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Under current rules, personal income tax (PIT) is calculated only on the portion of revenue that exceeds a non-taxable threshold, while value-added tax (VAT) is calculated on the entire revenue. Experts say the two calculation methods should be coordinated to ensure fairness for household businesses and individual enterprises.
From 2026, after removing the 500 million dong threshold, households and individual businesses will pay only two types of taxes: VAT and PIT.
At present, the 500 million dong threshold is exempt for both PIT and VAT. However, once revenue exceeds the threshold, the calculation approaches diverge between the two taxes.
The article cites a scenario where revenue reaches 510 million dong. In that case, a household business would pay PIT only on the portion exceeding 10 million dong, while VAT would be calculated on the entire 510 million dong.
Parliament has decided to remove the 500 million dong revenue threshold for household businesses. The government is tasked with adjusting the threshold, with the non-taxable revenue potentially being raised to 1 billion dong per year.
Despite the planned adjustment, many household businesses are concerned that even a small increase in revenue could change the tax payable due to the different ways PIT and VAT are calculated.
In the program “Raising the non-taxable revenue threshold: How to ensure fairness and avoid revenue loss?” on VTV, Mr. Truong Huynh Thang, Deputy Director of the Policy Review Department of Tax Fees and Fees (Ministry of Finance), explained that the difference arises from the nature of each tax.
Mr. Thang said VAT is an indirect tax embedded in the price of goods, meaning the ultimate consumer bears the tax. Households and businesses act as intermediaries collecting VAT.
Therefore, he argued that applying VAT only to the portion above the threshold would not align with VAT’s nature and could disrupt subsequent steps in the transaction chain.
By contrast, PIT is a direct tax charged on the actual income received by the taxpayer. Mr. Thang said applying the threshold and taxing only the portion above is appropriate and reflects a policy to support household businesses and small enterprises.
From the perspective of Ms. Le Thi Duyên Hai, Vice Chair of the Vietnam Tax Advisory Association, the policy should consider aligning VAT calculation with PIT because of a significant discrepancy around the threshold.
Ms. Hai noted that a household business with revenue of 999 million dong would be exempt from both taxes. However, if revenue reaches about 1.05 billion dong, the household could be liable for VAT on the entire revenue, amounting to roughly 10–50 million dong depending on the sector and rate.
She said this amount is not small for small-scale households and creates a perception that “exceeding the threshold means losing benefits.” As a result, many households may keep revenue under 1 billion dong or split their business activities to reduce tax obligations, which she said carries a risk of evasion.
Ms. Hai argued that, in addition to respecting VAT’s nature, policy should consider the legitimate interests of household businesses. She said the goal should be to ensure compliance while limiting incentives to split or evade taxes.
According to Ms. Hai, this issue should continue to be studied to find a more balanced solution between tax principles and business realities.
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