What is a Household Business?
A household business (hộ kinh doanh) is established by one individual or a group of individuals who are members of the same household, registered to conduct business at a single location. It is the simplest and most common form of business in Vietnam, governed by Decree 01/2021/ND-CP on business registration and Circular 40/2021/TT-BTC (effective 1 August 2021) on tax obligations.
Household businesses are distinct from enterprises (companies) and are not required to maintain a full double-entry accounting system unless they voluntarily upgrade their registration status.
Tax Obligations Overview
Household businesses with annual revenue exceeding VND 100 million are subject to two main taxes:
| Tax | Rate | |-----|------| | Value Added Tax (VAT) | 1–5% of revenue (by sector) | | Personal Income Tax (PIT) | 0.5–2% of revenue (by sector) |
Businesses below the VND 100 million annual revenue threshold are exempt from both VAT and PIT (Article 1, Circular 40/2021).
Tax Rate by Business Sector
Circular 40/2021/TT-BTC Appendix I specifies the following flat rates on revenue:
| Business Sector | VAT Rate | PIT Rate | |----------------|----------|----------| | Distribution and supply of goods | 1% | 0.5% | | Services, construction without materials | 5% | 2% | | Construction with materials | 3% | 1.5% | | Production, transport, and mixed activities | 3% | 1.5% |
These rates apply to actual revenue — not profit. This is called the presumptive tax method (phương pháp khoán).
Three Tax Payment Methods
1. Flat-Rate Tax (Thuế khoán) — Most Common
The tax authority assesses an annual flat tax based on estimated revenue. The household pays in fixed instalments, typically monthly or quarterly.
Process:
- Tax authority issues a tax notice (thông báo nộp thuế)
- Household pays according to the schedule without filing declarations
- Revenue fluctuations during the year can be reported for adjustment
2. Declaration Method (Khai thuế theo từng lần phát sinh)
Applies to household businesses that are not eligible for flat-rate tax, or that choose to declare per transaction. Requires filing a tax declaration each time a taxable transaction occurs.
3. Direct Declaration (Khai thuế trực tiếp)
For household businesses that maintain accounting records and choose to declare based on actual revenue and expenses. This method is closer to how enterprises file.
Business License Tax (Lệ phí môn bài)
All household businesses must pay an annual business license tax per Decree 139/2016/ND-CP:
| Annual Revenue | Annual Fee | |----------------|------------| | Over VND 500 million | VND 1,000,000 | | VND 300–500 million | VND 500,000 | | VND 100–300 million | VND 300,000 | | Under VND 100 million | Exempt |
Payment deadline: 30 January each year. New businesses established in the second half of the year pay 50%.
E-Invoice Requirements
Since 1 July 2022, household businesses with annual revenue over VND 1 billion are required to use e-invoices. Those below this threshold may use pre-printed receipts (phiếu thu) or e-invoices from the GDT free portal.
Per Circular 78/2021/TT-BTC, households subject to flat-rate tax that issue e-invoices per transaction must reconcile actual revenue against their assessed flat-rate amount and pay any difference.
Record-Keeping Requirements
While full double-entry bookkeeping is not mandatory, household businesses should maintain:
- A revenue register (sổ theo dõi doanh thu) recording daily sales
- Copies of all e-invoices issued and received
- Bank statements for all business transactions
- Purchase records for input costs
Good records protect against disputes during tax audits and support applications for tax rate reductions in low-revenue years.
Transitioning to a Company
When annual revenue consistently exceeds VND 10 billion or when the business has more than 10 employees, upgrading to a limited liability company (LLC) is advisable. This provides limited liability protection and allows the business to take on enterprise-level contracts.
Key Deadlines Summary
| Obligation | Deadline | |------------|----------| | Business license tax payment | 30 January annually | | Flat-rate tax payments | Per tax authority notice (monthly/quarterly) | | Year-end revenue reconciliation | 15 December each year (for the following year's assessment) |
Conclusion
Vietnam's tax framework for household businesses is straightforward once you understand which method applies to your situation. H&T Bay specializes in helping household businesses meet their obligations efficiently and plan for growth.