Discipline tax management of business households

Large business households will conduct online declarations and tax payments. Photo: Thuy Linh.

Increase the responsibility of large household businesses

The revenues from household businesses, as assessed by the tax sector, have been low compared to their development scale. Therefore, in the draft Circular guiding all contents of tax and tax administration for business households and individuals, the Ministry of Finance has separated regulations on tax administration for large-scale business households.

According to the General Department of Taxation, the amendment and supplementation of a number of tax administration circulars is to remove problems in tax administration for business households and individuals in recent years. Simultaneously, these regulations expand the tax base for a number of business areas of individuals that have not been regulated to adjust tax collection appropriately, ensuring fairness with other businesses.

According to the draft's regulations, the tax industry will promote electronic tax declaration and payment for business households, firstly for households that pay taxes according to the declaration method, and then will perform electronic tax declaration and payment for all units.

Large-scale business households have to prepare accounting books, invoices and documents like a micro-enterprise, but at a simpler level.

To manage large business households, the Ministry of Finance suggested that these units could declare taxes monthly or quarterly without tax finalization. They will pay tax according to the tax rate on revenue according to each category of production and business activities instead of calculating tax on revenue minus expenses. Therefore, they will implement a simple accounting regime, including only four types of books (revenue book, salary book, management expense book, and purchasing service book), and do not have to prepare financial statements.

This will minimize administrative procedures for taxpayers, and the tax authority also has enough information to manage tax according to the risk mechanism. If a business household does not have a large scale but needs to use invoices, it is encouraged to use invoices and must follow the accounting and tax payment regime according to the declaration method.

Apply e-invoices for large business households

In the draft circular, the Ministry of Finance stipulated that large business households have to make e-invoices when they are applied nationwide. According to the General Department of Taxation, this is aimed at strictly managing large households using VAT invoices, avoiding trading in this kind of invoices to legalize inputs for businesses.

This is because business households use invoices with the application of lump-sum tax, they do not have to keep accounting books, prove their inputs, and declare them with the tax authorities, meanwhile, they still issue VAT invoices as usual. Therefore, some business households take advantage of this to trade in VAT invoices even though they do not have any production or business activities.

The draft Circular on tax administration for business households and individuals also guides that households that do not have a fixed place of business or do business infrequently, will pay taxes every time it arises. And households that use retail invoices or declare and pay taxes before being issued retail invoices, are not required to follow the accounting regime. However, they must keep invoices and relevant documents to prove their legal goods, together with tax declaration dossiers for each time retail invoices are issued.

In fact, there are many large business households with revenue and scale similar to that of a small business. However, if these households continue to pay lump-sum tax like small business households, it will be unfair. Therefore, according to many experts, the provisions in the draft circular guiding tax and tax administration for business households and individuals are suitable with the current context. This will also be an effective measure to encourage households to upgrade to being businesses.