The Ministry of Finance calculates the conversion to profit-on-unds tax collection for business households
According to the current Law on Personal Income Tax (PIT), the revenue not subject to PIT is 100 million VND/year or less, this rate is being applied uniformly to value added tax (VAT) of business households and individuals, and is 100 million VND/year for business households not subject to VAT.
On November 26, 2024, the National Assembly passed Law on VAT No. 48/2024/QH15, accordingly, adjusted this level, raising it from VND 100 million/year to VND 200 million/year and applying it from January 1, 2026.
To ensure consistency in the legal system, the Government has submitted to the National Assembly to adjust the annual non-taxable revenue of business individuals to 200 million VND/year.
Based on listening to the opinions of the delegates, the Ministry of Finance said that it will continue to study and adjust this level to be appropriate, ensuring relatively fairness for individuals with income from salaries and wages and plans to amend the Law on Value Added Tax to increase the revenue level not having to pay VAT to ensure similarity.
Currently, the Ministry of Finance plans to report to the Government on the plan to adjust the non-taxable revenue level of business individuals to ensure compliance with the actual situation, demonstrating the State's sharing with households and individuals with revenue of VND3 billion or less, towards the goal of social security.
In addition, the Ministry of Finance will continue to study the tax calculation method for households and individuals with revenue of 3 billion or less as follows:
To ensure consistency and accurate representation of the nature of income tax, the Ministry of Finance plans to report to the Government on the plan to collect tax on income (revenue - cost) for all individuals with revenue according to the new revenue threshold.
The plan is expected to add a provision: Individuals with a tax rate above the non-taxable threshold of up to VND 3 billion will be paid with the tax rate corresponding to the corporate income tax applied to enterprises with a revenue of VND 03 billion or more.
In case a business individual has a revenue of less than VND 3 billion, if the cost cannot be determined, they will continue to pay tax according to the current revenue ratio (with tax rates of 0.5%, 1%, 2% depending on the industry) and these households and individuals will be deducted according to the tax-free threshold before calculating tax, not including tax from the first total revenue as currently prescribed.
imposing tax on revenue is unreasonable
Previously, according to Decision 3389/QD-BTC, the Ministry divided business households into 3 groups for management. In particular, business households with a revenue of over VND3 billion will only apply tax on profit, with a tax rate of 17%. The remaining households recorded revenue from 200 million VND to less than 3 billion VND per year, and will pay on the revenue.
This calculation method is controversial, many business households and experts believe that calculating tax on revenue is unreasonable, especially in the context of high costs as at present.
Ms. Le Yen - Chairman of the Board of Directors, General Director of Hanoi Tax Consulting Company Limited (HanoiTax) said: "In essence, taxes need to be based on added value or based on profit to accurately reflect business reality. The current method of direct taxation on revenue is not suitable for the characteristics of small business households and leads to many shortcomings, especially in the context of increasing input costs".
Ms. Yen analyzed that revenue is a "rough" number, not including any expenses. "A household can have a revenue of 200 million VND, 500 million VND or 2 billion VND, but the actual profit after deducting land, electricity and water, operating costs, capital prices... is sometimes only a few million VND. If tax is directly included in revenue, most households will certainly not be able to bear it" - Ms. Yen said.
