The Ministry of Finance has drafted a circular guiding on all contents of tax and tax management for business households and individuals in accordance with the Law on Tax Administration No.38. In particular, regulating specifically about basis and order to determine the rate of flat tax for business households and individuals.

Business households and individuals will made tax declaration by paper dossier
and using paper invoice printed by tax authority. Photo: Thùy Linh 

Avoiding to arise administrative procedures

According to the draft circular, tax administration for business households and individuals will be tightened by the tax sector to avoid tax loss, but ensure that there is no trouble in terms of administrative procedures for them.

The circular also clearly stipulates the abolition of chapters related to business households in Circular No. 92/2015/TT-BTC.

According to the Ministry of Finance, this draft circular only regulates value added tax, personal income tax of business households and business individuals who are resident individuals. For business households and individuals doing business at border markets and individuals who have leased assets in the Vietnamese territory, they will not be distinguished between residence and non-residence, because in reality, border residents travel between two countries for business purposes and if sitting at markets in the territory of Vietnam, they will be managed for tax collection as for individuals residing and operating business in the territory of Vietnam, while foreign individuals having assets for lease in Vietnam are also managed like Vietnamese individuals.

The draft circular gives instruction on tax calculation methods in six cases, including business households and business individuals that pay tax under the declaration method; business individuals paying tax every time it is incurred; business households, business individuals paying flat tax (payers of flat tax); personal leasing property; individuals who directly sign lottery, insurance, multi-level marketing agent contracts and those who organise to declare and pay tax on behalf of individuals.

The Ministry of Finance guaranteed the provisions in this draft would not generate administrative procedures. In terms of tax administration, since the coming into effect of the Law on Tax Administration No. 38 and its guiding documents, regulations on business individuals have changed in the way of classifying subjects, tax calculation methods and determination of the responsibilities of the concerned organisations. However, because of many new contents, it is necessary to guide the classification of business individuals and business households into six groups to apply different tax calculation methods, specifically define responsibilities for tax declaration and payment on behalf of business individuals in accordance with new regulations.

Instructions for tax declaration and payment for each case

According to the Law on Tax Administration No. 38, business households and individuals with large-scale businesses must pay taxes based on declarations and follow the accounting regime. Business households and individuals that pay tax via monthly or quarterly declaration and are not required to make tax finalisation (as prescribed in Decree No. 126/2020/ND-CP) should pay tax by the method of tax declaration and VAT declaration, personal income tax calculated directly on income and at the same time, to declare and pay electronic taxes and electronic invoices when instructed by the tax authorities.

According to the Ministry of Finance, while the tax authority has not been deployed electronically, business households and individuals should pay tax based on their method of tax declaration, paper declaration and use of paper invoices issued by tax authority.

Regarding the accounting regime for business households, currently, General Department of Taxation has worked with the Department of Accounting and Auditing Regulations (the Ministry of Finance) to develop an accounting system for business households to submit to the Ministry of Finance for promulgation. According to the draft circular guiding the accounting regime for business households, they will not have to make financial statements, but only use four accounting books in a simple form including: detailed books of sales of goods and services; detailed books of materials, tools, products, goods; monitoring books on the performance of tax obligations to the State budget; monitoring books on the payment of salaries and wages for employees. Based on four accounting books, business households fully declare the criteria of revenue and expenses on the tax declaration. The payable tax amount calculated is based on the ratio of revenue and expense information is only serve for tax authority to build a database to manage risks for inspection and examination when necessary.

To the requirements of individuals operating e-commerce business, in the draft circular, the Ministry of Finance has added the subjects who are operating e-commerce business if they choose to declare tax every time it is incurred or in a month, in a quarter or a year are also subject to tax declared every time it is incurred.

For organisations that declare and pay tax on behalf of individuals, basically, it will remain the same as stipulated in Circular No. 92/2015/TT-BTC (property leasing). Besides that, adding new contents under guidance in Decree No. 126/2020/ND-CP such as: if the organisation cooperates with an individual, the organisation must declare tax on all revenue; payment of bonuses, sales support, promotions, trade discounts, payment discounts and cash or non-cash support payments to payers of flat tax; the organisation is a partner located in Vietnam of a foreign online service provider that lacks a permanent establishment in Vietnam but has an agreement, the unit providing an foreign online service will pay income for individuals doing business in digital content products (electronic games, videos, clips) on an online platform through a partner organisation in Vietnam.