Comparison Between Fixed Tax Method and Declared Tax Method for Business Households – Latest Updates According to Circular 88
by KMC Consulting Company Limited
Choosing the appropriate tax payment method plays a crucial role in the operation and development of business households. Currently, there are two common tax payment methods available for business households: the fixed tax method and the declared tax method. Each method comes with its own advantages, limitations, and distinct accounting obligations. This article aims to provide a clear understanding of the differences, pros and cons of each method, as well as guidance on organizing accounting in accordance with the latest regulations stipulated in Circular 88/2021/TT-BTC.
I. Comparison Between the Fixed Tax Method and the Declared Tax Method for Business Households
Criteria | Declared Tax Method | Fixed Tax Method |
1. Applicable Subjects | Applied to business households with larger scale; small households can choose if eligible. | Mainly applied to small-scale business households. |
2. Tax Declaration Period | Declared monthly or quarterly. | No periodic tax declaration required |
3. Accounting and Record-Keeping | Required to maintain accounting books, receipts and payments documents, inventory records, etc. | No requirement to maintain accounting books. |
4. Output Invoices | Eligible to register and use electronic invoices; must issue invoices when selling goods or providing services. | Not allowed to register electronic invoices; must purchase invoices from the tax authority if invoicing. |
5. Tax Calculation Method | Based on actual revenue and applicable tax rates by industry. | Tax authorities set the fixed annual tax amount, regardless of actual revenue. Additional tax applies if invoices are purchased. |
6. Annual Tax Finalization | No requirement for annual tax finalization. | No annual tax finalization required. |
II. Accounting Records and Documentation System for Business Households According to Circular 88/2021/TT-BTC
- Organization of Accounting Work for Business Households
- Business households may arrange their own accounting personnel, who are not required to have professional qualifications.
- They may apply the accounting regime according to Circular 88 or follow the accounting regime for micro-enterprises (Circular 132).
- Regulations on accounting document retention:
- At least 5 years for documents used in management and operation.
- At least 10 years for documents used to prepare accounting books and tax reports.
- Permanent retention for important documents related to economic and security matters.
- List of Accounting Documents to be Prepared
No | Document Type | Form |
1 | Receipt Voucher | Form 01-TT |
2 | Payment Voucher | Form 02-TT |
3 | Warehouse Receipt | Form 03-VT |
4 | Warehouse Delivery Note | Form 04-VT |
5 | Payroll Payment Sheet | Form 05-LDTL |
6 | Invoice, State Treasury Payment Slip, Bank Credit – Debit Notices, Payment Orders | As incurred |
- Types of Accounting Books Applicable
No. | Book Name | Form |
1 | Detailed Revenue Book | S1-HKD |
2 | Detailed Materials and Goods Book | S2-HKD |
3 | Production and Business Expense Book | S3-HKD |
4 | Tax Obligation Tracking Book | S4-HKD |
5 | Payroll and Social Insurance Book | S5-HKD |
6 | Cash Fund Book | S6-HKD |
7 | Bank Deposit Book | S7-HKD |
🔍 Note: Not every business household is required to maintain all seven types of books. The selection depends on the actual business activities.
- Determination of Revenue, Expenses, and Tax Obligations
- Revenue and expenses are determined in the same manner as enterprises.
- Tax obligations depend on the business sector and taxable revenue, applied at specific rates:
Business Sector | VAT Rate | PIT Rate |
Trading goods | 1% | 0.5% |
Services without goods, construction without materials | 5% | 2% |
Services with goods, transportation, construction contracts including materials | 3% | 1.5% |
Other sectors (VAT 5%) | 2% | 1% |
III. Frequently Asked Questions
❓ Is it mandatory for business households using the declaration method to maintain all 7 types of accounting books?
👉 No, it is not mandatory. If the business household has no employees, maintaining a payroll book is not required. The application depends on actual business activities.
❓ Is it possible to switch between the two tax payment methods?
👉 Yes, it is possible. However, a re-registration procedure with the tax authorities is required, and the business must meet the eligibility criteria for the declaration method.
Choosing the appropriate tax payment method and organizing accounting properly will help business households operate transparently, smoothly, and optimize tax costs. If you are uncertain about whether to select the lump-sum tax method or the declaration method, consider your business scale, record-keeping capacity, and invoicing needs
For more detailed information about this or related Tax Advisory, please don't hesitate to contact us.
Website: https://kmc.vn/
Hotline: +84 81 489 4789 or +84 91 988 9331
Email: info@kmc.vn
