Elevate your tax threshold for small business owners

The draft of the amended Value Added Tax (VAT) Law is currently being consulted by the Ministry of Finance, which proposes to increase the taxable revenue threshold for households and individual businesses from 100 million VND to 150 million VND per year. However, many opinions suggest that this threshold is still relatively low.

Increasing is appropriate

According to the Ministry of Finance, since the amendment of the VAT Law in 2013, which supplemented some provisions of the VAT Law in 2008 and is still in effect to this day, the consumer price index (CPI) has increased significantly. It is necessary to adjust the revenue threshold for the sale of goods and services of individuals and business households to match the price fluctuations.

The Ministry of Finance also emphasizes that increasing the taxable revenue threshold as proposed above for individuals and business households will not incur compliance costs, administrative procedures for taxpayers, and will ensure transparency in tax administration.

Associate Professor Dinh Trong Thinh, senior lecturer at the Academy of Finance, believes that the regulation of a revenue threshold of 100 million VND per year for individuals and business households is outdated, in the context of economic indicators, especially the consumer price index, having changed significantly. Therefore, to be in line with reality and ensure fairness for business households, it is necessary to consider raising the taxable revenue threshold. The Ministry of Transport has proposed a threshold of 250 million VND for VAT. The Vietnam Tax Consultants’ Association (VTCA) has proposed a taxable threshold ranging from 180 million to 240 million VND. According to the VTCA, the standard income level for poor households in rural areas is currently 1.5 million VND per person per month, and in the city, it is 2 million VND per person per month. Therefore, someone with an annual income of 18 million VND is considered “poor and near-poor”.

According to the VTCA, based on the VAT tax calculation table, assuming a tax rate of 10% for commercial businesses, an income of about 10 million VND can be calculated. That means after a business process that earns 100 million VND, the value-added part is 10 million VND.

The Vietnam Chamber of Commerce and Industry (VCCI) suggests that the drafting agency consider raising the taxable revenue threshold to around 180 – 200 million VND per year for households and individual businesses. “However, according to the feedback of many businesses, the taxable revenue threshold of 150 million VND per year is still relatively low,” VCCI emphasized.

Increasing the taxable threshold will create motivation

Commenting on the drafting agency, Trong Tin Accounting and Tax Consulting Company proposes to increase the tax-exempt revenue threshold from 150 million to 180 million VND or stipulate an opening and leave it to the Government to regulate to ensure flexibility and closely follow reality.

Agreed, lawyer Bui Anh Tuan (Hanoi Bar Association) said that adjustments to tax policies to be in line with reality are very necessary, and also support production and business activities.

Economist Nguyen Minh Phong also believes that when the taxable threshold is raised higher, it will create motivation for business households and individuals to promote production and business activities and increase better revenue sources.

Economist Le Dang Doanh, former Director of the Central Institute for Economic Management Research, said that the threshold of 150 million VND per year as proposed by the Ministry of Finance is still low. In the current context, business households also have to invest heavily in business activities such as online sales, delivery costs, and premises costs. Therefore, raising the taxable revenue threshold is appropriate to encourage and motivate business households.

Le Dang Doanh suggests considering a threshold of 200 million VND per year, as proposed by some opinions.