Let’s find out with fdiinvietnam.com: Do you have to pay taxes when selling online? Types of online sales taxes that business households, enterprises and individual businesses must pay.
Find out if online sales have to pay tax?
1. Do I need to register a business to sell online?
Before answering the question of whether online sales are subject to tax, fdiinvietnam.com will share with you the regulations on registering an online sales business. Thanks to that, you can know which cases are required to register a business and which cases do not need to register.
Specifically:
➤ Case 1:
Individuals who sell online spontaneously, without a store (no fixed location), do not need to register a business. However, business individuals must still register a tax code according to form No. 03-DK-TCT (issued with Circular 105/2020/TT-BTC).
After successfully registering for a tax code, the tax authority will issue a tax code in the structure MST-001 for individuals to submit declarations and pay taxes.
➤ Case 2:
Individuals or organizations that sell online and have stores and regular sales activities are required to apply for a business license (business registration certificate).
In this case, you can choose 1 of the 2 business registration forms below to sell online:
- Individual business household: suitable for small scale, limited capital, few employees, few goods;
- Company/enterprise: suitable for large-scale business, diverse products, need to open more branches.
See also:
>> Do I need to register a business to sell on Shopee and Lazada?
>> How to register for a business license to sell online.
2. Are online sales taxed?
As fdiinvietnam.com shared above, there are 2 cases of online sales and no matter which case you sell in, you have to pay taxes.
Regulations on tax payment for each case are as follows:
➤ Case 1: Individuals who spontaneously sell online, do not have a store and do not register for business, only need to register a personal tax code to declare taxes.
➤ Case 2: Individuals/organizations selling online have stores, registered business as business households or enterprises and pay taxes in accordance with the regulations of each type.
In short, online sales are required to pay taxes. However, depending on each case, each form of business, and the revenue achieved, the tax payment level will be different.
Taxes payable when selling online on website
Paying online sales tax is an issue that many people are concerned about when starting an online business. In this content, fdiinvietnam.com will share in detail the types of taxes that you must pay when selling online in the form of business households and enterprises.
Note:
In the case of individuals selling online without registering their business (individual business), they must pay the same taxes as business households.
1. Declare and pay online sales tax according to the business household model
There are 3 types of taxes that online shops operating under the household business model need to pay: business license fee, personal income tax and value added tax (VAT).
1.1. Business license fee
Online sellers will pay annual business license fees. The business license fees will be calculated based on annual revenue.
Online sellers with annual revenue of 100 million or more will have to pay a business license fee of 300,000 VND – 1,000,000 VND. Details of the business license fee to be paid are as follows:
| Basis for calculating business license tax | Business license tax payable |
| Revenue over 500 million VND/year | 1,000,000 VND/year |
| Revenue over 300 – 500 million VND/year | 500,000 VND/year |
| Revenue over 100 – 300 million VND/year | 300,000 VND/year |
Note:
Online stores will be exempted from business license fees in the following cases:
- First year of business establishment;
- Have annual revenue of 100 million VND or less.
1.2. Personal income tax (PIT) and value added tax (VAT)
➤ How much revenue must be paid for personal income tax and VAT?
Pursuant to Clause 2, Article 4 of Circular 40/2021/TT-BTC, online sellers with revenue from production and business activities in the calendar year of VND 100 million/year or less are not required to pay personal income tax and VAT.
Thus, if the revenue calculated in the calendar year is from 100 million or more, online sellers must pay personal income tax and VAT.
➤ How to calculate personal income tax and VAT
| Amount of personal income tax payable | = | Revenue subject to personal income tax | x | Personal income tax rate |
| VAT payable | = | VAT taxable revenue | x | VAT rate |
In there:
- Personal income tax rate is 0.5% and VAT rate is 1% (because online sales are part of the distribution and supply of goods);
- Revenue subject to personal income tax and revenue subject to VAT is the revenue including tax (in case of taxable cases) of all sales, wages, commissions and service provision fees arising during the tax period from production and business activities of goods and services;
- In case the seller cannot determine the taxable revenue or the determination is not consistent with reality, the tax authority will determine the amount of tax payable.
See also:
>> How to calculate taxes and types of taxes that individual business households must pay;
>> Method, subjects and calculation of lump-sum tax for business households.
2. Declare and pay online sales tax according to business model
In case you do online sales business as an enterprise, in addition to the 3 types of taxes that you have to pay as an individual business: business license fee, VAT and personal income tax, you also have to pay corporate income tax (CIT).
However, due to differences in business forms, the way to calculate VAT, personal income tax, corporate income tax and determine the level of business license fees for enterprises will also be different from that of individual business households. Specifically as follows:
2.1. Business license fee
The business license fee for online business in the form of an enterprise will be calculated based on the charter capital.
| Basis for calculating business license tax | Business license tax payable |
| Enterprises with charter capital over 10 billion VND | 3,000,000 VND/year |
| Enterprises with charter capital of 10 billion VND or less | 2,000,000 VND/year |
| Affiliated units and other economic organizations | 1,000,000 VND/year |
Note:
Enterprises will be exempted from business license fees in the first year of establishment.
2.2. Personal income tax (PIT)
In case the enterprise pays salary to employees and the taxable income of the employee is greater than 0, the enterprise is responsible for paying personal income tax on behalf of the employee. However, the enterprise needs to check whether the employee’s income is at the taxable level or not. If so, the enterprise needs to deduct personal income tax from the employee before paying them or deduct personal income tax on behalf of the employee.
Depending on whether the employee is a resident or non-resident individual, there will be a corresponding way to calculate personal income tax.
➤ How to calculate personal income tax for employees who are individuals residing
- In case of labor contract of 3 months or more: calculate personal income tax according to progressive tax table;
- In case of labor contract under 3 months or no labor contract: personal income tax is calculated at the full tax rate of 10%.
Specifically, the calculation formula for each case is as follows:
➤➤ Calculating personal income tax for employees signing contracts for 3 months or more
The formula for calculating personal income tax payable is as follows:
| Personal income tax payable | = | Taxable income | x | Tax rate |
In there:
– Taxable income is determined as follows:
| Taxable income | = | Total income | – | Tax-exempt items | – | Deductions |
– Tax rate (progressive tax rate): depending on the taxable income/year or taxable income/month, there will be a corresponding tax rate.
>> To know specifically about the tax rates according to the progressive tax table as well as details of the exemptions and deductions for personal income tax, please refer to: How to calculate personal income tax for labor contracts of 3 months or more.
➤➤ Calculating personal income tax for employees under 3 months or without a contract
- For enterprises paying wages and salaries to employees with labor contracts of less than 3 months or without labor contracts, the total income from 2,000,000 VND/time or more must deduct tax at a rate of 10% of income before paying salaries to employees;
- If the employee has only one source of income but the estimated total taxable income after deducting family allowances is not enough to pay tax, the employee must make a commitment according to form 08/CK-TNCN so that the enterprise can pay the income as a basis for temporarily not deducting personal income tax.
➤ How to calculate personal income tax for employees who are not resident individuals
| Personal income tax payable | = | Taxable income from wages and salaries | x | 20% tax rate |
For details on how to calculate personal income tax accurately for each subject, please refer to the article:
>> How to calculate personal income tax from salary and wages.
2.3. Value Added Tax (VAT)
If the annual revenue is from 1 billion VND or more, the enterprise shall pay VAT by the deduction method. If the annual revenue is less than 1 billion VND, the enterprise shall pay VAT by the direct method.
Note:
In case a business establishment has an annual revenue of less than 1 billion VND and voluntarily registers to apply the deduction method, it shall pay VAT according to the deduction method.
➤ How to calculate VAT by deduction method:
| VAT payable | = | Output VAT | – | Input VAT |
➤ How to calculate VAT by direct method:
VAT declaration by direct method is calculated in 2 ways: directly on revenue and directly on VAT.
➤➤ Declaring by direct method on revenue:
| VAT payable | = | Value of goods sold | x | VAT rate (*) |
(*): VAT rate is 1% (because online sales are part of the distribution and supply of goods).
➤➤ Declaring by direct method on VAT:
This method is often applied to businesses that trade and manufacture precious stones, gold and silver.
| VAT payable | = | Added value (**) | x | 10% |
(**): Added value = Selling price – Purchase price.
2.4. Corporate income tax (CIT)
Corporate income tax is a tax that online sellers must pay based on the final profit of the business after deducting reasonable expenses.
➤ How to calculate corporate income tax:
| Corporate Income Tax | = | (Taxable income – Part of science and technology fund allocation (if any)) | x | Corporate income tax rate |
In there:
– Corporate income tax rate (also known as normal tax rate) is 20%;
– Taxable income is determined as follows:
| Taxable income | = | Taxable income | – | (Tax-free income + Carry-forward losses) |
– Taxable income is determined as follows:
| Taxable income | = | Revenue | – | Deductible expenses | + | Other income |
———-
In case a business household or enterprise sells online on a website owned by itself, it will carry out tax declaration and payment procedures itself.
In case a business household or enterprise sells goods on an e-commerce website (Tiki, Shopee, Lazada, Sendo…), it can authorize the e-commerce platform to declare and pay taxes to the tax authority on its behalf.
Penalty for late tax payment for businesses, households and individuals selling online
When doing business, whether selling in stores or online, businesses, business households, and individuals must pay taxes in accordance with the law.
In case an individual, business household or enterprise is late in paying taxes, they may be subject to administrative penalties or fines depending on the length of the delay, specifically as follows:
| Late payment time | Penalty level |
| From 1 – 5 days | Warning penalty |
| From 1 – 30 days | 2,000,000 VND – 5,000,000 VND |
| From 31 – 60 days | 5,000,000 VND – 8,000,000 VND |
| From 61 – 90 days | 8,000,000 VND – 15,000,000 VND |
| Over 90 days from the application deadline | 15,000,000 VND – 25,000,000 VND |
Note:
For individuals doing business online selling who pay taxes late, the penalty will be half of the above penalty.
>> See more: How much is the fine for tax evasion?
Frequently Asked Questions About Paying Online Sales Tax
1. What types of taxes must be paid when selling online under the business household model?
To sell online as a business household, you need to pay business license fees, VAT and personal income tax.
>> See details: Pay online sales tax according to the business household model.
2. Do I need to register a business to sell online?
Depending on each case, organizations/individuals may or may not need to register a business when selling online, specifically:
- If an individual sells online spontaneously and does not have a store, he/she does not need to register a business. However, he/she must still register a tax code according to form No. 03-DK-TCT;
- If an individual/organization selling online has a store and sells regularly and continuously, it is mandatory to apply for a business license in the form of a business household or enterprise.
>> See details: Do I need to register a business to sell online?
3. When do online sellers under the business household model not have to pay taxes?
If the revenue calculated in the calendar year is 100 million or less, online sellers do not have to pay personal income tax and VAT. In addition, online sellers are also exempted from business license fees.
4. What taxes do businesses need to pay when selling online?
You need to pay the following 4 taxes: business license fee, VAT, corporate income tax, personal income tax (if salary payments to employees arise and the employee’s taxable income is greater than 0).
>> See details: Paying online sales tax according to business model.
5. What is the VAT rate and personal income tax rate for business households when selling online?
According to the law, online sales are activities of distributing and supplying goods, so the VAT rate and personal income tax rate for business households are regulated as follows:
- VAT rate: 1%;
- Personal income tax rate: 0.5%.
(Based on Appendix I of Circular No. 40/2021/TT-BTC).
6. What is the penalty for online sellers who pay taxes late?
In case an online seller has to pay tax but pays late, he/she will be warned or fined from 2,000,000 VND – 25,000,000 VND (depending on the time of late payment).
>> See details: Penalties for online sellers who are late in submitting tax declarations and paying taxes.