While these households are significant contributors to the state budget, optimizing tax collection and oversight for this large group is a persistent issue that requires a more effective and streamlined solution.
Business households have substantial income with minimal profit
By the end of December 2024, the nation had approximately 3.6 million business households and individual enterprises under tax management, with 2.2 million households operating in a stable manner. In the initial three months of 2025, the revenue generated from this group is projected to be VND8,695 billion, reflecting a 25.7 percent increase compared to the same period in 2024. For the year 2024, the total contribution is anticipated to reach around VND25,953 billion, highlighting the significant role of this sector in the revenue of the state budget.
Starting January 1, 2026, the lump-sum tax, which is the predominant form for individual business households, will be eliminated and replaced with a declaration system. The Ministry of Finance has indicated that the lump-sum tax is outdated, leading to inequality and budgetary losses for households with higher revenues.
Statistics reveal that, on average, a household that declares its income pays about seven times more in taxes than a lump-sum household (VND4.6 million per month compared to VND700,000 per month). Furthermore, the implementation of electronic invoices and a simplified accounting system will facilitate digital transformation, assist business households in becoming familiar with financial management, enhance transparency, and gradually evolve into enterprises.
According to Decree 70, effective June 1, 2025, business households with an annual revenue of VND1 billion will be mandated to issue electronic invoices through cash registers that are directly connected to tax authorities. This regulation is anticipated to foster advancements in management, although it may also increase compliance costs, resulting in initial financial strain.
Deputy Head Nguyen Van Duc of the Legal Department of the Vietnam Chamber of Commerce and Industry (VCCI) in Ho Chi Minh City said that the revenue threshold of VND1 billion a year as prescribed above is causing concern. Because some industries such as grocery stores and restaurants, although their revenue exceeds VND1 billion, their profits are very thin, taxing based on revenue can cause them to fall into a situation of 'large revenue, small profit' or losses. Therefore, VCCI recommends a transition period of at least one year and no penalties in the initial phase; raising the threshold for applying electronic invoices from VND1 billion to VND2 billion-VND3 billion yearly; allowing small retailers such as grocery stores and restaurants to use simple invoices, not requiring immediate connection to electronic invoices.
Careful consideration required to align interests
Vice Chairwoman Nguyen Van Chi of the Economic and Financial Committee of the National Assembly saidd that any alterations to tax policies affecting business households must be approached with caution, relying on precise quantitative data and determining which group should be prioritized for management resources: the smaller group with substantial revenues or the larger remaining group. She concurred with the elimination of the lump-sum tax but stressed the importance of aligning with practical realities and conducting thorough calculations that is what percentage of revenue does the current lump-sum tax represent, and if a transition to a declaration system occurs, will the tax amount owed increase or decrease? She also highlighted the necessity for financial assistance, as many companies currently offer solutions for collecting fees on each electronic invoice while certain business households that frequently issue invoices may face considerable expenses.
In parallel, Chairwoman Nguyen Thi Cuc of the Vietnam Tax Consulting Association suggested increasing the tax-free revenue threshold to VND500 million per year, as opposed to the VND200 million proposed in the draft Law on Tax Administration. The VND200 million threshold, which equates to over VND540,000 per day, is deemed insufficient for current living standards. Raising it to VND500 million would reduce the number of households requiring management without significantly affecting budget revenue. However, tax exemption for low-revenue business households may result in input goods of buyers not having invoices, affecting the rights of buyers. She proposed a mechanism that allows tax-free households to still purchase electronic invoices each time they arise when requested by customers.
A significant concern for business households is the risk of hefty fines for invoice violations. The current penalties can be substantial, with fines of millions of Vietnamese dong for a single violation. For instance, a draft decree to amend the Decree 125/2020 proposes fines ranging from VND1 million to VND80 million for failing to issue sales invoices, with the penalty amount depending on the number of invoices not issued.
In response, the Vietnam Chamber of Commerce and Industry (VCCI) has proposed a grace period, suggesting that business households should not face financial penalties for the first two years. Instead, they would be required to correct their errors and pay any outstanding taxes.
A VCCI survey from June 2025, which included 1,368 business households, highlighted the practical challenges they face. Some 73 percent of respondents reported a lack of technological knowledge and 49 percent found it difficult to change old management habits. VCCI argues that many initial errors are unintentional, stemming from a lack of familiarity with new procedures rather than a deliberate attempt at tax evasion.
While a more lenient penalty policy could help businesses comply with greater confidence and provide a stable, long-term source of revenue for the state, some experts worry that waiving penalties might reduce the seriousness and fairness of the system.
To address this, a more fundamental approach is being considered. Solutions include:
- Increasing training and consultation, with a greater role for tax agents, solution providers, and banks.
- Organizing pilot training and testing before full implementation.
- Reducing taxes in the initial period to encourage businesses to adopt the new declaration system and offset conversion costs.
