‘Doubling the tax exemption threshold helps reduce the burden on business households’

The Law amending and supplementing a number of articles of the Tax Law was passed by the National Assembly on the morning of April 24, which removed the taxable revenue threshold of 500 million VND for business households. The Government will specifically regulate this taxable revenue level, expected to be raised to 1 billion VND.

At the press conference about the results of the following session, Ms. Pham Thi Hong Yen, a specialized delegate of the Economic and Finance Committee, said that raising the threshold of revenue not subject to personal income tax (PIT), value added tax (VAT) to 1 billion VND helps reduce the tax burden for nearly 5 million business households, small businesses, and cooperatives.

“Doubling the tax-free revenue level will help this group ensure their livelihoods, social security, and create motivation for business households to convert to cooperatives or enterprises,” Ms. Yen said.

She explained that capital business activities are diverse, but the management agency has not divided the tax exemption threshold by industry or field.

Instead, when upgrading to a business or cooperative, these households will be compensated with many other preferential policies. Incentives include first-term tax exemption, capital support and training. Therefore, in the immediate future, according to her, the operator will “agree on a revenue threshold that is not subject to general tax”.

According to a Government report, the whole country currently has about 2.55 million business households and individuals with a revenue of less than 1 billion VND. If the tax threshold is raised to 1 billion, the budget is expected to reduce revenue by 16,650 billion VND compared to 2025 and reduce 4,850 billion compared to the tax payment threshold of 500 million.

Some delegates, when discussing at the National Assembly, also proposed the need for taxable revenue thresholds by sector. In the explanatory report, the Government explained that the Law on Personal Income Tax (PIT) and Value Added Tax (VAT) have different tax rates on revenue for each industry group. This regulation ensures relative fairness for taxpayers, according to the Government.

At the same time, the tax exemption threshold is the level of revenue generated from the beginning, so the difference in income between industries and fields is not large.

To compensate for income differences between sectors, current law applies different tax rates. For example, the goods distribution sector is subject to personal income tax of 0.5% and VAT of 1%, while services and construction include raw materials at 1.5% and 3%. Tax rates for other business activities are 1% and 2%, respectively.

According to data from the tax authority, the whole country has about 2.56 million business households and individuals with a revenue of less than 1 billion VND. About 900,000 businesses are operating, of which small and micro units account for nearly 94%.

The Ministry of Finance said that in the period 2022-2025, the country will have 3-4 million business households, of which more than 2 million households declare taxes stably, contributing about 2% of total budget revenue. In 2025 alone, tax revenue from this area will reach 32,840 billion VND, an increase of 37.5% over the same period.