Tax declaration by businesspersons paying flat tax

 

1. Tax declaration principles:

a) Persons who pay flat tax shall declare tax once per year at the Sub-departments of taxation of the district where their business premises are located and are not required to make annual tax statements.

b) Flat tax payers using invoices of tax authorities shall declare and pay taxes on revenues on the invoices quarterly in addition to the flat revenue.

c) In case a businessperson engages in business cooperation with an organization using property under his/her personal ownership but is not able to determine revenue from business, he/she may authorizes the organization to declare and pay flat tax on his/her behalf. The organization shall declare and pay tax on behalf of the person at its supervisory tax authority.

2. Tax declaration documents:

From November 20 to December 05 every year, the tax authority shall hand out tax declarations of the next year to all businesspeople who pay flat tax.

Tax declaration documents submitted by flat tax payers:

– Flat tax payers shall declare tax on flat revenue using declaration form no. 01/CNKD enclosed herewith.

– Flat tax payers using invoices of tax authorities shall declare their revenues according to the invoices in form No. 01/BC-SDHĐ-CNKD enclosed herewith. They are not required to make and submit the invoice use report using the form enclosed with Circular No. 39/2014/TT-BTC dated March 31, 2014 of the Ministry of Finance.

– In case a businessperson engages in business cooperation with an organization and authorizes it to declare and pay tax on his/her behalf, the organization shall use form No. 01/CNKD and form No. 01-1/BK-CNKD enclosed where with and submit a photocopy of the business cooperation contract (for the first time of tax declaration of the contract).

3. Deadline for submitting tax declarations:

– Flat tax payers shall submit tax declarations by December 15 of the year preceding the tax year.

– Flat tax payers who are new to business or changes their business lines or scale of business in the year shall submit tax declarations within 10 days from the beginning date or changing date.

– Flat tax payer using invoices of the tax authorities shall submit tax declarations by the 30th day of the quarter succeeding the quarter in which tax is incurred.

 

4. Determination of flat tax and revenue

 

a) Flat revenue of a flat tax payer shall remain unchanged for 01 year.

b) Flat tax payers shall determine the flat revenue themselves as the basis for determining the tax payable on form No. 01/CNKD enclosed herewith. If the businessperson is not able to determine the flat revenue, fails to submit the tax declaration, or the flat revenue determined is not practical, the tax authority is entitled to impose a flat revenue in accordance with regulations of law on tax administration.

According to tax declarations submitted by businesspeople and database of tax authorities including: integrated information system of tax authorities; verification and survey results; tax inspection results (if any), tax authorities shall determine flat revenue and flat tax in order to conduct a public enquiry and consult with Tax Advisory Council. This is the basis for Provincial Departments of Taxation to direct and review the making of … of each sub-department of Taxation of districts.

c) Every flat tax payer who makes changes to their business (business lines, scale, location, etc.) in the year must register the changes in order for tax authorities to re-calculate the flat revenue, flat tax, and other information about the tax payer that is applied to the rest of the tax year. If the tax authority, through inspection, finds that the taxpayer does not make changes to his/her business but flat revenue varies by 50% or more, the tax authority shall only recalculate the flat revenue which is applied to the rest of the tax year. If the business lines are changed, adjustments shall be made accordingly.

5. First public enquiry

The tax authority shall conduct the first public enquiry to seek opinions about flat revenues and flat tax by posting documents publicly. Documents to be posted include: A list businesspeople exempt from VAT and/or PIT; a list of businesspeople who have to pay tax; and a list of businesspeople using invoices of tax authorities. The first public enquiry shall be conducted as follows:

a) The Sub-department of taxation of each district shall post the documents at the Sub-department of taxation, the People’s Committee of the district, the gate or a suitable location of the People’s Committees of communes within the district, offices of tax collector teams, management boards of markets, etc. in order to ensure convenient obtainment of information. The first public enquiry shall take place from December 20 to December 31 every year.

b) Sub-department of taxation of the district shall send posted documents to the People’s Councils and Fatherland Front Agencies of the district and communes therein by December 20; specify the address and deadline for receiving feedbacks from the People’s Council and Fatherland Front Agencies which is December 31.

c) By December 20 every year, Sub-departments of taxation shall send form No. 01/TBTDK-CNKD enclosed herewith (notice of estimated flat revenue and flat tax) together with form No. 01/CKTT-CNKD enclosed herewith (information sheet) to each businessperson, specify the address and time for the Sub-departments of taxation to receive feedbacks from businesspeople (if any) which is December 31. The notice may be sent directly to businesspeople (the receipt of the notice must be confirmed by taxpayers) or by tax authorities by registered mail.

Preliminary information sheets shall be sent to businesspeople within the district, including both businesspeople who have to pay tax and who do not. If the market, street, and neighborhood that has 200 businesspeople or fewer, the Sub-department of taxation shall print and hand out the information sheet to every businessperson. If the market, street, or neighborhood has more than 200 businesspeople, the Sub-department of taxation shall print and hand out the information sheet to not more than 200 businesspeople. If the market has more than 200 businesspeople, the Sub-department of taxation shall print and hand out the information sheet to each businessperson by their business lines.

d) The Sub-department of taxation has the responsibility to publish the posting location and address for receiving feedbacks (including phone numbers, fax numbers, address, email address).

e) Sub-departments of taxation shall collect and consolidate feedbacks from the people, taxpayers, the People’s Councils and Fatherland Front Agencies of the district and communes therein, then consider changing the regulated entities, estimated flat revenues and flat taxes before consulting with Tax Advisory Council.

 

6. Consulting Tax Advisory Council

 

Each Sub-department of taxation shall consult Tax Advisory Council during the period from January 01 to January 10 every year about documents posted for the first public enquiry and the feedbacks. The minutes of consultation meeting with Tax Advisory Council must be made and bear the signatures of members of Tax Advisory Council. The minutes must specify opinions about changes of taxpayers, revenues, taxes of each businessperson which serve as the basis for making the tax register.

Tax Advisory Councils mentioned in this Circular Article Tax Advisory Councils established in accordance with regulations of law on tax administration.

7. Making and approving tax registers

According to tax declarations submitted by flat tax payers, investigation results, feedbacks obtain from the first public enquiry, minutes of meeting with Tax Advisory Council, and instructions from the Department of Taxation of the province, Sub-departments of taxation shall make and approve their tax registers by January 15.

Every month, depending on the business status of businesspeople (new businesses; suspension/shutdown of businesses; change of business scale or business lines, or change of tax calculation method, etc.) and changes of tax policies which affect the flat revenues and tax payable, the Sub-department of taxation shall adjust the tax register and re-inform flat tax payers of tax payable in the month or quarter.

8. Responsibility of Provincial Departments of Taxation for directing, supervising Sub-departments of taxation making their tax registers

Provincial Departments of Taxation have the responsibility to use tax administration database to analyze, assess, and direct the making of tax registers of Sub-departments of taxation as follows:

a) Departments of Taxation shall carry out annual inspections of at least 20% of Sub-departments of taxation in terms of adherence to regulations on risk management of determination of flat revenues and flat taxes. Inspection results given by Provincial Departments of Taxation are one of the bases for Sub-departments of taxation to make and approve tax registers of flat tax payers.

b) While performing its tasks, each Department of Taxation shall carry out periodic inspections of at least 10% of the Sub-departments of taxation in the first, second, and third quarter. The inspection results are the basis for estimating flat revenues and flat taxes of the next year. Flat revenue and flat tax applied to the rest of the tax year shall be adjusted in accordance with instructions of Point c Clause 4 Article 6 of this Circular.

c) Contents of the inspection by Provincial Department of Taxation mentioned in Clause 8 of this Article include: inspection of the administration database; comparison of information about business registration and tax registration; inspection of at least 15% of local businesspeople, 100% businesspeople classified as risky according to the criteria prescribed in Point c Clause 12 Article 6 of this Circular.”

9. Notice of tax payable and deadline for paying tax

a) Sending tax notice

a.1) The tax authority shall send the tax notice (form No. 01/TBT-CNKD) together with the information sheet (form No. 01/CKTT-CNKD) to every flat-tax payers (including both businesspeople who have to pay tax and who do not) by January 20 every year. The notice shall be sent to every businessperson whether directly (taxpayers’ confirmation is required) or by express mail.

Official information sheets shall be sent to businesspeople within the district, including both businesspeople who have to pay tax and who do not. If the market, street, and neighborhood that has 200 businesspeople or fewer, the Sub-department of taxation shall print and hand out the information sheet to every businessperson. If the market, street, or neighborhood has more than 200 businesspeople, the Sub-department of taxation shall print and hand out the information sheet to not more than 200 businesspeople. If the market has more than 200 businesspeople, the Sub-department of taxation shall print and hand out the information sheet to each businessperson by their business lines.

a.2) In case of change of flat tax because of change of business scale, business lines, or tax policies, the tax authority shall send form No. 01/TBT-CNKD enclosed herewith (tax notice) to flat tax payers by the 20th of the month succeeding the month in which tax is changed.

a.3) In case of a new flat tax payer, the tax authority shall send form No. 01/TBT-CNKD (tax notice) to the tax payer by the 20th of the month succeeding the month in which tax is incurred.

b) Deadline for paying tax

b.1) According to the tax notice, flat tax payers shall pay VAT and PIT of the quarter by the last day of the quarter.

b.2) Flat tax payers that use invoices of tax authorities shall pay tax on revenues on invoices by the deadline for declaring tax on revenues on the invoices as prescribed in Clause 3 of this Article.

10. Second public enquiry

The tax authority shall conduct the second public enquiry into official revenues and taxes of businesspeople of the year. The second public enquiry shall be conducted as follows:

a) Tasks of Department of Taxation of the province

Department of Taxation of the province shall publish information about flat-tax payers by January 30 on the website of tax authorities, including: A list businesspeople exempt from VAT and/or PIT; a list of businesspeople who have to pay tax; and a list of businesspeople using invoices of tax authorities.

In case of a new businessperson or change of tax payable or change of business status, the Department of Taxation shall publish or adjust information on the website of tax authorities by the last day of the month succeeding the month in which the business is inaugurated or the change occurs.

b) Tasks of Sub-departments of taxation:

b.1) The Sub-department of taxation of each district shall post the documents at the Sub-department of taxation, the People’s Committee of the district, and the gate or a suitable location of the People’s Committees of communes within the district, offices tax collector teams, management boards of markets, etc. in order to ensure convenient obtainment of information.

b.2) Sub-department of taxation of the district shall send posted documents to the People’s Councils and Fatherland Front Agencies of the district and communes therein by December 20, specify the address and deadline for receiving feedbacks from the People’s Council and Fatherland Front Agencies.

b.3) The Sub-department of taxation has the responsibility to publish the posting location and address for receiving feedbacks (including phone numbers, fax numbers, address, email address).

b.4) Documents published by the Sub-department of taxation are the same as those posted by the Department of Taxation on the website of tax authorities.

11. Cases of flat tax reduction

a) The flat tax payer suspends/shuts down the business

The flat tax payer suspends/shuts down the business shall send a notification to the tax authority at least one day before suspension or shutdown. The tax authority shall determine the reduction in flat tax according to the duration of suspension or time of shutdown and issue a decision of tax reduction (form No. 03/MGTH) or notice of no tax reduction (form No. 04/MGTH enclosed with Circular No. 156/2013/TT-BTC). The reduction in flat tax is determined as follows:

If the business is suspended for the whole month (from the 1st to the last day of the month) or longer, the flat tax payable in the quarter shall be reduced by 1/3. If the business is suspended for two whole months or longer, the flat tax payable in the quarter shall be reduced by 2/3. If the business is suspended for the whole quarter, the flat tax payable in the quarter shall be cancelled. If the business is suspended for less than a month, flat tax payable in the month shall not be reduced.

Example 8: Household A has a flat tax payable in 2015 of VND 12 million, which means VND 3 million/quarter. Household A suspends its business continuously from February 20 to June 20. It will be considered that household A suspends its business in March, April, and May. So tax incurred by household A shall be reduced due to business suspension as follows: tax payable in the first quarter is reduced by 1/3 (VND 1 million), tax payable in the second quarter is reduced by 2/3 (VND 2 million).

b) The flat-tax payer suffers from a natural disaster, conflagration, accident, or fatal disease

The flat-tax payer that suffers from a natural disaster, conflagration, accident, or fatal disease shall submit an application for tax exemption or reduction (form No. 01/MGTH enclosed with Circular No. 156/2013/TT-BTC) to the tax authority within 90 days from the end of the calendar year.

The tax authority shall consider granting tax reduction according to the damage. Nevertheless, the reduction shall not exceed the amount of tax payable.

c) The flat-tax payer changes the tax declaration method

Any flat-tax payer that wishes to switches over to pay tax whenever it is incurred shall follow the procedures in Point a Clause 11 of this Article during the months in which flat tax is not paid.

12. Other regulations on tax administration of flat-tax payers

a) The businessperson who hires 10 employees or more must establish an enterprise as prescribed by the Law on Enterprises. If the businessperson has not established an enterprise, the tax authority shall impose flat tax. The tax authority shall make and send the list of such businesspeople to the business registration authority.

b) Tax authorities have the responsibility to issue taxpayer ID numbers (TIN) to businesspeople according to information on their tax declaration documents and follow tax administration procedures using the tax administration application of tax authorities.

c) Provincial Departments of Taxation shall establish a set of risk criteria applied to flat-tax payers by type and area of tax payers, such as:

– Flat-tax payers doing business at bordering markets;

– Flat-tax payers selling building materials derived from natural resources (sand, stones, gravel, timber, timber products, etc.);

– Businesspeople whose taxable revenues are unreasonable in comparison to costs (business areas, leases of business premises, value of assets, equipment, stores, warehouses, cost of electricity and water supplied), quantity of vehicles, employees, goods (goods purchased, displayed, in stock, etc.)

– Flat-tax payers who hire 10 employees or more without establishing enterprises;

– Flat-tax payers using invoices of tax authorities;

– Flat-tax payers having 02 business locations or more;

– Flat-tax payers having outstanding tax.

d) Sub-departments of taxation shall update information about developments of flat-tax payers. On November 01 every year, Sub-departments of taxation and Provincial Departments of Taxation must finish building the database about flat-tax payers (including those on the list of businesspeople exempt from VAT and/or PIT) based on information from taxpayers’ profiles, results of verification and inspection of tax authorities, and information provided by relevant regulatory agencies.

e) General Department of Taxation shall provide guidance on procedures and methods for establishing and using the database about flat-tax payers according to regulations of the Ministry of Finance to serve risk management in tax inspection and tax collection.