VND/year: 500,000 (five hundred thousand) VND/year;
3. c) Individuals, groups of individuals, households with a turnover of over 100 to 300 million VND/year: 300,000 (three hundred thousand) VND/year.
4. d) Turnover used as a basis for determining license fee rates for individuals, groups of individuals and households according to the guidance of the Ministry of Finance.”

The revenue used as a basis for determining license fee rates for individuals, groups of individuals, and households in this Clause is the total revenue for calculating personal income tax under the law on personal income tax.

If an individual, group of individual or household mentioned in this Clause changes their turnover, the basis for determining the license fee rate is the personal income tax revenue of the year preceding the year in which the license fee is calculated.

Individuals, groups of individuals, households that have just started doing business in the year, the revenue level as the basis for determining the license fee rate is the revenue of the tax year according to the provisions of the law on personal income tax.

– VAT

According to Circular No. 92/2015/TT-BTC dated June 15, 2015

Individual business households with an annual turnover of 100 million VND or less are exempt from VAT. In case of the turnover is more than 100 million VND, it is compulsory to pay VAT and PIT. How to calculate the flat tax payable by business households:

Payable VAT = Taxable turnover x VAT rate.

+ In which, the rate of VAT calculation is prescribed for each industry as follows:

+ Distribution and supply of goods: the value-added tax rate is 1%.

+ Services, construction excluding raw materials: the value-added tax rate is 5%.

+ Production, transportation, services associated with goods, construction including raw materials: the value-added tax rate is 3%.

+ Other business activities: value-added tax rate is 2%.

– PIT

Individual business households with an annual turnover of 100 million VND or less are exempt from income tax unless they must pay personal income tax.

PIT payable amount = PIT taxable turnover x PIT rate

The income tax rate is calculated as follows:

+ Distribution and supply of goods: personal income tax rate is 0.5%.

+ Services, construction excluding raw materials: the personal income tax rate is 2%.

+ Production, transportation, services associated with goods, construction including raw materials: the personal income tax rate is 1.5%.

+ Other business activities: personal income tax rate is 1%.

Van Luat hopes that the above information will be useful for households’ business able to grasp the taxes they need to pay. If you have any questions or need to clarify any issues, contact us for answers and advice. Van Luat has a team of highly qualified and experienced accountants who will provide the best service to customers.

Clause 1, Article 79 of Decree 01/2021/ND-CP on business registration dated January 4, 2021

Circular No. 302/TT-BTC dated November 15, 2016, of the Ministry of Finance guiding license fees

Decree No. 139/2016/ND-CP dated October 4, 2016, of the Government.

Circular No. 92/2015/TT-BTC dated June 15, 2015, implementing value-added tax and personal income tax for resident individuals with business activities

Source of Thuvienphapluat.vn

Source: https://vanluat.vn/huong-dan-nop-thue-ho-kinh-doanh-gia-dinh-tai-viet-nam-11195.html