1. Legal Regulations

• Law on Tax Administration No. 38/2019/QH14: Article 51 determines the tax levels for home-based businesses and individuals paying tax according to the flat-rate tax method.
• Decree No. 126/2020/ND-CP: Article 7, Point c, Clause 5 of the decree provides detailed regulations on tax declaration and payment for cases where organizations cooperate with individuals.
• Circular No. 40/2021/TT-BTC: Article 2 defines the applicable entities, and Clause 10, Article 3 addresses “Organizations cooperating with businesses.” Additionally, Articles 8, 10, and 16 provide guidance on tax calculation methods, tax bases, tax declaration documents, submission locations, and deadlines.

2. Tax Declaration Regulations

Guidance according to Circular No. 40/2021/TT-BTC:

• Applicable Regulations: According to Article 2 of Circular No. 40/2021/TT-BTC dated June 1, 2021, organizations cooperating with individuals are subject to this circular. Companies need to base their application on this regulation to follow the guidance of Circular No. 40/2021/TT-BTC.
• Declaration Method According to Cooperation Contracts: The company is responsible for declaring taxes and paying taxes on behalf of individuals or home-based businesses involved in cooperation.

Legal Basis:

Based on Article 8, Article 16 of Circular No. 40/2021/TT-BTC and Point c, Clause 5, Article 7 of Decree No. 126/2020/ND-CP regarding direct tax declaration, the regulations are as follows:

“c) Organizations cooperating with individuals are responsible for tax declaration on behalf of the individuals. Individuals are not required to declare taxes directly. The organization must declare VAT for all revenue from the business cooperation according to tax and organizational management regulations, regardless of the form of profit-sharing from the cooperation. Additionally, the organization must declare and pay personal income tax on behalf of the cooperating individual. In cases where the organization cooperates with individuals who are home-based businesses or individual businesses as specified in Clause 5, Article 51 of the Law on Tax Administration, and the individual is engaged in activities related to the business cooperation with the organization, both the organization and the individual must perform tax declaration corresponding to the actual results of the business cooperation as regulated.

Clause 5, Article 51 of the Law on Tax Administration: ‘5. Home-based businesses and individual businesses with revenue and labor scale meeting the highest criteria for micro-enterprises according to the regulations on supporting small and medium-sized enterprises must implement accounting systems and declare taxes according to the declaration method.’”

Summary from Regulations:

• Declaration Method According to Cooperation Contracts:
  • Circular No. 40/2021/TT-BTC: According to Articles 8 and 16, companies must declare VAT and PIT for all revenue from business cooperation.
  • Decree No. 126/2020/ND-CP: Point c, Clause 5, Article 7 clarifies that organizations cooperating with individuals must declare VAT for all revenue and pay PIT on behalf of the individual or home-based business.
  • In cases where organizations cooperate with individuals/home-based businesses: According to Article 51 of the Law on Tax Administration, if individuals/home-based businesses have an active profession along with the cooperative business, then the organization and individual must declare taxes based on the results of the cooperation.
• Tax Rates: According to Appendix 1 issued with Circular No. 40/2021/TT-BTC, the tax rates on revenue include VAT rates and PIT rates, detailed for each field and industry.
• Tax Declaration and Payment Deadline: According to the guidance of the tax authority, the company must declare taxes on a monthly or quarterly basis (except as provided in Clause 5, Article 51 of the 2019 Tax Administration Law).
• Tax Filing Location: The tax authority that manages the company (except as provided in Clause 5, Article 51 of the 2019 Tax Administration Law).

3. Reference Document

Document No. 1805/TCT-DNL dated May 27, 2022, from the General Department of Taxation, provides guidance on tax declaration and payment for organizations cooperating with individuals, especially emphasizing the regulations in Articles 8, 10, and 16 of Circular No. 40/2021/TT-BTC.

Based on the regulations and documents:

• At Articles 8, 10, and 16 of Circular No. 40/2021/TT-BTC, regulations on the method of tax calculation for cases where organizations or individuals declare and pay taxes on behalf of individuals; tax bases; and tax management for organizations or individuals declaring and paying taxes on behalf of individuals are outlined.
• Based on the above regulations, in cases where a company signs a business cooperation contract with an individual, the company is responsible for declaring value-added tax on the entire revenue from the business cooperation activities as per the provisions of tax law and tax management of the organization, without distinguishing the form of sharing the results of the business cooperation. At the same time, the company is also required to declare and pay personal income tax on behalf of the individual involved in the business cooperation.
• In cases where the company signs a business cooperation contract with an individual engaged in business activities, as specified in Clause 5, Article 51 of the Law on Tax Administration, and the individual has a profession that is aligned with the business cooperation activity with the company, both the company and the individual are required to declare taxes corresponding to the actual results of the business cooperation according to regulations.
• The method of tax calculation, tax base, tax declaration dossier, place for submitting the tax declaration dossier, deadline for submitting the tax declaration dossier, and tax payment deadline shall be implemented in accordance with the provisions of Articles 8, 10, and 16 of Circular No. 40/2021/TT-BTC dated June 1, 2021, by the Ministry of Finance.

Conclusion

Properly adhering to tax declaration and payment regulations in cases where organizations cooperate with individuals/home-based businesses is essential to ensure compliance with the law and avoid legal risks. Companies should focus on fulfilling their tax obligations in accordance with legal regulations and the guidance from the General Department of Taxation.

We hope that the above guidance will assist individuals and organizations in fulfilling their tax obligations effectively. Should you have any further questions, please contact TPM via our website: tpm.com.vn or Hotline 028 3505 1800 for the quickest support.