HÀ NỘI — The Ministry of Finance has proposed raising the annual revenue threshold for exemption of personal income tax for household businesses from VNĐ100 million (US$3,790) currently to VNĐ500 million.

The VNĐ500 million threshold would allow 90 per cent of household businesses to be exempted from paying tax and reduce the tax burden on them by an estimated sum of VNĐ11.8 trillion per year.

The proposal was outlined in a recent report to the Government on revision to the draft amended Law on Personal Income Tax.

Under the draft previously submitted to the National Assembly, the tax-free revenue threshold for household businesses is proposed at VNĐ200 million per year.

The ministry said that the VNĐ200 million revenue threshold for tax exemption is no longer appropriate and should be reviewed to ensure fairness with salaried taxpayers. 

Accordingly, the ministry proposed the revenue threshold for tax exemption to be increased to VNĐ500 million. This sum would also be deducted before calculating taxes based on revenue.

The ministry also proposed introducing an income-based taxation mechanism for household and individual businesses with revenues from VNĐ500 to VNĐ3 billion per year, with a tax rate of 15 per cent – equivalent to the corporate income tax rate applied to enterprises with revenues below VNĐ3 billion under the Law on Corporate Income Tax.

Only business households which cannot determine their expenses would pay taxes on revenue.  

The ministry also proposed amending the Law on Value Added Tax to raise the annual revenue threshold for exemption from VNĐ200 million to VNĐ500 million to ensure consistency with the upcoming Law on Personal Income Tax.

Official data showed that there are more than 2.54 million household businesses operating regularly in Việt Nam as of the end of October. — VNS