Tax and Social Insurance Obligations of Individuals Acting as Both Household Business Owners and Company Owners

Introduction

In practice, many individuals concurrently operate as sole proprietors of household businesses and also serve as founders and managers of enterprises (e.g., limited liability companies or joint stock companies). In these dual capacities, individuals incur separate obligations regarding taxes and social insurance (SI). A clear understanding of the applicable legal provisions is essential to avoid errors and to ensure the protection of long-term rights and entitlements, especially in light of the Social Insurance Law 2024 and relevant tax regulations taking effect as of July 1, 2025.

See more article: How many days off work in a month without paying social insurance?

Tax Obligations of Household Businesses and Enterprises Under the Latest Regulations

Household Businesses

Pursuant to Article 30 of the Law on Tax Administration and Article 4 of Circular No. 40/2021/TT-BTC guiding VAT and PIT applicable to household businesses, such entities are required to:

• Register a tax identification number; and
• Declare and pay taxes corresponding to their business activities.

Applicable taxes include:

• Value-added tax (VAT)
• Personal income tax (PIT)
• Business license fee (if annual revenue exceeds the threshold)

Specific provisions:

According to the 2024 Law on VAT, all organizations, households, and individuals engaged in the production or trading of goods and services are subject to VAT.

Exemptions: VAT and PIT are exempted if annual revenue is less than or equal to VND 100 million.

Enterprises (e.g., Limited Liability Companies, Joint Stock Companies, etc.)

Enterprises are subject to a different set of taxes compared to household businesses, including:

Value-added tax (VAT):

Levied on revenue from the sale of goods, services, and imports, at the following rates:

• Standard rate: 10%
• Preferential rates: 5% or 0%, depending on specific goods or services

Corporate income tax (CIT):

Standard rate: 20% on taxable income (i.e., actual net profit)

Personal income tax (PIT) for business owners:

If the owner receives a salary or remuneration from the company, PIT shall be imposed under the progressive tariff ranging from 5% to 35%, in accordance with Article 22 of the 2007 Law on Personal Income Tax.

Personal Income Tax Regulations for Individuals with Multiple Sources of Income

Classification and Tax Calculation Principles

Under the Law on Personal Income Tax, individuals with multiple sources of income are not subject to tax aggregation; instead, each type of income must be declared and taxed separately. These sources include:

• Income from business activities (e.g., household businesses operated by individuals);
• Income from salaries and wages (received from enterprises);
• Income from capital investment, dividends, capital transfers, etc.

Applicable Tax Rate Principles

Income from household business activities (if declared):

As stipulated in Appendix I of Circular No. 40/2021/TT-BTC guiding VAT, PIT, and tax administration for individual businesses:

• Tax is imposed at a fixed percentage of revenue, generally ranging from 2% to 5%, depending on the business line.
• In cases where the annual revenue exceeds a certain threshold, taxpayers may be required to declare taxes quarterly or annually.

Income from enterprises (salaries, bonuses):

Tax is calculated using a progressive rate schedule ranging from 5% to 35%, based on taxable income after deductions (including personal deductions, dependent deductions, and mandatory insurance contributions).

Income from dividends and capital investment:

A flat tax rate of 5% applies, withheld at source, pursuant to Clause 2, Article 10 of Circular No. 111/2013/TT-BTC, which provides guidance on the implementation of the Personal Income Tax Law.

Social Insurance Obligations Under the 2024 Social Insurance Law (Effective from July 1, 2025)

Household Business Owners

As of July 1, 2025, individuals operating household businesses (i.e., persons registered as the heads of sole proprietorships) are required to participate in mandatory social insurance (SI) pursuant to Point m, Clause 1, Article 2 of the 2024 Social Insurance Law.

Monthly contribution rates are as follows:

• 3% of the salary used as the basis for mandatory SI contributions to the sickness and maternity fund;
• 22% of the salary used as the basis for mandatory SI contributions to the retirement and survivorship fund.

Entitlements include:

• Sickness and maternity benefits;
• Retirement and survivorship benefits, under the same conditions as regular employees.

Company Owners

If the company owner (i.e., the individual employed by the company to manage it) signs a labor contract and receives a salary from the company:

• They are required to participate in mandatory social insurance as an employee;
• Monthly contribution: 8% of the salary used as the basis for mandatory SI contributions to the retirement and survivorship fund.

If the company owner does not sign a labor contract with the company or does not receive a salary:

• They are not subject to mandatory SI participation as an employee;
• However, they may opt to participate voluntarily in social insurance to secure future retirement and survivorship benefits.

All enterprises are required to enroll their employees in mandatory social insurance and must deduct and remit social insurance contributions based on the actual wages paid to employees.

Individuals Falling Under Multiple Categories for Social Insurance Contribution

If an individual concurrently operates as a household business owner and a company owner or employee:

• The individual is only required to contribute to social insurance once, under a primary status, to avoid duplication.
• Example: If the individual already participates in compulsory social insurance as an employee of an enterprise, the obligation to contribute as a household business owner may be waived to avoid duplicate contributions to the same fund (e.g., the retirement and survivorship fund).

Exemptions and Avoidance of Duplication in Tax and Social Insurance Obligations

Tax and Fee Exemptions

For Low Income Thresholds:
Household businesses with annual revenue less than or equal to VND 100 million are entitled to:

• Exemption from value-added tax (VAT);
• Exemption from personal income tax (PIT).

Avoidance of Overlapping Obligations Across Systems

In Terms of Taxation:

• Corporate income (at the enterprise level) is subject to corporate income tax (CIT) at 20%;
• When dividends are distributed to shareholders, a 5% PIT is applied on the dividend income only — there is no double taxation of the same corporate profit under CIT.

In Terms of Social Insurance:
Pursuant to Clause 5, Article 2 of the 2024 Social Insurance Law:

• If a person is party to multiple labor contracts, they shall participate in social insurance based on the first effective employment contract;
• If the first contract is suspended and there is no agreement to continue social insurance contributions during the suspension period, the applicable contract will be determined in order of the remaining valid contracts.
• In cases where an individual falls into multiple contributory categories under social insurance:

1. The individual is only required to contribute to compulsory social insurance under one primary category;
2. Participation is determined based on the most substantial role or the earliest effective contract, thereby avoiding duplicate contributions across roles.

Conclusion

An individual who concurrently acts as both a household business owner and a director/shareholder of a company must fully comply with the obligations under both the tax and social insurance systems:

Such individuals must clearly distinguish income sources derived from household business activities and from corporate involvement. Specifically:

• Household businesses are subject to value-added tax (VAT), personal income tax (PIT) calculated by fixed rates, and business license fees;
• At the company level, individuals may be liable for PIT on salaries or dividends, while the company itself is subject to corporate income tax (CIT).
•  All declarations and payments must be accurate, timely, and aligned with the appropriate calculation methods applicable to each business form.

As of July 1, 2025, household business owners will fall under the scope of mandatory social insurance if they meet the conditions set forth under the 2024 Social Insurance Law. Additionally, if the individual is also an employee of an enterprise (i.e., receiving a salary), the enterprise is responsible for paying compulsory social insurance contributions on their behalf at the prescribed statutory rates. Where the individual is already eligible to receive a retirement pension, they are exempt from further compulsory contributions. The legal framework adopts the principle that each person shall only participate in mandatory social insurance under one prioritized category, thereby avoiding duplicative contributions. Similarly, income from different sources (e.g., business income, wages, investment returns) is taxed separately, not aggregated. Furthermore, tax exemptions and social insurance exemptions for specific groups (e.g., low-income individuals, retirees) contribute to ensuring equity and rationality in the application of relevant laws and policies.

Harley Miller Law Firm

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