Some new in Circular 40/2021/TT-BTC of the Ministry of Finance on 01/06/2021

On June 1st, 2021, the Ministry of Finance has just issued Circular No. 40/2021/TT-BTC guidelines VAT, PIT, and tax administration for business households and individuals. This document officially comes into effect from August 1st, 2021. This is a new circular with many important changes, in the following article, TASCO Tax Agent will present some new highlights of Circular 40 to help customers have an overview of this document law.

In this article, TASCO Tax Agent will compare regulations between two related legal documents, Circular 40/2021/TT-BTC (Take effect from 01/08/2021) and Chapter I, II Circular 92/2015/TT-BTC (to be invalid on 01/08/2021).

1. Household business

Circular 40: Clause 1 Article 3

• “Household business” means a business or manufacturing facility established by an individual or members of a household who take responsibility with all of their property for its business operation as prescribed.
• This regulation is consistent with Decree 01/2021/ND-CP on business registration (Article 79).

Circular 92: Not regulated.

2. The concept of large-scale business households and individuals

Circular 40: Clause 2 Article 3

• "A large-scale household business or individual business" means a household business or individual business that satisfies the highest criteria for revenue and employees of extra-small enterprises. To be specific: A household business or individual business in agriculture, aquaculture, forestry, aquaculture, industry, construction has an annual average number of at least 10 employees participating in social insurance or has a total revenue in the preceding year of at least 3 billion VND; business households and individual business in the field of commerce and services has at least 10 employees participating in social insurance or has a total revenue in the preceding year of at least 10 billion VND.

Circular 92: Not regulated

3. Explain each method of tax payment

Circular 40: Explaining clearly each method of tax payment of business households and individuals including the following methods:

⭕ Declaration method (Clause 3.4, Article 3)

• “Declaration method” means a method of declaring, calculating the proportional tax on actual revenue earned per month or quarter.
• “Household businesses and individual businesses paying tax under-declarations method” are large-scale household businesses and individual businesses; or other household businesses and individual businesses that choose to pay tax under-declarations method.

⭕ Tax declaration method for each time it is incurred (Clause 5.6, Article 3)

• “Separate declaration” means a method of declaring, calculating the proportional tax on actual revenue earned separately.
• “Individual businesses paying tax under separate declarations” are individual businesses that have not frequently business operations and do not have fixed business locations.

⭕ Presumptive method (Clause 7,8.9, Article 3)

• “Presumptive tax” means a fixed amount of proportional tax on a fixed amount of revenue determined by the tax authority as prescribed by Article 51 of the Law on Tax Administration.
• “Household businesses and individual businesses paying presumptive tax” are household businesses and individual businesses that fail to comply with or fully comply with regulations on accounting, invoices, and documents, except household businesses and individual businesses paying tax under periodic or separate declarations.
• “Presumptive tax” means a fixed amount of tax and other amounts payable to the state budget by household businesses and individual businesses that have to pay presumptive tax determined by tax authorities as prescribed in Article 51 of the Law on Tax Administration.

Circular 92: Not regulated

4. Accounting regime when paying tax according to the declaration method

Circular 40: Clause 4, Article 5 of Circular 40/2021/TT-BTC

• Household businesses and individual businesses paying tax under periodic declarations shall comply with accounting, invoices, and documents. A household business or individual business is not required to do accounting if their business line has the basis for determination of revenue which is confirmed by a competent authority.

Circular 92: Not regulated

5. Organizations having business cooperation with individuals

Circular 40: Clause 10, Article 3

• “Organizations having business cooperation with individuals” are organizations that have agreements with individuals on the contribution of assets and work to operate a business and jointly reap benefits and take responsibility in accordance with Article 504 of the Civil Code dated 24/11/2015, and guiding, amending, or replacing documents (if any).

Circular 92: Not regulated

6. Additional objects responsible for declaring and paying tax on behalf of individuals:

Circular 40: Pursuant to Clause 1, Article 8 of Circular 40/2021/TT-BTC, stipulating that organizations and individuals declare and pay tax on behalf of individuals in the following cases.

✅ An organization or individual shall declare and pay tax on behalf of another individual in the following cases:

a) The organization leases the property from the individual under a lease contract which prescribes that the lessee is the taxpayer;

b) The organization has business cooperation with the individual;

c) The organization pays bonuses, sales compensation, promotions, commercial discounts, payment discounts, assistance in cash or not in cash, compensations for breach of contract, other compensations for presumptive taxpayers;

d) The organization in Vietnam is a partner of an overseas digital platform provider (without a permanent establishment in Vietnam) and pay income from digital information content products and services under an agreement with the overseas digital platform provider;

dd) The organization is the owner of an e-commerce platform, declares and pays tax on behalf of the individual according to the tax authority’s roadmap. Before being able to declare and pay tax on behalf of individuals, organizations that are owners of e-commerce platforms shall provide information about the individuals’ business operation on their platforms as requested by tax authorities, such as full name; ID/passport number; taxpayer identification number (TIN); address; email address; phone number; goods and services provided; revenue; the seller’s bank account; other relevant information;

e) The organization or individual is authorized by the other individual to declare and pay tax on his/her behalf as prescribed by civil laws.

Circular 92: Pursuant to Clause 2, Article 8

• If an individual signs a property lease contract with an enterprise or economic organization in which the lease contract has an agreement that the lessee pays tax on behalf, the enterprise or economic organization is responsible for withholding tax, declaring tax, and paying tax on behalf of the individuals including value-added tax and personal income tax.

7. Additional incomes subject to value-added tax and personal income tax:

Circular 40: Pursuant to Appendix I to Circular 40/2021/TT-BTC:

• Bonuses, sales compensation, promotions, commercial discounts, payment discounts, assistance will be subject to a personal income tax rate of 0.5% and subject a value-added tax of 1%.
• Advertising services on products, digital information content services, and other services that are the object calculate value-added tax by the withholding method under the tax rate of 10%, subject to 2% personal income tax and subject to a value-added tax of 5%
• Activities that object calculate value-added tax by the deduction method under the tax rate of 10%, subject to personal income tax of 1.5% and subject to a value-added tax of 3%.

Circular 92: Not regulated

8. Tax payment according to the declaration method without finalization

Circular 40: Pursuant to Clause 5, Article 5 of Circular 40/2021/TT-BTC

• Business households and individuals that pay tax by the declaration method are not required to finalize tax.

Circular 92: Not regulated

9. New points on tax calculation method for individuals who lease property

• Business individuals, including property rental individuals at less than 100 million VND/year on revenues, are not required to pay tax as prescribed in Clause 1, Article 9 of Circular 40.

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✨ The above are some outstanding provisions of Circular No. 40 issued on 1/6/2021 and this document will reject the provisions in Chapters I and II of Circular No. 92/2015/TT-BTC for applicable objects are business households and individuals engaged in the production of goods and services. This Circular officially takes effect from 01/08/2021, please refer to the above information to understand clearly and comply with the law!

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