Mr. Hung now wants to switch to filing taxes using the declaration method for easier invoicing and tax payment. However, the Tax Department officials informed him that his business does not yet meet the conditions for switching to the declaration method.

Mr. Hung asked what conditions his business needs to fulfill in order to change the tax calculation method.

Regarding this issue, the Tax Department of Quy Nhon City, Binh Dinh Province has the following opinion:

According to Article 5 of Circular No. 40/2021/TT-BTC dated June 1, 2021, from the Minister of Finance guiding the declaration method applicable to business households:

• The declaration method applies to business households and individuals operating on a large scale; and to business households and individuals who do not meet the large-scale criteria but choose to pay taxes using the declaration method.

• Business households and individuals paying taxes using the declaration method must comply with accounting regulations, invoices, and documentation. In cases where business households and individuals operate in sectors where revenue can be verified by relevant authorities, they are not required to maintain accounting records.

Based on the above regulations, if a business household is currently using the fixed tax method and does not meet the large-scale criteria but chooses to pay taxes using the declaration method, the business household should submit a written request to change the tax payment method and adjust and supplement the tax declaration using Form No. 01/CNKD issued with Circular No. 40/2021/TT-BTC to the Tax Department for review and guidance.

Business households must study the regulations on accounting, invoices, documentation, and tax declaration when switching to the declaration tax method. In particular, they should pay attention to the following points:

• Comply with the accounting regulations for business households issued under Circular No. 88/2021/TT-BTC dated October 11, 2021, which guides the accounting regime for business households and individuals: maintain complete documentation proving the origin of goods and services, such as: purchase lists for agricultural products if they are domestic agricultural goods; invoices from sellers if the goods are imported from domestic businesses; and relevant documents to prove the source if the goods are produced or supplied by individuals themselves.

• Regarding sales invoices:

Business households must register for the use of electronic invoices in accordance with the provisions of Decree No. 123/2020/ND-CP starting from the date they adopt the declaration tax method.

Invoice issuance timing: Business households must issue invoices when selling goods or providing services (including cases where the buyer does not request an invoice), specifically:

• For selling goods, the timing is when ownership or usage rights are transferred to the buyer, regardless of whether payment has been received.

• For providing services, the timing is when the service provision is completed, regardless of whether payment has been received. If payment is received before or during the service provision, the invoice issuance time is when the payment is collected.

If a business household violates any of the following, the tax authority will consider imposing taxes, administratively sanctioning, and notifying the business household that it does not meet the requirements for using the declaration method and must revert to the fixed tax method in the following cases:

• The household declares taxes inaccurately, not reflecting the actual revenue generated in the declaration period.

• Selling goods or providing services without issuing invoices; issuing invoices that do not reflect the actual value of the goods or services provided; or issuing invoices at the wrong time as per regulations.

• Failing to submit tax declarations or submitting them late compared to regulations without complying with administrative penalties.

• Not adhering to the accounting regulations for business households issued under Circular No. 88/2021/TT-BTC dated October 11, 2021.

• Not complying with requests from the tax authority for explanations, or failing to provide or supplement requested documentation, or providing information that the tax authority verifies and determines is incorrect.