Small business households are worried
The owner of a small grocery store in the suburban district of Binh Chanh estimates that the total amount of goods sold for the whole year is about VND600 million (US$22,990)-VND700 million. With this revenue, she is not eligible to use electronic invoices according to the Government's Decree 70/2025, but she is also being encouraged to apply electronic invoices.
For a long time, she followed a simple process of paying a fixed tax rate. She would complete a standard form, submit it to the tax office, and the local tax advisory council would review it and determine the annual amount owed—done and dusted.
She kept track of inventory and debts in a notebook, relying on experience rather than any formal standards, and didn’t maintain a complete record of specific revenues and expenses. If she were to switch to the tax declaration system, she had no choice but to hire someone with accounting and tax expertise. She admitted that she wouldn’t know where to begin and feared making mistakes that could lead to penalties.
According to the Tax Department under the Ministry of Finance, switching to the tax declaration method offers several advantages for business households. The Department said that the tax declaration method enhances professionalism, builds customer trust, reduces the risk of tax penalties, improves revenue and expense management, facilitates access to loans and investment opportunities, and supplies accurate data for policymaking to support the private sector.
However, these benefits often don’t resonate with small business owners like the above-mentioned owner. She says that she runs a small business just to make a living, and the profit is modest.
Deputy Director Mai Son of the Tax Department under the Ministry of Finance highlighted that phasing out the lump-sum tax system is crucial for reforming tax administration and fostering private sector growth. This aligns with international practices and the experiences of developed nations, promoting a transparent, cohesive, and sustainable economy. The shift also encourages business households to transition into enterprises.
He added that previously, many households which are accustomed to lump-sum taxation neglected proper accounting and documentation. With the new declaration-based method, they will adapt to systematic financial management, facilitating their transformation into enterprises and enabling access to more effective support policies.
Supporting business households to transform
The phase-out of lump-sum taxation is ushering in a sweeping tax reform. Its implications are substantial, as by the end of 2024, 3.6 million business households in the country were under tax administration.
With limited time left in 2025 to prepare for this transition, the Tax Department has been rolling out a series of coordinated measures. Most notably, it is developing an automated electronic tax declaration system that calculates tax obligations based on invoice data. This means business households will only need to review and confirm, rather than manually input every item.
At the same time, the tax sector is pushing forward the use of electronic invoices linked to cash registers. Local tax offices are actively reminding and assisting business households in setting up the necessary equipment and software—and even offering financial support where needed. The Ministry of Finance has also directed local governments to take a proactive role in ensuring business owners feel confident and supported during the transition.
A lecturer at Ho Chi Minh City University of Law noted that the lump-sum tax system has long had weaknesses, particularly its failure to reflect actual business income. The recent implementation of electronic invoicing has exposed significant gaps. For instance, in many cases, actual revenues are far higher than previously declared. Some households earning billions of Vietnamese dong per year were paying the same low tax rates as those with just a few hundred million in annual revenue.
However, the abolition of lump-sum tax cannot be done all at once, but must be done very carefully, along with systematic support, because this is a vulnerable economic sector.
The lecturer recommended a comprehensive support package to facilitate the transition for business households, including personal income tax and VAT exemptions or reductions for the first two years, provision of user-friendly, free accounting software, and detailed guidance to ensure compliance. This proposal aligns with recommendations from numerous economic experts.
Director Tran Quang Thang of the Ho Chi Minh City Institute of Economics and Management supports the shift from lump-sum taxation to a declaration-based system, emphasizing its appropriateness. However, he recommends prioritizing households with significant revenue for initial implementation. Small businesses, facing challenges with tax reporting and associated costs such as hiring accountants, installing cash registers, and establishing data connectivity require tailored policies. To ease this transition, the Government should provide support through subsidized cash registers, electronic invoice services, and comprehensive tax training programs.
While implementing Decree 70, data from the Ho Chi Minh City Tax Department Area II shows that 46,290 taxpayers including 31,568 enterprises and 14,722 business households covered by the provisions of Decree 70 have successfully registered to use e-invoices generated from cash registers. The HCMC tax authority will provide hotlines at tax departments and tax teams to assist and resolve issues for taxpayers.
