Taxpayers

1. Taxpayers mentioned in Chapter I of this Circular are residents including individuals, groups of individuals, and households who manufacture and/or trade in goods, services in any field and sector prescribed by law (hereinafter referred to as businessperson or businesspeople). The business fields and sectors also include:

a) Independent practice in the fields and sectors that are permitted in the practising certificate or license as prescribed by law.

b) Acting as a lottery, insurance, multi-level marketing agent who directly signs a contract with the lottery company, insurer, or multi-level marketing company.

c) Business cooperation with other organizations.

d) Agriculture, forestry, salt production, aquaculture activities that do not satisfy conditions for tax exemption in Point e Clause 1 Article 3 of Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance.

2. Taxpayers mentioned in Clause 1 of this Article do not include businesspeople whose revenues are VND 100 million/year or lower.

Article 2. Tax calculation methods applied by businesspeople paying flat tax

1. Applied principles:

a) Businesspeople who pay flat tax (hereinafter referred to as payers of flat tax) are those who earn revenue from trading in goods/services in any field and sector prescribed by law, except for the businesspeople mentioned in Article 3, Article 4, and Article 5 of this Circular.

b) If the revenue subject to personal income tax (PIT) earned by the businessperson who pays flat tax in the year is VND 100 million/year or lower, the person shall not pay VAT and PIT.

If the revenue subject to PIT earned by a flat tax payer who does not do business for the whole year (less than 12 months of a calendar year) is VND 100 million per year or lower, such person shall not pay VAT and PIT. Persons who do not do business for the whole year include persons who are new to business; persons doing seasonal business; persons who suspend/shut down their business. The actual revenue for calculating tax payable in the year is the revenue earned during the months in which they actually do business. If a payer of flat tax who does not do business for the whole year has received a tax notice from the tax authority, the flat tax shall be reduced according to the months in which the business is suspended or shut down.

Example 1: Mr. A starts his business from April 2015 and expects to earn a revenue of VND 90 million after 09 months of business (averagely VND 10 million/month). The corresponding revenue of a year (12 months) is VND 120 million (> VND 100 million) In this case, Mr. A has to pay VAT and PIT on the actual revenue earned from April 2015, which is VND 90 million.

Example 2: Ms. B has received a tax notice of 2015 from the tax authority. In October 2015, Ms. B suspends/shuts down her business. In this case, she will receive a reduction in flat tax corresponding to the last 03 months of 2015.

c) Businesspeople who do business as a group or household and earns a revenue of VND 100 million/year or lower shall not pay VAT and PIT. It is considered that the revenue is earned by only 01 representative of the group or household in the tax year.

Example 3. Household C is established by a group of 04 persons. In 2015, household C has a revenue of VND 180 million from business (>VND 100 million). Household C has to pay VAT and PIT on the total revenue of VND 180 million.

d) Businesspeople who are not residents but have permanent business premises in Vietnam shall declare tax as if those who are residents.

2. Basis for tax calculation

The basis for tax calculation by a payer of flat tax is the taxable revenue and tax rate.

a) Taxable revenue

a.1) Revenue subject to VAT and PIT means the tax-inclusive revenue (if taxable) from the sale of goods, payment for processing, commission, provision of services earned in the tax period from the business (hereinafter referred to as taxable revenue).

If the flat tax payer uses invoices of the tax authority, the taxable revenue is based on the flat revenue and revenue on the invoice.

a.2) In case a businessperson fails to determine the flat revenue or the flat revenue is not practical, the tax authority is entitled to impose a flat revenue in accordance with regulations of law on tax administration.

b) Tax rates

b.1) Tax rates include VAT rate and PIT rate and vary according to the business line as follows:

– Distribution, provision of goods shall incur 1% VAT and 0.5% PIT.

– Service provisions and construction exclusive of building materials shall incur 5% VAT and 2% PIT.

– Manufacture, transport, provision of services associated with goods, construction inclusive of building materials shall incur 3% VAT and 1.5% PIT.

– Other business lines shall incur 2% VAT and 1% PIT.

b.2) The detailed list of business lines and corresponding tax rates is provided in Appendix 01 enclosed herewith.

b.3) The businessperson who involves in multiple business lines shall declare and calculate tax according to the rates applied to each of the business lines. If such businessperson is not able to separate revenue from each business line or it is not practical, the tax authority is entitled to impose a flat revenue upon each of the business line in accordance with regulations of law on tax administration.

c) Determination of tax payable

VAT payable

=

Revenue subject to VAT

x

VAT rate

PIT payable

=

Revenue subject to PIT

x

PIT rate

Where:

– Revenue subject to VAT and revenue subject to PIT are prescribed in Point a and Point b.3 Clause 2 of this Article.

– VAT rate and PIT rate are prescribed in Point b Clause 2 of this Article.

d) Time for determination of taxable revenue

d.1) Flat revenue shall be determined during the period from November 20 to December 15 of the year preceding the tax year.

d.2) If a businessperson is new to business (who does not do business from the beginning of the year) or changes the business scale in the year, the flat revenue of the year shall be determined within 10 days from the beginning date or the changing date.

d.3) Variable revenue (according to invoices) shall be determined at the time prescribed in Point d Clause 2 Article 3 of this Circular.