These household businesses mainly operate in retail, food services, small-scale transportation, and similar sectors, with limited scale and weak management capabilities.

These households will need internet access and devices like computers, smartphones, or iPads to register to use electronic invoices generated from the tax authority and have them approved.

Because these millions of households have different circumstances and operate in regions with varying levels of development, experts have warned that a one-size-fits-all policy will not suit everyone.

Revenue may not cover costs

Let's consider a business household as an example: assuming a profit margin of 15 percent, their actual income is only VND10–15 million/month, which covers living expenses, operational costs, and asset depreciation.

Under current regulations, the combined VAT and personal income tax rate for household businesses is 1.5 percent of revenue. This means each household  pays VND1.5 million in taxes monthly on average, equivalent to 10–15 percent of their profit.

The issue lies not only in the tax rate but also in the collection mechanism and compliance costs. With the adoption of electronic tax technology and a deduction-based declaration method similar to that applied to enterprises, these 2 million business households will need to invest in technological devices and electronic invoicing software, and learn how to handle periodic tax declarations and payments. 

They may even need to hire accountants. This is a significant burden, especially for those lacking digital skills or access to accounting support services.

For tax authorities, the costs of organizing, monitoring, and supporting declarations for these 2 million households will also be substantial. When combining compliance costs and collection costs—both from households and the state—the total may be nearly equivalent to, or even exceed, the total profit generated by this small-scale household business sector. This raises a major question about the policy’s efficiency.

Expanding electronic taxation is necessary to ensure fairness and modernize the tax system. However, the policy needs careful design, a reasonable roadmap with risk and capacity classification for different household groups, and a thorough cost-benefit analysis of tax collection versus actual revenue.

Otherwise, the policy could lead to business closures or “underground” economic activities, which are not the goals Vietnam strives for.

Nguyen Quoc Viet from the University of Economics (Vietnam National University, Hanoi) believes that tax authorities and local governments need flexibility in implementation. A six-month to one-year guidance period should be provided to help household businesses adapt to the new policy, avoiding rigid enforcement and especially overly strict penalties.

How to collect tax accurately and sufficiently?

Household businesses in Vietnam are highly diverse, ranging from street vendors and small eatery owners to manufacturing or wholesale businesses with annual revenues reaching one billion dong. A uniform tax policy, rigidly applied, will either be too lenient for larger businesses or overly burdensome for smaller ones.

The first thing that needs to be done is to clarify the legal status of household businesses. The legal system needs to distinguish between individual businesses and legal entities. 

Household businesses should be referred to as sole proprietorships or single-owner enterprises and treated as individual businesses in tax and other regulations. Tax regulations for these businesses, preferably called sole proprietorships, should follow the personal income tax framework.

Dr Le Duy Binh suggests classifying household businesses into three main groups for taxation:

First, business households with annual revenue above VND1 billion: Approximately 37,000 households fall into this group. They should be encouraged, not forced, to shift into enterprise models, such as single-member LLCs, multi-member LLCs, or joint-stock companies.

This would require them to comply with accounting standards, declare, and pay corporate income tax like other enterprises. Such a transition would allow input cost deductions, transparent transactions, access to formal credit, and state support policies. More importantly, it offers a chance to formalize part of the economy that is not fully managed.

Second, business households with annual revenue from VND100 million to under VND1 billion: These are small-scale sole proprietorships that should be subject to personal income tax (PIT) instead of revenue-based taxation. 

Third, micro-businesses with annual revenue below VND100 million: This group should be exempt from taxes but required to report revenue periodically—e.g., once a year—via a simple form. 

Tu Giang