1. How to calculate personal income tax
According to the provisions of Article 7 of the Personal Income Tax Law, small business households with an annual income of over 500 million VND to 3 billion VND are allowed to choose one of two ways to calculate personal income tax as follows:
Method 1: Calculate tax based on income
Personal income tax on income from business of resident individuals with annual revenue of over 500 million VND/year is determined by taxable income multiplied by (x) by the tax rate.
In which: Taxable income is determined by the revenue of goods and services sold minus (-) expenses related to production and business activities during the tax period.
Individual businesses with annual revenue exceeding the level specified in Clause 1 of this Article by 3 billion VND: tax rate of 15%.
Accordingly, the formula for calculating personal income tax for small business households with annual revenue of over 500 million VND to 3 billion VND is:
PIT = (Revenue – Expenses) X 15%
In addition, in cases where households and individuals do business with annual revenue of over 3 billion VND to 50 billion VND, a tax rate of 17% is applied; for annual revenue of over 50 billion VND, a tax rate of 20% is applied.
Income from real estate leasing does not apply this tax calculation method.
Method 2: Tax calculation based on revenue
Tax calculation formula by revenue: Personal income tax = Tax rate X Taxable revenue
Taxable revenue and tax rates are determined as follows:
- Taxable revenue is determined by the revenue exceeding 500 million VND
- Tax rates for business lines and occupations:
Distribution and supply of goods: tax rate of 0.5%;
Services, construction without bidding for raw materials: tax rate 2%. For asset leasing activities, insurance agents, lottery agents, multi-level marketing agents: tax rate 5%;
Production, transportation, services associated with goods, construction with subcontracting of raw materials: tax rate of 1.5%;
Activities providing digital information content products and services on entertainment, video games, digital films, digital photos, digital music, digital advertising: tax rate of 5%;
Other business activities: tax rate of 1%.
Leasing real estate, excluding accommodation business activities: Tax rate of 5%.
Individuals and business households with revenue over 03 billion VND are required to calculate tax according to income, and are not allowed to choose to calculate tax according to revenue.
2. How to calculate value-added tax
Small business households can choose one of two ways to calculate value-added tax as follows:
Method 1: Calculate value-added tax by direct method
VAT payable = Revenue x Percentage %
The percentage % to calculate value-added tax is specified in point b, clause 2, Article 12 of the 2024 Value Added Tax Law as follows:
+ Distribution and supply of goods: 1%;
+ Services, construction without bidding for raw materials: 5%;
+ Production, transportation, services associated with goods, construction with raw material bidding: 3%;
+ Other business activities: 2%;
Revenue for calculating value-added tax is the total amount of goods and services sold recorded on the goods.
In addition, business households can voluntarily register to apply the deduction method if they meet the conditions.
Method 2: Calculate value-added tax by deduction method
VAT payable = Output VAT - Input VAT deductible
According to Article 11 of the Value Added Tax Law 2024:
- The output value-added tax amount is equal to the total value-added tax of goods and services sold recorded on the value-added invoice.
- Value-added tax on goods and services sold recorded on the value-added invoice is equal to the taxable price of taxable goods and services sold multiplied by the value-added tax rate of those goods and services.
-In case using invoices recording payment prices as prices already subject to value-added tax, the output value-added tax is determined by the payment price minus the value-added tax calculation price determined according to point k, clause 1, Article 7 of this Law.
- The input value-added tax amount deductible is equal to the total value-added tax recorded on the value-added invoice for purchase of goods and services, value-added tax payment documents of imported goods or tax payment documents for cases of purchase of services specified in Clauses 3, 4, Article 4 of this Law and meeting the conditions specified in Article 14 of this Law.
