Raising the tax threshold for business households to 500 million VND: Still low?

Many opinions say that the proposal to raise the taxable revenue threshold for business households from 200 million to 500 million VND/year is more reasonable but still lower than expected.

Mr. Nguyen Van Duoc, General Director of Trong Tin Accounting and Tax Consulting Company Limited, Ministry of Finance recently proposed to adjust taxes much more reasonably than before. Specifically, the Ministry of Finance proposed the taxable revenue (income, value added) for business households to be 500 million VND/year. This is also the threshold to be deducted before paying tax according to the rate on revenue. Thus, this figure is 5 times higher than the current level and 2.5 times higher than the previous proposal. And if considered in principle, the tax-exempt subjects will increase.

" In this adjustment, the Ministry of Finance proposed to tax at a level above 500 million VND, meaning that if the revenue is from 501 million, only 1 million will be taxed, not the entire 501 million VND. This approach is more reasonable and closely follows the nature of income tax, in line with the trend of reform, simplification of procedures and increased transparency in tax management ," Mr. Duoc assessed.

The Ministry of Finance proposed raising the tax threshold for business households to 500 million VND/year. (Illustration photo)

However, according to this expert, the tax exemption threshold of 500 million VND/year is still not fair compared to the tax rate of salaried employees and needs to be raised to 1 billion VND/year. In addition, it is necessary to note that tax policies for business households need to be placed in relation to enterprises. Accordingly, the Draft Decree guiding the Law on Corporate Income Tax is applying a lower tax rate on revenue than the rate that business households are currently subject to.

'' The tax rate for business households needs to be designed similarly to ensure equality and reduce tax pressure. If the tax rate is unreasonable, it will "erode" profits, making business households, which are already weaker due to small scale and limited cash flow, even more likely to encounter difficulties, '' Mr. Duoc stated his opinion.

Therefore, in addition to raising the tax threshold, Mr. Duoc proposed reducing the tax rate for business households in a direction compatible with the Law on Corporate Income Tax, to create legal consistency and support business households in the transition period.

Meanwhile, Dr. Chau Dinh Linh (Banking University of Ho Chi Minh City) said that the proposal to raise the tax threshold for business households to 500 million VND/year is a remarkable step forward. However, in the context of strong economic fluctuations, business activities are facing many big challenges, this level needs to be carefully calculated.

According to Mr. Linh, reality shows that many start-up businesses are losing money or even "evaporating" after about 3 years of business. " Even though businesses are losing money, they still have to pay taxes based on their revenue. For some business lines, with a revenue of 500 million/year after deducting expenses, the profit margin is only about 7-10%, meaning less than 4 million VND per month but still have to pay taxes ," Dr. Chau Dinh Linh raised the issue.

Mr. Chau Dinh Linh said that the profits of most small businesses, especially in the food, retail or service sectors, are often very low. A business with a revenue of 500 million VND/year may only earn a few tens of millions in profit after deducting expenses. Therefore, although the tax-free revenue threshold has increased and is "more comfortable", it still does not truly reflect the resilience of businesses in the face of increasing costs.

In addition, the threshold of 500 million VND/year does not take into account the differences between industries, regions and living standards. For example, business households in large urban areas have much higher costs than those in rural areas.

" I think it is necessary to consider raising the tax threshold for business households even higher or design a more flexible calculation method. At the same time, there should also be a mechanism to update the tax threshold according to annual economic fluctuations, so that business households are not stuck at a fixed level for too long ," Dr. Chau Dinh Linh suggested.

Giving a specific figure, Mr. Linh said that the taxable revenue threshold for business households should be raised to 750 million - 1 billion VND/year to create room for business households to expand operations, promote growth and strengthen their ability to recover after many challenges and difficulties.

About 2.3 million business households do not have to pay income tax.

Recently, speaking before the National Assembly , Deputy Minister of Finance Cao Anh Tuan said that the draft Law on Personal Income Tax (amended) raised the non-taxable revenue of business households and individuals from 200 million VND to 500 million VND/year; this threshold will also be regulated to be adjusted simultaneously with value added tax.

Adjusting the tax threshold ensures relative fairness between the income of business households and individuals and other types of income; between business households and individuals and private enterprises and small and medium enterprises; between business households and individuals that do not have to pay tax and business households and individuals that have to pay tax...

If this revenue level is applied, according to tax industry data, by October 2025, it is expected that about 2.3 million business households will not have to pay taxes (accounting for about 90% of the total 2.54 million business households). According to tax authorities' estimates, the total tax reduction (including personal income tax and value added tax) is about VND 11,800 billion.

On the other hand, the bill adds regulations for households and individuals doing business with revenue from 500 million VND/year to 3 billion VND/year to apply tax calculation based on income (revenue - expenses).

This ensures tax collection in accordance with the nature of income tax and applies a 15% tax rate similar to the corporate income tax rate prescribed in the Law on Corporate Income Tax for enterprises with revenue of less than VND 3 billion/year.

Accordingly, all households and individuals doing business must pay taxes based on actual income. If income is high, they pay more tax, if income is low, they pay less, and if there is no income, they do not have to pay tax.

Therefore, the level of non-taxable revenue will no longer have much impact on tax-paying households and individuals. In case the business households and individuals cannot determine the costs, they will have to pay tax based on the revenue rate.

" With the above adjustment, the bill has created a fair and equal legal corridor, suitable for the business conditions of households and individuals, thereby supporting individuals to feel secure in production and business to stabilize their lives and develop production and business, " Mr. Tuan commented.

Hieu Nguyen

Source: https://vtcnews.vn/nang-nguong-chiu-thue-cua-ho-kinh-doanh-len-500-trieu-dong-van-con-thap-ar990966.html