Calculation to make the tax exemption threshold for business households suitable to reality

(PLVN) - The Ministry of Finance has proposed a new change in the way of calculating income tax for business households. This plan has changed significantly compared to the old plan, but is it suitable for the small business situation of business households in Vietnam?

According to the latest information, the Ministry of Finance has made a new proposal on tax collection for business households. Accordingly, the Ministry proposes to collect tax on business individuals with annual revenue above the non-taxable threshold of up to 3 billion VND, then pay tax at the tax rate corresponding to the corporate income tax applicable to businesses with revenue under 3 billion VND. In this case, the tax rate is calculated on profit (revenue - expenses).

In case of business individuals with revenue under 3 billion VND, if the cost cannot be determined, they will continue to pay tax at the current rate on revenue (with tax rates of 0.5%, 1%, 2% depending on the industry). These households and individuals will be deducted according to the non-taxable threshold before calculating tax, not calculating tax from the first revenue as current regulations.

In addition, according to the Ministry of Finance, the current Personal Income Tax Law stipulates that the revenue not subject to personal income tax is 100 million VND/year or less, applied uniformly with value added tax. However, the National Assembly has passed the Value Added Tax Law No. 48/2024/QH15, raising the tax from 100 million VND/year to 200 million VND/year and applying from January 1, 2026. To ensure consistency and uniformity, the Government has submitted to the National Assembly to raise the tax-free annual revenue of business individuals to 200 million VND/year.

This means that if an individual business has a revenue of 1.5 billion VND/year, they will be deducted 200 million VND/year before calculating income tax. However, the current taxable revenue level (from 100 million VND/year according to the old regulations and proposed to increase to 200 million VND/year) is still considered by most tax experts and representatives of tax companies to be too low compared to the actual inflation.

Specifically, experts say that a revenue of 200 million VND/year is equivalent to only about 17 million VND/month, this level includes the capital that the business person spends to buy goods, which means the profit is very low, only about 15% of 17 million VND. Ms. Nguyen Thi Cuc - President of the Vietnam Tax Consulting Association affirmed that the tax-free revenue of 200 million VND/year for business households is too low and does not reflect the actual income of business households.

Many experts suggest raising the tax threshold for business households. (Illustration photo).

Ms. Cuc analyzed that if the assumed profit is 16% of revenue, with a revenue of 200 million VND, the business household will earn 32 million VND/year, equivalent to about 2.6 million VND/month - a very low income compared to the current cost of living. Meanwhile, the family deduction for salaried employees has been raised to 15.5 million VND/month and 6.2 million VND/month for each dependent from the 2026 tax period.

Even taking the taxable revenue level up to 500 million/year, many experts also think it is not appropriate. Ms. Nguyen Thi Cuc explained, with the taxable level of 500 million VND, the monthly revenue is 41.6 million VND. If this 41.6 million VND is revenue, then multiplying by the highest profit rate of 10%, they will only earn less than 4.2 million VND/month.

Some experts also believe that if the ideal profit margin is calculated at 15%, a business with a revenue of 500 million VND/year will only receive a profit of about 6 million VND/month. And this is also considered a low profit margin (or also considered as taxable income of the business) to be able to spend for individuals and families at current prices, not to mention paying taxes.  

According to Ms. Cuc, to ensure fairness among tax payers, the tax exemption threshold for business households also needs to be adjusted accordingly. She gave an example, even if the tax-free revenue is increased to 1 billion VND/year, with a profit of 16%, the actual income of a business household is only about 13 million VND/month, still lower than the family deduction threshold that will be applied to salaried employees. Therefore, she believes that business households in this case should still be exempt from tax.

Many tax consulting company representatives also proposed to raise the taxable revenue to 1 billion VND/year, to ensure that business individuals have enough income to spend (similar to salaried employees who are entitled to family deductions), especially suitable for small businesses such as grocery stores, breakfast restaurants, etc.  

Chairwoman of the Vietnam Tax Consulting Association Nguyen Thi Cuc emphasized that when the tax exemption threshold is adjusted more reasonably, business households will tend to comply better and fully declare their actual revenue. This will not only reduce pressure on small businesses but also help tax authorities to manage and collect taxes more transparently and effectively.

Source: https://baophapluat.vn/tinh-toan-de-nguong-mien-thue-doi-voi-ho-kinh-doanh-phu-hop-thuc-te.html