Tax & legal alert - Circular 40 guiding VAT, PIT and Tax administration for business households and individuals

On 01 June 2021, the Ministry of Finance (“MoF”) issued Circular 40/2021/TT-BTC (“Circular 40”) guiding Value Added Tax (“VAT”), Personal Income Tax (“PIT”) and Tax administration for business households and individuals. This Circular officially replaces and abolishes Chapter I and II of Circular 92/2015/TT-BTC (“Circular 92”) guiding the implementation of VAT and PIT applicable to residents doing business.

Circular 40 takes effect from 01 August 2021.

The Circular has the following main note-worthy points:

  • Compared with the current Circular 92, Circular 40 further lists out the followings case which are subject to the scope of this Circular:
    • Business households and individuals conducting business in e-commerce activities, including individuals having incomes from digital-information content products and services in accordance with the Law on E-commerce;
    • Individuals transferring domain name “.vn”;
  •  Supplementing the guidance on tax calculation methods for business households and individuals paying tax under the declaration method. Accordingly, the declaration method is based on actual monthly/quarterly revenue generating and applied to large-scale business households and individuals; or business households and individuals that do not meet the requirements of large scale but choose to pay tax under the declaration method.
  • Amending the principle for revenue determination (comparing with the revenue level of VND 100 million/year) to determine who is subject to VAT and PIT for cases of business households paying presumptive tax on revenue not doing business for full year and individuals conducting assets lease with revenue not being generated for full 12 months in a calendar year. Accordingly, the revenue as the basis for determining whether the taxpayer is obliged to pay VAT and PIT is the extrapolated taxable revenue of a calendar year (12 months), which is re-determined from revenues generated in the months in which the business is actually operated or the asset is actually leased.
  • Supplementing the requirement that the owners of e-commerce platform must declare and pay tax on behalf of individuals according to the tax authority's roadmap. Accordingly, during the initial period which the owners of the e-commerce platform cannot declare and pay tax on behalf of individuals, such organisations must be responsible for providing information related to an individual's business activities via the e-commerce platform at the request of the tax authority such as: full name; personal identification number or identity card or citizen identification number or passport; tax code; address; email; phone number; goods and services provided; business revenue; seller's bank account; other relevant information.
  • Supplementing the requirement that the organization who pays bonuses, sales support, promotion, trade discount, payment discount, cash or non-cash support, compensations for contract violations, other compensation to business households paying presumptive tax must declare and settle tax on behalf of those business households and base on the actual paid amounts in the tax year (regardless whether the revenue of such business households exceeding the revenue level of VND 100 million/year or not). The tax filing/settlement shall be conducted on a monthly or quarterly basis instead of occasional basis pursuant to previous regulations.
  • Amending the tax rates applicable to certain specific activities, however, this tax rate is still within the range of 0.5%-5% as in the previous regulations.
  • Besides, Circular 40 has also officially issued new declaration forms, relevant annexes and attached lists as well as detailed instructions on tax administration for each specific case.
  • Circular 40 also provides specific transition instructions as follows:
    • In case an individual has a property lease contract for many years and has already declared and paid tax according to the previous regulations before the effective date of Circular 40, the tax amount declared and paid shall not be adjusted.
    • The notification of the deadline for payment of presumptive tax in 2021 shall comply with regulations before the effective date of Circular 40 until the end of the tax period in 2021.
    • Business households and individuals, if satisfying the requirements to apply declaration method before the effective date of Circular 40 and not being requested for changing the method, shall continue to pay flat tax until the end of tax year 2021.
    • Organisations conducting tax filing/settlement on behalf of business households paying presumptive tax on revenue from bonuses, sales support, promotion, trade discount, payment discount, cash or non-cash support shall declare and pay tax on behalf of those business households according to the guidance in Circular 40 from effective date of such Circular.

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Documents

[ENG] Mazars in Vietnam_Tax alert_Circular 40 on PIT, VAT for individual household doing business
[ENG] Mazars in Vietnam_​Tax alert_​Circular 40 on PIT, VAT for individual household doing business
[VIE] Mazars Vietnam_Tin Thuế_Thông tư 40 về thuế TNCN-GTGT đối với hộ kinh doanh, cá nhân kinh doanh
[VIE] Mazars Vietnam_​Tin Thuế_​Thông tư 40 về thuế TNCN-GTGT đối với hộ kinh doanh, cá nhân kinh doanh