Tax-free revenue threshold of 500 million VND/year: Who is happy and who is worried?

VTV.vn - The tax-free revenue threshold of 500 million helps 90% of business households breathe a sigh of relief, but also raises concerns about unfairness between industries and income groups.

With a threshold of 500 million VND, business households only start paying taxes when their average revenue is about 1.36 million VND per day.

Business households breathe easier

Official Letter 18491/BTC-CST of the Ministry of Finance sent to the Prime Minister The draft Law on Personal Income Tax (amended) has introduced a landmark change: raising the revenue level not subject to personal income tax and value added tax of business households and individuals from 200 million to 500 million VND per year. At the same time, the 500 million VND level is also the revenue deducted before calculating tax at the rate on revenue. Compared to the current regulations, the new threshold is 5 times higher, reflecting a strong adjustment in tax management thinking towards supporting the small business sector.

The new regulation, if applied, with a threshold of 500 million VND, business households will only start paying taxes when their average revenue is about 1.36 million VND per day.

According to the Ministry of Finance, by October 2025, the country will have more than 2.54 million regular business households. If the threshold of VND500 million is applied, it is expected that about 2.3 million households will not have to pay taxes, accounting for nearly 90% of the total number of households. The total tax reduction, including personal income tax and value added tax, is estimated at about VND11,800 billion. A large number of small-scale business households are therefore "untied" from tax obligations, while the management agency also significantly reduces the burden of monitoring and collecting very small amounts of revenue.

Along with the revenue threshold, the tax calculation method is also adjusted to be closer to the nature. For households and individuals doing business with revenue of over 500 million to 3 billion VND per year, the draft stipulates that tax is calculated based on income, that is, revenue minus expenses, applying a tax rate of 15%, similar to the corporate income tax rate for businesses with revenue under 3 billion VND. In cases where expenses cannot be determined, tax will be applied at a rate on revenue for the part exceeding 500 million VND. For example, with a threshold of 500 million VND, business households only start to have to pay tax when the average revenue is about 1.36 million VND per day.

According to Mr. Nguyen Hoang Son, Vice President of the Ho Chi Minh City Tax Consultants and Agents Association, with the threshold of 500 million VND, business households only have to start paying taxes when the average revenue is about 1.36 million VND per day. Compared to the previous level of 100 million VND, this is a huge step forward, helping small traders significantly reduce pressure. In the field of real estate leasing, the draft also simplifies procedures by only applying tax calculation based on the rate of revenue, without having to determine costs, and without annual settlement.

Overall, the 500 million VND threshold brings clear benefits to the majority of small businesses, especially in traditional markets, rural and mountainous areas. However, when looking at specific industries, that joy is not evenly distributed.

Revenue is not enough to cover expenses

From a practical perspective, many experts and business people believe that the threshold of 500 million VND is a "step forward" but not really optimal. Mr. Huynh Van Thanh, owner of a Hu Tieu restaurant in Tan Thuan Ward, Ho Chi Minh City, has an annual revenue of about 700 to 800 million VND, but a profit of only 70-80 million VND/year due to low profit margin and rapidly increasing input costs. The 500 million level makes it "easier to breathe", but does not reflect the reality of escalating costs in the small retail industry.

Many business households said that although annual revenue is about 700 to 800 million VND, profit is only 70-80 million/year due to low profit margin and rapidly increasing input costs.

Specifically, Mr. Thanh calculated that at peak sales, his noodle shop sells about 90 bowls/day (VND 30,000/bowl), with monthly revenue reaching VND 75 million. However, total costs are up to VND 60 to 65 million/month, accounting for 90-94% of revenue, with low monthly profits due to input material costs skyrocketing 10-15% compared to the same period last year.

Mr. Thanh's family of 4 spends about 12-13 million (food 5 million, tuition 3-4 million, other 4 million, rent 10 million/month, expenses for 2 maids 18 million (salary 9 million/person). "If we calculate all expenses, even though my family's annual revenue is nearly 800 million, but after working all year, we still cannot save for the future, mainly taking advantage of the work to make ends meet," Mr. Thanh said.

Experts also admit that in many areas in large cities, this level is still not optimal compared to the tax obligations of salaried workers. Many business households only achieve a profit margin of 7-10%, meaning with 500 million VND in revenue, the net profit is only about 50 million VND per year, more than 4 million VND per month, while salaried workers only start paying taxes when their income is over 15.5 million VND per month. Therefore, many opinions suggest that the State should consider raising this threshold to 1 billion VND to be more reasonable.

From the perspective of supporting startups, Mr. Le Van Tuan, Director of Keytas Tax Accounting Company Limited, cited statistics saying that up to 90-95% of startups suffer losses and withdraw after 3 years. Meanwhile, households that pay taxes based on revenue still have to pay full tax obligations even when they suffer losses, which raises questions about the fairness of the policy in the early stages of business. Compared with Thailand, Malaysia or China, Mr. Tuan said that the tax-free revenue level in Vietnam should be considered from 750 million to 1 billion VND to be more suitable with the regional development correlation.

In reality, it is impossible to set a common revenue "mold" for all industries, which have very different cost structures and risks. A grocery store, a technical store, a service startup or an individual renting a house all face different business conditions. The threshold of 500 million VND may be a "lifebuoy" for this group, but a "pressure line" for another group.

On the other hand, the management agency believes that when switching to the tax calculation mechanism based on actual income, the revenue threshold no longer has too much impact. However, the problem is that many business households still do not have enough conditions, skills and motivation to fully account for costs, making the 500 million VND boundary still have a very real meaning in business life.

According to many experts, the ultimate goal of tax policy is not only to collect budget revenue, but also to nurture long-term revenue sources. The threshold of 500 million VND is an important step in that direction, but for the policy to be truly fair and consensual, re-evaluation by each industry and each stage of development is something that cannot be ignored.

500 MILLION THRESHOLD – NOTEWORTHY NUMBERS

• Tax-free revenue threshold: VND 500 million/year
• 5 times higher than the current rate applied under the Personal Income Tax Law
• Number of regular business households: more than 2.54 million households
• Number of households expected not to pay tax: about 2.3 million households
• Rate of tax-exempt households: about 90% of total business households
• Estimated tax reduction (PIT + VAT): about 11,800 billion VND/year

• Revenue from 500 million to 3 billion VND/year:
• - Calculate tax based on income (revenue - expenses)
• - Tax rate: 15% , similar to businesses with revenue under 3 billion VND/year

Source: https://vtv.vn/nguong-doanh-thu-mien-thue-500-trieu-dong-nam-ai-mung-ai-lo-10025120308282273.htm