Online sales for individuals, businesses and business households must comply with regulations on tax payment. Specifically, the taxes related to online sales activities that they need to pay attention to include value added tax (VAT), personal income tax (NCT) and corporate tax (if applicable). For individuals, they also need to pay attention to declaring and paying personal taxes according to the regulations of local tax authorities. In today’s article, VIET MY LAW AND ACCOUNTING will answer in detail about the issue of online business tax.

1. Do online sales have to pay online business tax?

According to Article 4 of Circular 40/2021/TT-BTC, business households and individuals with revenue of less than VND 100 million are not subject to value-added tax (VAT) and personal income tax (PIT) according to the VAT and PIT laws. However, when revenue from online sales reaches VND 100 million/year, online sellers are responsible for paying both types of online business taxes. This applies to both business households and individual businesses. At the same time, they must also comply with tax declaration regulations, ensure the accuracy, completeness and honesty of tax records, as well as submit their records on time. This helps them avoid legal violations and be held legally responsible.

2. What types of business taxes must be paid?

To ensure full compliance with tax regulations, you must pay the following four types of online business taxes:

• Business license fee: Business license fee is a tax that businesses or individuals must pay for the use of certain types of fixed assets or for doing business in a specific location. This tax is usually determined based on the level of business activity or the value of the asset.
• Value-added tax (VAT): VAT is a tax applied to the purchase and sale of goods and provision of services. The seller or service provider will collect VAT from the buyer or service user and then pay it to the tax authority.
• Corporate income tax (CIT): CIT is a tax applied to the income of a business from business activities. This tax is usually calculated based on the profit or income of the business after deducting reasonable expenses.
• Personal Income Tax (PIT): PIT is a tax imposed on an individual’s income from various sources such as wages, interest, interest, and self-employment income. If you have employees and their income exceeds the tax-free limit, you must also pay PIT on them.

3. How to declare online sales?

There are two common methods for declaring and paying personal income tax. These are the lump-sum method and the method of organizing tax declaration and payment on behalf of individuals.

3.1. For cases of paying online business tax by lump-sum method

The lump-sum method is a form of declaring and paying personal income tax specifically regulated in Circular 40/2021/TT-BTC in Clause 1, Article 7. This is a popular choice applied to business households and business individuals who do not declare taxes according to the detailed method or do not belong to the group of subjects that must pay tax on each transaction.

In the context of the strong development of the online sales market, the lump-sum method has become the preferred choice of the majority of individuals and business households operating in this field. However, unless they sell through large e-commerce platforms and are subject to specific conditions and regulations from that platform, the lump-sum method can be applied.

The method of calculating taxes by the lump-sum method is usually based on a fixed rate that is predetermined, instead of having to calculate each specific income item. This helps reduce the burden of procedures and increases flexibility in managing online business taxes for businesses and individuals. However, applying this method also requires businesses to take great responsibility for self-adjustment to ensure transparency in tax payment.

3.2. For cases of paying online business tax by tax declaration organizations or paying taxes on behalf of individuals

The method of tax declaration and payment on behalf of individuals is an important regulation for individuals or business organizations selling through e-commerce trading platforms such as Shopee, Tiki, Lazada and many other platforms. This is specifically stipulated in Point d, Clause 1, Article 8 of Circular 40/2021/TT-BTC and amended and supplemented by Clause 2, Article 1, Circular 100/2021/TT-BTC.

According to the regulations, “organization” here is not only limited to enterprises but also includes owners of e-commerce trading floors. This organization is responsible for declaring online business taxes and paying taxes on behalf of individuals operating on their platforms, based on authorization as prescribed by civil law.

For these cases, tax declaration and payment on behalf of individuals can be done on a time unit such as monthly or quarterly, in compliance with the provisions of the law on tax administration. This helps ensure completeness and accuracy in tax collection from online business activities, while facilitating tax management and legal compliance from businesses and individuals.

4. Instructions for calculating personal income tax for online business

Instructions for calculating personal income tax (PIT) for online business are specified in Clause 3, Article 10 of Circular 40/2021/TT-BTC. Accordingly, the amount of PIT payable is calculated based on a specific formula: taxable revenue for PIT multiplied by the prescribed PIT rate. This rate is determined according to the instructions in Appendix I, attached to Circular 40/2021/TT-BTC.

For households and individuals doing business in many industries, instructions for declaring PIT are implemented according to the rate calculated on revenue corresponding to each industry and field. Meanwhile, business establishments calculating value-added tax (VAT) are applied through reducing the % rate on revenue by 20% when issuing invoices for goods and services eligible for VAT reduction.

Revenue for calculating personal income tax on online business includes a series of items, such as: Sales of goods, processing fees, commissions, and service provision fees arising from the production and trading of goods and services. In addition, subsidies, additional fees, surcharges, and other compensations are also included in this revenue.

Note that other revenues earned by business households or individuals, regardless of whether they have received the money or not, are also included in the total revenue for calculating personal income tax.

5. Will there be a penalty for late or non-payment of online business tax?

If online business households or individuals are subject to online business tax but do not pay the tax or pay the tax late, they will be subject to handling measures according to the provisions of law.

5.1. Late tax declaration

According to Article 13 of Decree 125/2020/ND-CP, violations related to the time of submitting online business tax declarations will be punished according to the following provisions:

• Submitting tax declarations from 01 to 05 days late, the penalty is a warning.
• Submitting tax declarations from 01 to 30 days late, the penalty is from VND 2,000,000 to VND 5,000,000.
• Submitting tax declarations from 31 to 60 days late, the penalty is from VND 5,000,000 to VND 8,000,000.
• Other violations subject to a fine of VND 8 million to VND 15 million include:

• • Submitting tax declarations past the prescribed deadline from 61 to 90 days;
  • Submitting tax declaration dossiers 91 days or more after the prescribed deadline but no tax payable is incurred;
  • Not submitting tax declaration dossiers but no tax payable is incurred;
  • Not submitting appendices as prescribed on tax management for enterprises with related-party transactions attached to corporate income tax settlement dossiers.

In case of submitting online business tax declaration dossiers more than 90 days after the prescribed deadline and tax payable is incurred. But the taxpayer has paid the full amount of tax and late payment before the time the tax authority announces the decision to inspect and examine the tax or before the time the tax authority makes a record of the act of late submission of tax declaration dossiers, the penalty will be exempted.

5.2. Late payment of tax

According to Clause 2, Article 59 of the Law on Tax Administration 2019, the late payment fee is calculated at 0.03% per day on the amount of late tax, and the time for calculating the late payment fee is calculated continuously from the day following the date of late tax payment to the day immediately before the taxpayer transfers the late payment to the state budget.

The above is basic information about online business tax. For businesses or individuals doing business online, when the revenue exceeds 100 million VND, they will have to pay personal income tax. At the same time, understanding and strictly complying with tax regulations is necessary to avoid unwanted legal problems. If you need to learn more about this issue, please contact VIET MY LAW AND ACCOUNTING immediately for detailed advice and support.