Authorities reveal strategies for comprehensive and robust tax policy enforcement
Modernizing Tax Administration for Household Businesses
A significant change is on the horizon for household businesses in Vietnam, as the draft Law on Tax Administration proposes to overhaul the current tax management system. The new law aims to modernize the system by replacing the presumptive tax scheme with a profit-based model supported by digital tools, phased implementation, transitional exemptions, and administrative simplifications.
The proposed changes will integrate business households into the national tax management system like small enterprises, applying digital accounting tools, electronic invoicing, and offering tax exemption or reduction support for the first 6-12 months to ease vulnerable households into the new regime.
Classification of Business Households
Business households will be classified into four groups based on their annual revenue:
- Less than VND200 million ($8,000) - These households will not be subject to tax.
- Between VND200 million and VND400 million ($8,000 - $400,000) - These households will be in the second group.
- Between VND400 million and VND4 billion ($400,000 - $16,000,000) - These households will be in the third group and must use e-invoices with codes from the tax authority when selling directly to consumers.
- More than VND4 billion ($400,000) - These households, which are considered large or medium-sized, are in the fourth group and must use e-invoices with codes from the tax authority for both buying and selling goods.
Tax Exemption Thresholds and Transition Support
To facilitate the transition from the presumptive tax to the profit-based self-declaration model, the draft law proposes tax exemptions or reductions for the first 6-12 months for all business households. The threshold for mandatory use of e-invoices is also proposed to be raised from 1 billion VND to 2-3 billion VND annual revenue, allowing small retail households to continue using simpler invoices initially.
Use of Electronic Invoices
The policy encourages issuing electronic invoices to improve tax management and transparency. Large and medium business households will adopt e-invoicing more rigorously, while smaller households will benefit from delayed mandates and supports such as software subsidies and affordable cash registers.
Implementation Roadmap
The transition is planned in phases over approximately five years:
- Early years will focus on upgrading local tax management systems, integrating declaration, payment, and reporting digitally.
- Later years (Years 4-5) will see the nationwide standardization and full phase-out of the presumptive tax scheme.
- Business households will be supported by training, tax incentives, and formalization policies such as social insurance, credit access, and labor training support.
- Hanoi’s recommendation to require household businesses to register separate bank or electronic transaction accounts for easier tax cash flow management may also be incorporated.
In conclusion, the draft law aims to modernize tax administration for household businesses by replacing the presumptive tax with a profit-based model supported by digital tools, phased implementation, transitional exemptions, and administrative simplifications to foster business formalization and compliance. The changes are expected to bring greater transparency and efficiency to the tax system, benefiting both the government and the household businesses themselves.
[1] Vietnam News Agency [3] Vietnam Investment Review [5] Vietnam Insider
- The proposed changes in Vietnam's tax administration will integrate household businesses into the national business tax system, allowing them to use digital accounting tools and electronic invoicing for improved finance management.
- The phased implementation of the new tax administration law includes support for small retail households, such as raising the threshold for mandatory use of e-invoices and offering software subsidies, to help them transition smoothly to the new profit-based finance model.
