The Ministry of Finance has announced that, based on feedback from National Assembly delegates regarding the draft Law on Personal Income Tax (amended), it will further study the tax calculation method for business households and individual entrepreneurs.
The Ministry of Finance plans to raise the taxable revenue threshold for business households. Illustrative image.
Regarding taxes for individual entrepreneurs, the Ministry of Finance stated that under the current Law on Personal Income Tax, the revenue threshold exempt from personal income tax is VND 100 million/year or less. This aligns with the value-added tax (VAT) threshold for households and individual entrepreneurs, which is also VND 100 million/year or less, exempting them from VAT.
According to the Law on Value-Added Tax passed by the National Assembly in 2024, this threshold has been adjusted from VND 100 million/year to VND 200 million/year, effective from January 1, 2026. To ensure consistency and uniformity in the legal system, the Government has proposed to the National Assembly to raise the tax-exempt revenue threshold for individual entrepreneurs to VND 200 million/year.
Currently, the Ministry of Finance is preparing to report to the Government on adjusting the tax-exempt revenue threshold for individual entrepreneurs to align with practical realities. This adjustment reflects the state’s support for households and individual entrepreneurs with revenues up to VND 3 billion, aiming to enhance social welfare.
The Ministry of Finance will continue to study and raise this threshold to ensure relative fairness compared to individuals earning income from wages and salaries. It also plans to amend the Law on Value-Added Tax to raise the VAT-exempt revenue threshold, ensuring consistency.
Additionally, the Ministry of Finance will further research tax calculation methods for households and individuals with revenues up to VND 3 billion. To ensure appropriateness and accurately reflect the nature of income tax, the Ministry plans to report to the Government a proposal to levy taxes on income (revenue minus expenses) for all individuals with revenues above the tax-exempt threshold.
Accordingly, it is proposed that individual entrepreneurs with annual revenues above the tax-exempt threshold up to VND 3 billion will pay taxes at rates corresponding to corporate income tax applicable to enterprises with revenues below VND 3 billion.
In cases where individual entrepreneurs with revenues below VND 3 billion cannot determine expenses, they will continue to pay taxes based on revenue ratios as currently applied (with tax rates of 0.5%, 1%, or 2% depending on the industry). These households and individuals will be entitled to deduct the tax-exempt threshold before calculating taxes, rather than taxing from the first unit of revenue as per current regulations.
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