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Vietnam’s government has issued Decree No. 141, increasing the tax exemption threshold for individuals and households engaged in business to 1 billion dong per year. Under the new rule, individuals or households with annual turnover below 1 billion dong will not be required to pay personal income tax or value added tax.
Tax authorities’ data indicate that about 2.56 million households and individual businesses have annual turnover under 1 billion dong. The adjustment is broad in coverage, particularly because micro businesses remain a large part of the economy.
While raising the exemption threshold can reduce tax burdens for small operators, it also requires tighter oversight. Le Thi Duyen Hai, vice chair of the Vietnam Tax Advisory Association, said on state television that tax authorities should strengthen audits and reminders to limit misreporting.
The main risk is underreporting revenues to remain below the threshold, especially since the exemption level is raised from 500 million dong to 1 billion dong. There is also concern that if the exemption applies to both personal income tax and VAT, some taxpayers could attempt to evade the rules by splitting business households, separating cash flows, separating sales points, or registering under multiple names.
The expert argued for practical rules to prevent revenue splitting that is only formal. She also supported a periodic reporting system to help ensure the policy reaches the intended beneficiaries and reduces revenue losses.
In practice, the concern is that a business household with turnover around 3 billion dong per year could split into three households of about 1 billion dong each to avoid tax if monitoring is insufficient. The question, she said, is how to determine whether a business household truly operates independently.
According to Le Thi Duyen Hai, a business household is considered independent only if it has separate capital and assets, distinct operations, and clear legal responsibility. If shared assets and capital are used but the business is divided into multiple households, the independence criteria are not met and this could indicate a violation.
Tax authorities can identify potential cases through data management, including population registry information, business registration data, business locations, and other relevant sources. If signs of illegal splitting to conceal or disperse revenue are found, authorities can retroactively collect taxes and impose penalties.
At the same time, the expert noted that some splits may be legitimate. She said policies should review the legal framework for business households—especially the independence criteria—to clearly distinguish valid cases from violations.
Regarding policy development, the draft decree guiding the law includes provisions addressing unlawful splitting. It states that factors such as sources of capital, business location, revenue, and expenses will be considered to determine whether a business household is truly independent, reducing opportunities to circumvent the rules.
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