Personal income tax (PIT) on business income

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* Income level requires tax payment

Business individuals only have to pay personal income tax when their total revenue in the calendar year is over VND 100 million (based on Clause 3, Article 4 of Circular 40/2021/TT-BTC).

* Tax calculation method for business individuals

Pursuant to Circular 40/2021/TT-BTC, depending on each case that business individuals must pay tax, they will be taxed according to the following method:

(1) Declaration method.

(2) Flat method (a flat tax - in fact mainly apply this method).

(3) Method of paying tax according to each time it is incurred.

(4) Tax calculation method in case organizations and individuals declare tax on behalf of individuals or pay taxes on behalf of individuals.

(5) Tax calculation method for some special cases (such as business by leasing property, insurance agent, lottery agent, multi-level sale agent).

* Formula for calculating tax when doing business

If there is a turnover in the calendar year of over VND 100 million, they will have to pay tax. When paying tax, an individual must pay 2 types of tax, namely personal income tax and value added tax, specifically:

** How to determine the amount of value-added tax (VAT)

Value-added tax payable = Value-added taxable revenue x Value-added tax rate

** How to determine the amount of personal income tax 

Amount of personal income tax payable = Personal income taxable turnover = Personal income tax rate

Accordingly, the revenue subject to value-added tax, personal income tax and the rate of value-added tax and personal income tax are specified in Clauses 1, 2 and Appendix I to Circular 40. 2021/TT-BTC.

Each income will have a different calculation, in order to know how much tax must be paid, it is necessary to calculate tax for each type of income.