There are 4 main types of taxes in Vietnam that businesses need to pay attention to after establishment.
License fee (tax)
From January 1, 2017, the term “license tax” will be replaced by “license fee”, which is a tax that enterprises must pay annually.
License fee payers: economic sectors specified in Decree 139/2016/ND-CP;
Subjects of license fee exemption: Added or changed according to Decree 22/2020/ND-CP;
Tax rate and license fee payment deadline: Depending on the time of business registration and the level of revenue, the license tax level will vary, from 300,000 VND/year – 3,000,000 VND/year.
Value Added Tax (VAT)
Value Added Tax (VAT), or sales tax, is the difference between VAT purchased and VAT sold.
In order to determine the amount of VAT payable, the enterprise needs to determine whether the VAT declaration method is the deduction method or the direct method. Then:
Declare VAT by deduction method
If the output VAT is greater than the input VAT, the enterprise must pay the difference. Conversely, if the output VAT is smaller than the input, the enterprise will be able to deduct the difference.
Vision Accounting Company bought a desk with a price of VND 7,700.000, of which VAT = VND 700,000.
After that, Vision Accounting company sold the desk to An Phuc Construction Company for a price of 9,900,000 VND, of which VAT = 900,000 VND. So:
- Output VAT = 900,000 VND;
- Input VAT = 700,000 VND.
Thus, the payable VAT amount = 900,000 – 700,000 = 200,000 VND.
Declare VAT by the direct method
For the method of declaring VAT by the direct method, it will be calculated in two ways: directly on revenue and directly on VAT.
Method 1: Declaration by direct method on revenue
The VAT rate for this method is determined based on the actual business lines of the enterprise. For example: Distribution and supply of goods is 1%; services is 5% (Refer to Article 13 of Circular 219/2013/TT-BTC).
Vision Accounting Company sells tables and chairs to Vi vu Ly Son company for 9,000,000 VND.
- Amount of VAT payable = 9,000,000 x 1% = 90,000 VND;
- In which: 1% is the percentage of VAT payment on the turnover of wholesale and retail activities.
Method 2: Declare by direct method on VAT
This method is often applied to businesses engaged in trading and processing of gold, silver, and gems. At that time, VAT will be charged at 10% of the added value.
Vision Accounting Company bought a gold ring.
- The buying price is 4,000,000 VND;
- The selling price is 5,000,000 VND.
If so, the added value will be 5,000,000 – 4,000,000 = 1,000,000 VND.
So the payable VAT of the Vision Accounting company = 1,000,000 x 10% = 100,000 VND.
Corporate income tax (CIT)
CIT is a tax collected on the final profit of the business, after deducting reasonable expenses.
Corporate income tax payers: all individuals, organizations, and establishments producing and trading goods and services that generate income.
How to calculate corporate income tax
Vision Accounting Company has a total sales revenue of VND 100,000,000 in 2019. In there:
- Cost of goods is 70,000,000 VND;
- Selling expenses is 5,000,000 VND;
- The cost of enterprise administration is 3,000,000 VND.
Then profit = revenue – cost price – selling expenses – administrative expenses = 100,000,000 – 70,000,000 – 5,000,000 – 3,000,000 = 22,000,000 VND.
Thus, accounting company Vision profit 22,000,000 dong.
So the payable CIT of the accounting company Vision = 22,000,000 x 20% = 4,400.000 VND.
Note: The determination of reasonable and valid costs depends on the production and business situation and the individual industry of each enterprise.
Personal income tax (PIT)
Personal income tax is a tax that businesses pay on behalf of employees.
PIT is calculated on a monthly basis, declared monthly or quarterly, but finalized annually.
How to calculate personal income tax?
- Income subject to PIT = Income subject to PIT – Deductions;
- Taxable income = Total PIT paid by the company – Incomes not subject to PIT.
Personal income tax deductions
- Family allowances:
For themselves: 11,000,000 VND/person/month;
For dependents: VND 4,400,000/person/month.
- Compulsory insurances: social insurance, health insurance, unemployment insurance and occupational insurance in some special fields.
An employee has:
- Basic salary: 15,000,000 VND;
- Lunch allowance: 730,000 VND;
- Bonus: 3,500,000 VND;
- Insurance payables: 15,000,000 x 10.5% = 1,575,000 VND;
- Personal deduction: 11,000,000 VND;
- Register 1 dependent: 4,400,000 VND.
- Taxable income of employees = 15,000,000 + 3,500,000 – 730,000 = 17,770,000 VND;
- Taxable income of employees = 17,770,000 – 11,000,000 – 4,400,000 – 1,575,000 = 795,000 VND;
- Payable personal income tax = 795,000 x 5% = VND 39,750.