The Ministry of Finance has just drafted a circular guiding the entire contents of tax and tax administration for business households and individuals according to the Law on Tax Administration No. 38, specifying the grounds and order for determining the presumptive tax rate applicable to business households and business individuals.

Business households and business individuals will declare tax according to paper
records and use paper invoices printed by the tax office. Photo: Thuy Linh 

Administrative procedures

According to the Draft Circular, tax administration for business households and individuals will be tightened by the tax industry to avoid tax loss, but make sure not to cause administrative problems for people.

The Draft 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, business individuals who are resident individuals. This is regardless of residence and non-residence for business households and individuals doing business at border markets; individuals who have leased assets in the Vietnamese territory. Because in reality, border residents traveling between the two countries to do business, if they sit at markets in the territory of Vietnam, they will be managed in terms of tax like individuals residing in the territory of Vietnam; foreign individuals whose property for lease in Vietnam is also managed the same as Vietnamese individuals.

The Draft Circular guides tax calculation methods for six cases, including: business households and business individuals that pay tax according to the declaration method; business individuals declaring tax every time it arises; business households, business individuals paying tax according to the presumptive method (presumptive households); personal property leasing; individuals who directly sign contracts to act as lottery agents, insurance agents, multi-level marketing; organize tax declaration instead, pay tax on behalf of individuals.

The Ministry of Finance guarantees that the provisions in this draft will not create more administrative procedures. In terms of tax administration, from the effective date of the Law on Tax Administration No. 38 and its guiding documents, regulations on business individuals have basically changed in the classification of objects, tax calculation methods, and determination of the responsibilities of related organizations.

However, because there are many new contents, it is necessary to clearly guide the classification of business individuals and business households into six groups to are subject to different tax calculation methods, specifying the responsibility for tax declaration and tax payment on behalf of business individuals according to the 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 according to their declaration and follow the accounting. Business households and individuals that pay tax by the method of monthly or quarterly declaration and tax declaration and are not required to make tax finalization (as prescribed in Decree No.126/2020/ND-CP) will pay tax by the declaration of value added tax, personal income tax calculated directly on turnover; at the same time, to declare and pay electronic taxes and electronic invoices when instructed by the tax office.

According to the Ministry of Finance, while the tax office has not been electronically deployed, business households and individuals temporarily pay tax by the method of tax declaration and tax declaration according to paper documents and use paper invoices issued by the tax agency.

Notably, regarding the accounting regime for business households, the General Department of Taxation has cooperated with the Department of Accounting and Auditing Supervisory (Ministry of Finance) to develop the accounting system for business households to submit to the Ministry of Finance for issuance.

According to the draft Circular guiding the accounting regime for business households, they will not have to make financial statements but only use four simple accounting books, including: detailed book of sales of goods and services; detailed books of materials, tools, products and goods; monitoring books on the performance of tax obligations to the state budget; monitoring book on the payment of salaries and wages by employees.

Based on the four accounting books, business households fully declare the criteria of turnover and expenses on the tax return. The payable tax amount calculated according to the ratio of turnover and expense information is only for tax offices to build a database to manage risks for inspection and examination when necessary.

In addition, to meet the requirements of individuals doing e-commerce, in the draft Circular, the Ministry of Finance has added objects who are e-commerce business individuals if they choose to declare tax each time. Month, quarter or year are also subject to tax return each time.

For organizations that declare tax and pay tax on behalf of an individual, they basically remain the same as in Circular No. 92/2015/TT-BTC (asset lease).

In addition, adding new contents under the guidance in the Decree No.126/2020/ND-CP such as: if the organization does business with an individual, the organization must declare tax on all revenue; payment of bonuses, sales support, promotions, trade discounts, payment discounts, cash or non-cash support payments to contracted households; the organization is a Vietnamese partner of a foreign online service provider that does not have a permanent establishment in Vietnam, but has an agreement that the foreign online service provider will pay income for individuals trading digital content products (video games, videos, clips) on online platforms through partner organizations in Vietnam.