Provide feedback for the latest draft of the Value Added Tax (VAT) Amendment Law, with some organizations, proposing to increase the threshold for taxable revenue. Specifically, Quang Ngai province proposes to exempt VAT for households and individuals with annual revenue below 300 million VND. Some other agencies propose lower thresholds, such as the Ministry of Transport suggesting the figure of 250 million VND.
The Ministry of Finance rejects the proposal of 300 million VND/year revenue for VAT (Illustrative image)
The Vietnam Tax Consultancy Association (VTCA) proposes thresholds of 180 million to 240 million VND. According to VTCA, Decree 07 states that the standard income for poor households in rural areas is currently 1.5 million VND/person/month, with cities being 2 million VND/person/month. Therefore, a person with an annual income of 18 million VND is considered “poor and near-poor”.
According to VTCA’s calculations, based on the VAT tax table, assuming a 10% tax rate for commercial business, the calculated income is about 10 million VND. This means that after a business process with revenue of 100 million VND, the added value is 10 million VND. With 150 million VND, the revenue is 15 million VND.
Based on reviewing the feedback, the Ministry of Finance maintains the proposal of a 150 million VND threshold for individuals and business households for VAT. Accordingly, individuals and business households with sales revenue above 150 million VND/year will have to pay VAT. This taxable threshold is 50 million VND/year higher than the current regulations.
Proposal to increase the VAT taxable threshold to over 150 million VND/year
According to the explanation by the Ministry of Finance, the amount of 150 million VND is based on the inflation index and the actual situation. The Ministry of Finance also raises the issue that a higher tax reduction threshold will affect the local budget revenue, especially in areas with low revenue.
The Ministry of Finance also believes that a higher taxable threshold will not encourage households and individuals engaged in business to switch to enterprises, where enterprises will generate revenue subject to VAT.
Previously, the Ministry of Finance proposed to increase the VAT taxable threshold for individuals and business households to over 150 million VND/year in the draft amendment to the Value Added Tax Law. According to this agency, since the amendment to the Value Added Tax Law in 2013, amending and supplementing some provisions of the 2008 Value Added Tax Law, the Consumer Price Index (CPI) has increased significantly.
Adjusting the threshold for sales of goods and services of individuals and business households to align with the price fluctuations is necessary. The Ministry of Finance also emphasizes that raising the tax burden for individuals and business households does not generate compliance costs, administrative procedures for taxpayers, and transparency in tax management.
