Personal income tax reform: Easing difficulties for household businesses

The National Assembly has recently passed the amended Law on Personal Income Tax, along with a number of adjustments to the Law on Tax Administration. Among the most notable changes drawing strong attention from the household business community is the increase in the annual revenue threshold eligible for tax exemption from VND 200 million to VND 500 million.

This move is seen as a major reform aimed at reducing procedural burdens and compliance costs for the individual and household economic sector, while also aligning with the context of business recovery and adjustments in the general price level.

Under the new regulations, households and individuals engaged in business activities with total annual revenue not exceeding VND 500 million will be exempt from personal income tax as well as value-added tax. Raising the non-taxable revenue threshold is expected to give small household businesses more room to accumulate capital, expand operations, and gradually formalize their business models.

For households and individuals with annual revenue ranging from over VND 500 million to VND 3 billion, the law allows taxpayers to choose the most suitable tax calculation method. Two main options are available. The first is taxation based on actual income, calculated as revenue minus reasonable expenses, with the taxable income subject to a 15% tax rate. The second method applies a presumptive tax based on revenue, in which only the portion of revenue exceeding VND 500 million is included in the tax base. This flexibility is intended to ensure greater fairness and better reflect the actual scale and capacity of each business.

The amended law also maintains the current family deduction levels: VND 15.5 million per month for the taxpayer and VND 6.2 million per month for each dependent. This helps better protect low-income earners or those with significant family responsibilities, while ensuring policy stability during the transition period.

Overall, the adjustment of the taxable revenue threshold reflects a broader trend toward a modern, fair, and market-oriented tax reform. The new policy not only facilitates the development of household businesses but also contributes to sustainably expanding the tax base, nurturing long-term revenue sources for the state budget in the future.

Duy Duc