The Ministry of Finance has issued Official Dispatch 18491/BTC-CST to the Prime Minister, reporting on the absorption and explanation of feedback from National Assembly deputies regarding the draft Law on Personal Income Tax (amended).
One of the most notable points is the Ministry’s proposal to apply income-based taxation (revenue minus expenses) for households and individuals with annual revenue between VND 500 million and VND 3 billion. The tax rate is set at 15%, equivalent to that of micro-enterprises under the 2025 Corporate Income Tax Law.
According to the drafting agency, all households and individuals will pay taxes based on actual income, meaning those with lower income pay less, and those without income are exempt.
For those unable to determine expenses (common among traditional businesses and market vendors), the Ministry will calculate taxes as a percentage of revenue, depending on the industry, for the portion exceeding VND 500 million annually.
As of October 2025, there are over 2.54 million active households nationwide. With a tax-exempt revenue threshold of VND 500 million, approximately 2.3 million households (90% of the total) would be exempt. However, many argue this threshold is still unrealistic for small businesses, especially those with high capital costs or unable to prove expenses.
Most businesses with revenue between VND 500 million and VND 3 billion annually will only pay taxes on the amount exceeding VND 500 million (Illustrative image)
Ms. Tran Thi Cam Hong, Director of VIFATAX Tax Consulting and Services Company, believes the VND 500 million threshold is “insufficient” for many market vendors. Their typical revenue ranges from VND 1.5 to 3 billion annually, but their ability to prove expenses is nearly zero, risking a 15% tax on total revenue, turning “profit into loss.”
Additionally, most households have 2-3 family members working, but these individuals do not receive personal deductions like salaried employees, making the tax system unfair.
To avoid excessive pressure, Ms. Hong suggests taxing only the revenue exceeding VND 500 million, with rates ranging from 0.5% to 5%, depending on the industry.
“For example, a goods distribution household with VND 510 million in annual revenue should only pay taxes on the VND 10 million exceeding the threshold, at a 0.5% rate,” Ms. Hong illustrates.
Ms. Hanh, owner of a beef noodle shop in Ho Chi Minh City, believes a VND 1 billion annual revenue threshold better reflects small businesses’ reality. She explains that a bowl of beef noodles costs VND 40,000-50,000, with daily revenue of VND 3-4 million, equivalent to VND 1-1.2 billion annually.
However, rising material costs, rent of nearly VND 20 million per month, utilities, and depreciation leave a profit of only VND 200-240 million annually. Divided between the couple, each earns about VND 100 million per year—far less than salaried workers with personal deductions. “For small businesses like ours, the VND 500 million threshold is too low. It should be raised to VND 1 billion annually for fairness,” Ms. Hanh suggests.
National Assembly Deputy Hoang Van Cuong (Hanoi delegation) provided a specific example in the National Assembly to highlight the inconsistency in determining taxable revenue thresholds for businesses. He cited: Someone buys a milk box for VND 900,000 and sells it for VND 1 million, profiting only VND 100,000. Selling 200 boxes annually yields VND 200 million in revenue, but only VND 20 million in actual profit.
Deputy Cuong analyzed: The current personal deduction is VND 186 million annually; adding one dependent increases it to VND 260 million. Thus, to match the VND 260 million income level, the milk seller needs VND 2.6 billion in annual revenue. Only then does their tax liability equal that of a salaried worker.
Based on this, Mr. Cuong proposes adjusting the taxable revenue threshold for traders and agents (industries with high input costs) to VND 1.5 billion annually. For service businesses like haircutting, with lower costs, the minimum threshold should be VND 500 million to ensure post-expense income exceeds personal deductions. For other production and business sectors, he suggests a minimum threshold of VND 1 billion to accurately reflect income and ensure tax fairness.
Potential Increase to VND 10 Billion?
From a legal perspective, lawyer Nguyen Duc Nghia, Director of Viet Tin Nghia Law Company, argues that the VND 500 million to 3 billion revenue range based on profit is inconsistent with the 2017 Law on Supporting Small and Medium Enterprises.
This law defines manufacturing and construction enterprises (excluding material contractors) with VND 3 billion in revenue, while trading and construction enterprises (including material contractors) can have up to VND 10 billion. Many households now operate similarly to small enterprises but are still categorized under much lower criteria.
Mr. Nghia proposes significantly raising the taxable profit threshold: VND 3 billion for households not contracting materials and VND 10 billion for trading or construction households contracting materials. This aligns with current laws and provides profit margins for sustained business operations.
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