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Businesses operated within households will be reclassified into four distinct groups following the abolition of presumptive tax.

Tax official Mai Sơn, deputy director of the Department of Taxation, declared the latest updates at the routine MoF press meeting for Q2, held on a Wednesday.

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Businesses operated within households will be reclassified into four distinct categories following...
Businesses operated within households will be reclassified into four distinct categories following the presumptive tax abolishment.

Businesses operated within households will be reclassified into four distinct groups following the abolition of presumptive tax.

In a groundbreaking move, the Vietnamese government has announced a new classification system for household businesses based on their annual revenue, as part of the implementation of the Politburo's Resolution 68 on private sector development. This change aims to promote financial transparency and ensure fairness among various economic sectors (The Saigon Times, 2022).

The new classification system divides household businesses into four groups:

1. **Group 1:** Businesses with annual revenues below **VND 200 million** (approximately USD 7,649). 2. **Group 2:** Businesses with annual revenues between **VND 200 million** and under **VND 1 billion**. 3. **Group 3:** Businesses in agriculture, industry, and construction with revenues from **VND 1-3 billion** per year, and in commerce and services with revenues from **VND 1-10 billion** per year. 4. **Group 4:** Businesses with revenue over **VND 10 billion** per year.

Groups 1 and 2 are encouraged to adopt e-invoicing, with Group 2 following a phased roadmap for e-invoice usage starting from 2027–2028. Both groups must maintain simple accounting records using software templates provided by the Ministry of Finance. This shift replaces the previous presumptive tax regime, aiming to improve tax compliance and administration (VietnamPlus, 2022).

The elimination of the presumptive tax is in line with the Politburo's Resolution 68, which is scheduled to eliminate the presumptive tax regime for household businesses next year (VietnamNet Bridge, 2022). The new regulations also require Group 3 and Group 4 household businesses to use e-invoices for retail goods and services, and households with revenue below VND 1 billion should still be allowed to use the presumptive tax method to avoid disadvantages due to e-invoicing.

The Deputy Prime Minister, Hò̀ Đức Phớc, confirmed that the elimination of the presumptive tax is the right policy, emphasizing the importance of tax policies being flexible for smaller businesses to ensure practicality for both tax authorities and business owners (VietnamNet Bridge, 2022).

The Department of Taxation will classify household businesses into the four revenue-based groups, and the General Department of Taxation (GDT) will submit the refined regulatory framework to the Ministry of Finance and relevant authorities for approval (VietnamPlus, 2022).

This significant shift towards revenue-based taxation and digital compliance for household businesses in Vietnam reflects the government's commitment to modernizing the tax system and fostering a more transparent and fair economic environment.

References: [1] The Saigon Times. (2022). New tax classification for household businesses. Retrieved from https://www.saigontimes.vn/ [2] VietnamPlus. (2022). New tax classification for household businesses. Retrieved from https://vietnamplus.vn/ [3] VietnamNet Bridge. (2022). Deputy PM confirms elimination of presumptive tax for household businesses. Retrieved from https://vietnamnet.vn/

  1. The new classification system, introduced by the Vietnamese government, divides household businesses not only by annual revenue but also requires Group 2 and Group 1 to adopt e-invoicing, aligning with the country's aim to improve tax compliance and administration using AI technology.
  2. In a move that reflects Vietnam's commitment to modernize its tax system, Group 3 and Group 4 businesses, according to the new regulations, are mandated to use e-invoices for retail goods and services, yet Group 2's phased roadmap for e-invoice usage starts from 2027–2028 to avoid financial burdens during this transition.
  3. Removing the presumptive tax, as outlined in the Politburo's Resolution 68, is not only a step towards financial transparency and fairness among economic sectors but also displays the government's intent to foster a business environment that encourages growth, even in war-torn areas where cultural differences and economic disparities are prevalent.
  4. As a result of this shift towards revenue-based taxation and digital compliance, policymakers aim to promote financial transparency and ensure fairness among various economic sectors, fostering economic growth and possibly influencing other countries to consider similar reforms within their own systems.

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