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The Ministry of Finance (MOF) has recently issued Decision 3389/QD-BTC, approving the Scheme on transforming the tax administration model and method for business households upon abolition of the presumptive tax collection method. This is considered a significant step toward the comprehensive modernization of tax administration for business households, aiming to create a fair business environment.
Under the scheme, from January 1 next year, business households will carry out self-declaration and self-payment of taxes. The scheme classifies business households into three groups and highlights new provisions on tax calculation methods for them.
The first group includes business households each with an annual revenue below VND 200 million. These households will be exempt from both value-added tax (VAT) and personal income tax (PIT). They must still make periodical tax declarations though not having to maintain accounting records. Declarations may be submitted twice a year, at the beginning and middle or end of the year, or when appropriate.
The second group embraces business households with an annual revenue of between VND 200 million and under VND 3 billion. They will continue to apply the method of direct calculation of tax on revenue. The tax rate depends on business line, e.g., 1 percent for goods distribution and supply, 5 percent for services and construction without material supply, 3 percent for manufacturing, transportation, services involving goods, or construction with material supply, or 2 percent for other business activities.
Business households in this group must make tax declarations every quarter, and maintain simple accounting books using law-specified forms.
Meanwhile, those earning an annual revenue above VND 1 billion in retail or services provided directly to consumers must issue e-invoices from cash registers connected to tax agencies.
If a household’s annual revenue exceeds VND 3 billion for two consecutive years, the household will be moved to the third group from the third year.
The third group covers business households with an annual revenue exceeding VND 3 billion. These households must pay VAT by the credit method, in which payable VAT amount equals the output VAT amount minus the input VAT amount. Their PIT will be calculated at 17 percent of the total profit, which is defined as revenue minus reasonable expenses.
The frequency of tax declaration depends on revenue of business households, which is monthly for those earning over VND 50 billion per year or quarterly for those gaining below that threshold. They are also required to open separate bank accounts for business transactions, and issue e-invoices with tax agency codes or invoices generated from cash registers.
The scheme sets the goal that all business households will have access to information and receive assistance from tax agencies regarding the transition from presumptive tax payment to declaration-based taxation.
It also targets a reduction of at least 30 percent of the time of processing administrative procedures and 30 percent of tax compliance costs, with further decreases in subsequent years.
Another salient point of the scheme is the improvement of the tax policies and institutions to meet new management requirements. Accordingly, the Ministry will propose amendments to the Law on Tax Administration and guiding texts to abolish the presumptive tax collection for business households, in tandem with reviewing and revising relevant decrees and circulars.
At the same time, PIT and VAT policies will be adjusted to ensure rational non-taxable revenue threshold and re-determine tax calculation methods for business households with a size equivalent to small- or medium-sized enterprises.
Especially, the MOF will study the application of income-based PIT calculation (revenue minus expense) for households that apply proper accounting systems. This aims to encourage transparency in cost reporting, support investment expansion, and ensure fairness between business households and enterprises.
VNA/VLLF
