Still Wondering About Taxable Revenue?

The Ministry of Finance has recently submitted an official dispatch to the Government, detailing their responses and absorption of feedback from National Assembly delegates regarding the draft amendments to the Personal Income Tax (PIT) Law. One of the most discussed aspects is the tax regulations for households and individual businesses.

Accurately Reflecting Profits

In this dispatch, the Ministry of Finance proposes raising the revenue threshold exempt from tax for households and individual businesses from 200 million VND to 500 million VND annually. This adjustment aims to ensure fairness with salaried employees (who benefit from family deductions) and to align with the realities of input costs and price fluctuations.

Beyond increasing the tax-exempt revenue threshold, the Ministry of Finance also suggests a significant change in the tax calculation method for businesses with annual revenues between 500 million VND and 3 billion VND. Instead of the current lump-sum tax, this group will pay taxes based on profits (revenue minus expenses) at a rate of 15%.

For larger individual businesses, the tax rates are tiered: 15% for revenues between 500 million VND and 3 billion VND annually, 17% for revenues between 3 billion VND and 50 billion VND annually, and 20% for revenues exceeding 50 billion VND annually.

Notably, individuals with revenues between 500 million VND and 3 billion VND who cannot determine valid expenses will apply a calculation method based on the excess revenue, with tax rates of 0.5%, 1.5%, 2%, or 5% depending on the industry. For example, a goods distributor with a revenue of 510 million VND will only pay PIT on the 10 million VND exceeding the threshold, at a rate of 0.5%. This new method ensures the principle of “lower income, lower tax, no income, no tax,” while minimizing the impact on most small business households.

According to the Ministry of Finance, there are currently over 2.54 million business households nationwide. With the proposed tax-exempt revenue threshold of 500 million VND annually, approximately 2.3 million households, or 90% of the total, will be exempt from tax.

However, upon receiving this information, some business households remain apprehensive. Mr. Lê Minh Hải, owner of a grocery store in Phú Nhuận Market (Ho Chi Minh City), shared that his family’s annual revenue is around 3 billion VND, but their profit margin is only about 10%, equivalent to 300 million VND.

This means each spouse earns approximately 150 million VND annually. “If calculated like salaried employees with family deductions, this income does not reach the taxable threshold. I hope the tax-exempt revenue threshold can be raised to 3 billion VND to accurately reflect business realities,” he said.

Sharing a similar view, Mr. Nguyễn Minh Đức, a trader at Thủ Đức Wholesale Market (Ho Chi Minh City), suggested raising the tax-exempt revenue threshold to 1 billion VND annually. According to him, traders at wholesale markets are primarily family-run businesses, with couples working and delivering goods themselves, while living costs in Ho Chi Minh City continue to rise. “A revenue of 1 billion VND annually, divided between two spouses and after deducting expenses, is actually equivalent to the family deduction for salaried employees. Taxing only the amount exceeding 1 billion VND would be more reasonable,” he stated.

Revenue Calculation by Industry

Mr. Nguyễn Ngọc Tịnh, Vice Chairman of the Ho Chi Minh City Tax Consultancy and Agency Association, believes that business households and salaried employees fundamentally use their labor to generate income and support their families. However, a significant difference lies in the level of risk. Salaried employees face less market volatility, while business households bear all risks: rising input costs, inventory losses, price fluctuations, or slow business periods. Despite this, business households do not receive family deductions like salaried employees, leading to tax disparities and unfairness.

Given this reality, Mr. Tịnh suggests that the government should conduct thorough research to establish a more appropriate tax-exempt revenue threshold, ideally tailored to each industry. Once the specific costs of each industry are calculated, the actual remaining income of business households will be more aligned with the current family deduction for salaried employees.

From a legal perspective, lawyer Nguyễn Đức Nghĩa, Director of Việt Tín Nghĩa Law LLC, proposes raising the tax-exempt revenue threshold to 1.2 billion VND annually. According to him, with this revenue and an average profit margin of 10%, the actual income of business households is only about 120 million VND annually, or 10 million VND monthly, which is not significantly different from the family deduction of 15.5 million VND monthly for salaried employees. Therefore, imposing taxes at such a low revenue level could place considerable pressure on small business households.

Another concern for business households is the profit-based tax calculation method (revenue minus expenses). Many expenses in family business models are difficult to validate. For instance, rental costs for home-based businesses or labor costs when the owner works directly. These actual expenses often cannot be documented with invoices or valid receipts as required by tax authorities.

Addressing this, Ms. Trần Thị Cẩm Hồng, Director of VIFATAX Tax Service and Consulting LLC, explains that when subject to tax under the deduction method, business households must retain all purchase and sale invoices, rental contracts, payrolls, and equipment expenses to deduct costs when calculating taxable income. However, business households are not yet entitled to minimum expense deductions like companies, such as 200 million VND annually for rental costs, uniforms, or insurance.

Therefore, Ms. Hồng recommends that the government include these common expenses in the list of deductible costs. Additionally, a clear and specific list of valid expenses should be issued to prevent confusion or unjustified expense exclusions during tax settlements.