Finance proposes removing the 500 million dong tax-exempt revenue threshold for households and individuals

Background: In a draft law amending several provisions of the Personal Income Tax Law, the Corporate Income Tax Law and the Value-Added Tax Law, the Ministry of Finance proposes not to fix a hard tax-exemption threshold in law. Instead, the Government would set the specific threshold. This means the current 500 million dong threshold for non-taxable income would be removed, and the Government would determine an appropriate threshold. According to the Finance Ministry, in 2026 input costs are rising, purchasing power is weakening, and operations of small and medium-sized businesses and individual traders face many difficulties. Adjusting the threshold for non-taxable revenue is seen as necessary to continue supporting small and medium-sized households and individuals, especially in sectors with low profit margins that are heavily affected by cost fluctuations. In the memo accompanying the draft, the Finance Ministry also assessed the impact. If the Government issues a decree raising the annual non-taxable income and VAT-exemption thresholds for households and individuals above 500 million dong, and also adds a threshold for small enterprises, the state budget could see short-term revenue reductions. However, in the long run, as firms and individuals grow, they would contribute to a more stable and sustainable budget. The aim of exempting corporate income tax and increasing non-taxable revenue thresholds while exempting VAT is to support and reduce tax burdens for businesses and individuals, giving them more resources to produce, expand scale, and raise productivity, thereby promoting economic growth. For residents, in the context of inflation and higher input costs, raising the revenue threshold would help individuals retain a larger portion of income to reinvest, supporting the development of small-scale households, especially in the early stages of establishment. To minimize impact on the state budget balance, the memo states that the Government will continue directing the Finance Ministry and related agencies to strengthen revenue administration, timely and effectively implement measures to combat revenue loss, transfer pricing, and tax evasion. In operation, the Government will require both the central budget and local budgets to continue reviewing and trimming expenditures that are not strictly necessary (including development investment and ordinary spending) to ensure budget balance. The Finance Ministry proposes presenting this draft law to the National Assembly at the first session (the second part, from April 20 to 23). If approved, the law would apply to the 2026 tax year.