Proposal to waive penalties for first-time violations.

The Ministry of Finance has proposed several new support mechanisms for businesses transitioning from household businesses, notably prioritizing guidance on rectification rather than penalties for first-time non-fraudulent violations.

Businesses that violate the regulations for the first time may be guided on how to rectify the situation.

The Ministry of Finance is seeking feedback on the draft Law on Supporting Small and Medium-Sized Enterprises (amended), notably including proposals for many new support mechanisms for businesses transitioning from household businesses.

These converted businesses inherit the legal rights, obligations, and benefits of the household business; receive support in transferring tax data, invoices, social insurance, and credit history; are exempt from business registration fees and initial business registration content publication fees; apply simplified tax declaration and payment mechanisms, accounting and reporting systems; are provided with free or subsidized use of digital platforms, shared accounting software, and accounting services during the initial period; and receive priority in training, consulting, legal support, and compliance support mechanisms in the first year after conversion.

Tax officials guide business owners on using the tax application. Photo: PV

Notably, within one year of receiving their initial business registration certificate, small and medium-sized enterprises (SMEs) that convert from household businesses receive support, guidance, and warnings from the State regarding their level of legal compliance.

In cases where a business commits a first-time violation regarding taxes, accounting, social insurance, labor, business conditions, and other administrative obligations, and the violation does not constitute fraud, evasion of obligations, or serious consequences, it will be given priority in guidance on rectification and completion of procedures, and may be considered for exemption from administrative penalties in accordance with the law…

An important psychological stepping stone.

Commenting on the proposal, economist Dr. Nguyen Thi Cam Giang (Finance Department - Banking Academy) observed that this is a policy adjustment towards a more practical approach to compliance behavior in the small business sector. The initial period after the transition is a time when businesses must adapt to a much more complex system of legal obligations compared to the household business model.

"Allowing a period of time to correct mistakes, provided there is no serious fraud or violation, can significantly reduce initial compliance costs and psychological risk for businesses when deciding to switch," the expert said.

Furthermore, the draft law shifts towards a business-partnering approach instead of focusing on management and penalties, reflecting a significant change in governance thinking.

Given that the majority of small and medium-sized enterprises (SMEs) in Vietnam are small in scale and have weak management capabilities, this approach is necessary to foster the sustainable development of the business sector.

Some other experts argue that this is a necessary step in the context of Vietnam aiming to have 2 million businesses by 2030. In reality, many household businesses are still hesitant to convert to enterprises due to concerns about complex administrative procedures, increased compliance costs, and the risk of penalties before adapting to new regulations.

Therefore, allowing businesses to inherit tax data, invoices, social insurance, and credit history, while also being exempt from certain fees, and receiving support in using digital platforms, accounting services, and legal advice, will significantly reduce costs and risks in the initial operating phase.

The draft Law on Supporting Small and Medium-Sized Enterprises (amended), once passed, could provide a significant boost to the process of transforming household businesses into enterprises.

However, to create large-scale change, in addition to support policies, it is necessary to continue reforming administrative procedures, simplifying accounting and tax regulations, and ensuring a favorable business environment.

When compliance costs are reduced and the benefits of becoming a business entity become clearer, household businesses will have more incentive to transform and develop sustainably.

Source: https://hanoimoi.vn/de-xuat-mien-xu-phat-vi-pham-lan-dau-976554.html