Raising the tax exemption threshold – Opening the way for sustainable household economy development

Moving away from short-term revenue collection thinking to nurture long-term revenue sources

At the First Session of the XVI National Assembly, the passage of the Law Amending and Supplementing a Number of Articles of the Tax Laws attracted special attention from voters, the business community, and millions of household businesses across the country. One of the most notable contents is the change in tax policy for business households and individuals, in the direction of reducing the burden of financial obligations and expanding room for development in the people's livelihood economy sector.

Accordingly, the National Assembly agreed to remove the fixed provision on the non-taxable revenue threshold of 500 million VND per year and assign the Government to determine an appropriate revenue threshold in line with practical conditions in each period. The option currently under consideration by the Government is to raise the tax exemption threshold to 1 billion VND per year for business households and individual businesspersons.

This marks an important shift in policy thinking. Whereas the focus was previously placed primarily on revenue management and preventing revenue loss, tax policy has now strongly shifted toward supporting development, nurturing sustainable revenue sources, and encouraging small-scale businesses to move into the formal sector.

At the plenary session, many National Assembly deputies stated that the threshold of 500 million VND per year is no longer appropriate given current cost levels and price fluctuations. Maintaining such a low threshold places disproportionate tax pressure on small business households, traditional market traders, and family-based producers relative to their actual financial capacity.

Raising the threshold to 1 billion VND is not a 'loosening of management,' but rather a necessary adjustment to bring tax policy closer to reality, ensuring the principles of fairness, reasonableness, and humanity in state governance.

Bringing business households into a transparent governance framework

Alongside raising the tax exemption threshold, this policy also carries deeper reform significance by gradually abolishing the presumptive tax regime—a model that has existed for many years but has revealed numerous shortcomings in terms of transparency and fairness.

The presumptive tax once facilitated simple management for small household businesses, but it also led to subjective imposition, difficulties in accurately reflecting actual revenue, and created room for budget revenue loss as well as potential misconduct in determining tax obligations.

Following the new orientation, business household will gradually shift to a declaration mechanism based on actual revenue, supported by data from tax authorities and the application of electronic invoices on a roadmap starting from January 1, 2026. This is an important foundation for building a fair, transparent, and modern business environment.

Tax management using digital data not only enables the State to better control budget revenues but also protects taxpayers themselves from risks arising from previously non-transparent mechanisms for determining tax obligations.

When business households are supported in making clear declarations and are taxed on a substantive basis rather than on subjective estimations, trust in policy will also be strengthened. This is a prerequisite for encouraging people to confidently expand their scale of operations and transition into enterprises when conditions are met.

Tax policy as a driver of development, not a barrier to livelihoods

Family business households have long been the 'micro-capillaries' of the Vietnamese economy. From small stalls, handicraft production facilities, and everyday service providers to traditional local business models, this sector is creating jobs for millions of workers and maintaining livelihood stability for many families.

Therefore, tax policy toward business households cannot be approached solely from the perspective of budget collection, but must be recognized as a tool for socio-economic development.

By raising the tax exemption threshold to 1 billion VND/year, the State is sending a clear message that institutional reform must begin with reducing unnecessary burdens on the people. Taxation must serve as a tool to promote production, encourage transparency, and nurture growth — not become a barrier that discourages people from entering the formal business sector.

According to estimates, approximately 2.56 million business households and individuals with revenue below this threshold will benefit directly. While the budget may see a short-term reduction in revenue collection, the long-term benefit is the expansion of the formal economy, improved manageability, and the creation of a more sustainable revenue base in the future.

A strong national finance does not come only from how much is collected, but also from how many healthy, self-disciplined, and sustainably developing business entities are created.

This tax reform is therefore not merely an amendment of the law, but a reform of governance thinking. And in that journey, 'untying the constraints' on business households is precisely the right step to create new momentum for national growth in this new phase of development.