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The government’s draft law revising and amending several provisions of Vietnam’s Tax Laws proposes setting a corporate income tax (CIT) exemption threshold for small and micro enterprises. The threshold, to be determined by the government, is expected to apply from the 2026 tax period.
Under a draft decree amending Decree 320 guiding the Corporate Income Tax Law, the Ministry of Finance is proposing that small businesses be exempt from CIT on annual revenue up to 1 billion VND.
Experts say the policy is being introduced for the first time because there is currently no specific regulation defining the tax-exemption level for small and micro enterprises.
Le Yen, Chair of Hanoi Tax Consultancy (HanoiTax), said the authorities’ policy direction is reasonable. She noted that small businesses—especially newly established ones—face higher compliance costs than household businesses, including accounting, invoicing, labor-related obligations, and social insurance. This can reduce incentives to shift from household to corporate models.
HanoiTax’s chair proposed that the exemption threshold for small businesses be 20–30% higher than that for household businesses, suggesting a gap of about 1.5–2 billion VND to create a stronger policy signal.
Mac Quoc Anh, Vice Chairman and General Secretary of the Hanoi Association of Small and Medium Enterprises (Hanoisme), proposed an exemption threshold ranging from 1.5 to 2 billion VND per year. He described this as a reasonable level that provides a safe margin from the current 15% CIT rate applied to enterprises with annual revenues under 3 billion VND.
He also suggested a progressive “staircase” model using tiered tax rates by revenue bands. An example given was:
According to Mr. Anh, this design can reduce the burden on enterprises while encouraging them to grow.
Under existing rules, a business is classified as “small” when it meets criteria such as annual revenue of 50–100 billion VND, or capital of 20–50 billion VND and fewer than 100 employees. The “micro” group uses criteria including at most 10 employees, revenue of 3–10 billion VND, or capital under 3 billion VND.
Nguyen Hoang Son, Vice President of the Ho Chi Minh City Tax Consultancy and Agency Association and CEO of Viet Tin, said many people assume enterprises are always larger than households. In reality, many households report higher revenue despite having fewer employees.
Mr. Son proposed harmonizing the tax-exemption threshold for small businesses and households at 1.5–2 billion VND per year to create a level playing field and encourage households to transition to corporate form.
He argued that if different thresholds are applied—for example, households at 2 billion VND and small businesses at 3 billion VND—it could create inequality because operating costs and scale between the two models are similar.
Expanding on the 2 billion VND threshold, he said households and small businesses typically have profit margins of about 7–10%. With assumed annual revenue of 2 billion VND, profits would be about 200 million VND, or roughly 16.6 million VND per month, which he said corresponds to the personal deduction for a salaried worker.
There are currently about 900,000 enterprises nationwide, of which nearly 94% are small and micro. Under the amended CIT law, many policies already apply to this group, including two years of CIT exemption for companies converting from household businesses, and a 15–17% tax rate for small enterprises.
The government also said the resilience of the small business group is not high against external shocks. It cited recent increases in fuel and logistics costs as factors making the group more fragile, requiring timely support.
Beyond setting the exemption threshold, Le Yen said authorities should clarify criteria for classifying household businesses by scale and industry so that appropriate tax treatment, accounting, and management regimes can be applied without a one-size-fits-all approach.
Experts also emphasized fairness in reporting obligations and the need to encourage households to adopt electronic invoicing to record revenue fully and transparently. HanoiTax’s chair warned that if enterprises require full invoices while households are not obligated, the transaction chain could be broken, making cost recording difficult.
To ensure fairness, Nguyen Hoang Son suggested regulators consider industry and regional factors when setting revenue-based tax thresholds. Mac Quoc Anh added that authorities should clearly define how revenue is calculated as the basis for exemption to avoid different tax outcomes arising from different calculation methods.
He also called for anti-avoidance measures to prevent tax base erosion through splitting or shifting revenue among related companies. Exemptions, he said, should be linked to simplified filing, tax settlement procedures, and accounting standards.
While allowing the government to set thresholds for small and micro enterprises is described as a flexible approach, experts said criteria should be transparent and reviewed periodically for inflation and economic conditions to support long-term planning.
Today, the National Assembly is scheduled to discuss the draft law and is expected to pass it tomorrow, April 24.
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