Since July 1st, 2022, as stipulated in Decree 123/2020/ND-CP and Circular 78/2021/TT-BTC, business households and individual businesses applying the tax declaration method are obligated to switch to electronic invoices. This is not only a legal requirement but also an important step in the modernization of business operations.

To ensure compliance and avoid legal risks, business owners need to understand the rules related to the creation, use, and management of electronic invoices. This article will clarify the key points to help you operate your invoicing business accurately and efficiently.

The Concept of Electronic Invoices

According to Article 3 of Decree 123/2020/ND-CP, an electronic invoice is understood as an electronic data document created by the seller of goods or services through electronic means, to record commercial transaction information in accordance with accounting and tax laws. This invoice can be generated from a cash register directly connected to the tax authority's system.

Electronic invoices are divided into two main types. The first type is an invoice with a tax authority code, which is issued before being sent to the buyer. This code includes a unique transaction number and an encoded string of characters based on the seller's information. The second type is an invoice without a tax authority code, which is generated by the organization itself and sent directly to the customer without prior verification from the tax authority.

Three Cases Where Electronic Invoices Are Mandatory

According to Circular 78/2021/TT-BTC, household businesses and individual business owners must use electronic invoices in three specific situations.

The first case applies to household businesses and individuals paying taxes using the declaration method. This group is obligated to regularly use electronic invoices in their business operations.

The second case involves household businesses paying taxes using the lump-sum method. When they need to issue invoices, the tax authorities will provide them with electronic invoices with codes for each transaction.

The third case applies to household businesses that file taxes on a transaction-by-transaction basis. Similar to the second group, if invoices are required, the tax authorities will issue individual electronic invoices for each specific transaction.

Points to Note When Using Electronic Invoices

Eligible recipients for electronic invoices issued on a per-transaction basis.

Household businesses paying flat-rate taxes are supported by the tax authorities with the issuance of invoices with codes on a case-by-case basis when needed. Individuals engaged in irregular business activities without a fixed location, paying taxes on a transaction-by-transaction basis, also fall under this category.

In addition, some special cases are also eligible for invoices issued on a case-by-case basis. For example, a business that has ceased operations but has not yet completed the procedures for terminating its tax identification number can still apply for invoices to liquidate assets. Businesses that have temporarily suspended operations but need to fulfill previously signed contracts are also eligible for similar support. Cases where the use of invoices is forcibly stopped are also included in this list.

Free Electronic Invoice Service

According to Clause 1, Article 14 of Decree 123/2020/ND-CP, small and medium-sized enterprises, cooperatives, business households, and individual businesses in areas with difficult or extremely difficult socio-economic conditions are exempt from electronic invoice service fees for 12 months from the start of use. The list of preferential areas is stipulated in Decree 118/2015/ND-CP.

Those not eligible for free services will have to pay service fees according to the contract signed with the electronic invoicing service provider.

Situations Requiring the Discontinuation of Electronic Invoices

Clause 1 of Article 16 of Decree 123/2020/ND-CP lists the cases where the use of electronic invoices with codes must be stopped.

When a business household's tax identification number expires or the tax authorities verify that it is no longer operating at its registered address, the use of invoices will cease. If the business household proactively notifies the competent authority of the temporary suspension of business operations, the use of electronic invoices will also stop.

Serious violations also have similar consequences. If a business uses invoices to sell smuggled goods, prohibited goods, counterfeit goods, or goods infringing intellectual property rights, the authorities will detect it and notify the tax authorities for handling. The act of creating fictitious invoices to embezzle money is also a reason for discontinuing the use of electronic invoices.

Furthermore, when the tax authorities announce the suspension of invoice usage to enforce tax debt collection, or when the business registration authority requests a temporary suspension of business operations in conditional sectors due to insufficient qualifications, the business household must also cease using electronic invoices.

Which tax authority issues invoices on a transaction-by-transaction basis?

Point c, Clause 2, Article 13 of Decree 123/2020/ND-CP clearly stipulates the location for submitting applications for invoice issuance.

For household businesses and individual business owners with a fixed business location, the application will be submitted to the Tax Office managing the area where the business is conducted. Conversely, household businesses and individuals without a fixed business location will submit their applications to the Tax Office in their place of residence or business registration.

Roadmap for Transitioning from Lump-Sum Tax to Declaration-Based Tax

From 2026, the tax authorities will implement a roadmap to transition household businesses from the lump-sum tax payment method to the declaration-based tax payment method. This requires household businesses to fully perform tasks such as bookkeeping, creating and sending electronic invoices, and declaring and paying taxes online as prescribed, instead of simply paying lump-sum taxes as before.

To help small businesses adapt to new regulations without having to hire accountants or perform complex manual processes, many comprehensive digital transformation solutions have been developed, integrating features for sales management, tax declaration, tax payment, electronic invoice issuance, and accounting record management on a single platform.

Conclude

The use of electronic invoices has become mandatory for household businesses and individual business owners who pay taxes using the declaration method. Understanding the regulations on electronic invoices, from the concept and applicable subjects to the cases in which invoices can be issued and situations requiring their discontinuation, is essential for all household business owners to operate their businesses transparently and in compliance with the law.

In particular, in the context of the transition from lump-sum to declaration-based tax, equipping businesses with suitable tools for managing accounting records, tax declarations, and issuing electronic invoices has become more crucial than ever. GTG CRM provides integrated automatic electronic invoice issuance features, helping business owners easily issue legal invoices, send data to tax authorities in accordance with regulations, and support checking and detecting errors in input invoices. As a result, business owners not only save time but also ensure accuracy in accounting and full compliance with tax authority requirements.