Expert: Business households pay the highest tax of 10% of total revenue

(Dan Tri) - The actual declaring household only has to pay a maximum of 10% of total revenue in tax, plus the current very low business license tax of up to 1 million VND. Calculating tax on revenue instead of profit is a reasonable solution.

How do businesses pay taxes?

Mr. H. (Binh Chanh District, Ho Chi Minh City) said that he is in the business of renting performance costumes, backdrops, and speakers. He registered to pay taxes according to the declaration method, with a value-added tax (VAT) rate of 5% and personal income tax of 2%, a total of 7% on revenue, because his rental service does not include supplies or materials.

“I have clear books, full declarations, and pay taxes on my income. I earn 100 million VND a month and pay 7 million VND, which is in accordance with regulations,” said Mr. H.

According to him, although switching to reporting requires more work to be done monthly, in return, it helps businesses manage their finances more clearly and makes it easier to work with corporate customers. At the same time, thanks to transparent books, he can easily calculate profits and losses, plan reasonable import plans and monitor business performance.

Mr. T. (a business owner in Go Vap, Ho Chi Minh City) said that his restaurant was determined by tax officials to have a fixed revenue of 1 billion VND/year. In the food and beverage industry, his business must pay a value-added tax (VAT) of 3% and a personal income tax of 1.5%. This corresponds to a tax he must pay of 45 million VND/year.

Mr. T. said that when he first switched to tax declaration, he encountered many obstacles. However, this declaration brought some clear benefits. When he kept full records, he had better control over his cash flow and was sure of his daily revenue instead of selling as much as he could like before.

Thanks to transparent books, he can easily calculate profits and losses, plan reasonable import plans and monitor business performance. In the long run, operating systematically also helps him build credibility with suppliers and opens up the possibility of expanding the scale if needed.

"In the coming time, the tax I have to pay will be calculated monthly, equal to 4.5% of total revenue," said Mr. T., adding that he is waiting for the end of the month to receive a notice to pay tax according to the new calculation method.

Last year, there were more than 4,000 business households with revenue of over 10 billion VND (Photo: Thanh Dong).

Previously, from June 1, according to Decree 70/2025, about 37,000 households with revenue of over 1 billion VND per year in a number of industries (food and beverage, hotels, retail, passenger transport, beauty, entertainment...) must use electronic invoices via cash registers connected to tax authorities.

In 2024, there will be more than 4,000 business households with revenue of over VND10 billion, but more than half of them will still pay lump-sum tax at a very low rate, only about 0.4% of revenue, while the declaring households will have to pay tax up to 25-30% of revenue, according to the content of the report to the Government on the proposal to develop the draft Law on Tax Administration (replacement).

However, according to tax expert Nguyen Ngoc Tu, former Editor-in-Chief of Tax Magazine, households that actually declare only have to pay a maximum of 10% tax on total revenue (for households that rent out houses, land, and warehouses) plus the current business license tax at a very low level - a maximum of 1 million VND for businesses with revenue of 500 million VND or more according to current regulations.

Accordingly, after eliminating lump-sum tax, business households will pay taxes based on actual revenue, including business license tax, personal income tax and value-added tax (VAT).

Tax rates that businesses must pay according to industry (Photo: My Tam).

Why tax on revenue and not profit?

Economist Nguyen Tri Hieu said that abolishing lump-sum tax and switching to the form of declaring and paying tax based on revenue is a reasonable trend, creating fairness among business types. However, to implement effectively, a transition period of at least one year is needed.

“Instead of a fixed lump-sum tax, paying tax based on revenue will more accurately reflect business activities, avoiding over-declaration or tax evasion. However, many small businesses such as pho restaurants and grocery stores are now accustomed to paying lump-sum tax - simple, easy to understand and convenient for both taxpayers and tax authorities,” said Mr. Hieu.

He emphasized that the major drawback of lump-sum tax is that many households deliberately declare low revenue to only pay a very small tax, even though the actual revenue is much larger. Therefore, switching to revenue-based declaration is reasonable, but it requires supporting infrastructure such as an electronic invoice system and bank payments to create a clear "trace" for tax authorities.

Citing an example from the US, Mr. Hieu said that all transactions at stores are directly linked to tax authorities, helping to manage revenue transparently and accurately. If Vietnam wants to move towards that model, it needs time to prepare and convert step by step.

Regarding the current tax rate for business households, which ranges from 1.5% to a maximum of 10% on revenue, plus a maximum business license tax of VND1 million, Mr. Hieu said that this is still quite low. “Businesses are normally taxed at a rate of about 20% on total revenue. However, to support small businesses and retailers, the above tax rate is reasonable,” he said.

When lump-sum tax is abolished, business households must pay according to actual revenue, keep accounting books, create invoices and invest in machinery to connect with tax authorities (Illustration: Thanh Dong).

Associate Professor Dr. Nguyen Huu Huan, Lecturer at Ho Chi Minh City University of Economics (UEH), commented that calculating business household tax based on revenue instead of profit is a reasonable solution in the current context. This method is both simple and reduces the pressure on costs and procedures for taxpayers, while also being suitable for the management level of the majority of small businesses.

He explained that in order to calculate tax based on profit, business households are required to fully declare input costs, including wages, raw materials, rental costs, electricity and water, and many other expenses.

However, most businesses today do not have proper accounting skills, nor do they have enough resources to prepare regular financial reports. If they are required to declare based on profits, they will have to hire accounting services or hire additional staff, which will incur unnecessary costs, especially for businesses with small revenues.

Meanwhile, applying a fixed tax rate on revenue from 1.5% to a maximum of 10%, along with a business license tax from VND300,000 to VND500,000, according to Mr. Huan, is a feasible and reasonable calculation method. Although this calculation method does not accurately reflect actual profits, it helps simplify tax procedures, making it convenient for both management agencies and taxpayers.

He also said that the shift to profit-based taxation should only be implemented when business households are supported to improve their management capacity, understand finance and accounting, and when the tax infrastructure is strong enough to effectively monitor and compare information.

Source: https://dantri.com.vn/kinh-doanh/chuyen-gia-ho-kinh-doanh-dong-thue-cao-nhat-10-tong-doanh-thu-20250618232828234.htm