A Proposal to Exempt Individuals with an Annual Income Below 200 Million VND from Taxation

A proposal to exempt individual households with an annual revenue of less than VND 200 million from VAT is good news for millions of households across the country. This move aims to encourage and motivate small businesses and micro-enterprises to grow and quickly enter the market. By raising the revenue threshold for VAT liability, a larger number of businesses and individual households will be exempt from this tax, allowing them to grow and contribute more to the state budget.

Artisans like Mrs. Nguyen Thi Tuyet, who has been running a handicraft business in Hanoi’s Hang Da street for over a decade, welcome this proposal. She shared that expenses on electricity, water, raw materials, and rent have been increasing year after year, making the current VAT threshold of VND 100 million outdated and impractical.

Mrs. Tuyet expressed her support for the proposal, especially considering the challenges faced by small businesses during and post-COVID-19. She believes that raising the threshold will provide much-needed relief to households during these difficult times.

Echoing this sentiment, PGS.TS Le Xuan Truong, Head of the Tax and Customs Department at the Academy of Finance, pointed out the inconsistencies in the current VAT Law. He explained that the current threshold is too low compared to the reality of Vietnam’s economic growth. With the country’s GDP per capita increasing from VND 40 million in 2014 to VND 101.9 million in 2023, a revision of the tax threshold is long overdue.

“In 2014, Vietnam’s GDP per capita was slightly over $2,000, but in 2023, it reached more than $4,000, doubling in just ten years. As the standard of living has improved, the definition of poverty and low income should also be adjusted accordingly. Therefore, it is necessary to increase the revenue threshold for tax liability,” said Le Xuan Truong.

Lawer Pham Ngoc Hung, from Ngoc Hung Law Firm, agreed that the current threshold is outdated and suggested raising it to VND 300 million per year. He justified this suggestion by pointing out the impact of rising prices and decreasing profit margins on small businesses.

The proposal to raise the VAT threshold for households has received support from various experts and practitioners. TS Mac Quoc Anh, Vice Chairman and General Secretary of the Hanoi Small and Medium Enterprise Association, and Director of the Institute of Economics and Enterprise Development, highlighted the benefits of this move. He explained that it would reduce the tax burden on small businesses and start-ups, encouraging more people to engage in business activities. Additionally, it would enhance competitiveness by reducing product prices compared to larger enterprises that are subject to VAT.

According to calculations by the Ministry of Finance, if the threshold is set at VND 200 million per year, more than 620,000 households will be exempt from VAT. Meanwhile, if the threshold is raised to VND 300 million, over 734,000 households will benefit from this change.