MOF has submitted a report responding to the review opinions and comments from National Assembly delegates on the amended PIT Law.

The ministry proposes raising the annual tax-exempt revenue threshold from VND200 million to VND500 million. This amount would also be deducted before applying tax rates based on revenue.

With this threshold, the ministry estimates that around 2.3 million out of 2.54 million household businesses (as of October 2025) would not be required to pay tax, accounting for about 90 percent of the total.

The draft further adds a provision requiring household and individual businesses with annual revenue above VND500 million and up to VND3 billion to calculate tax based on income (revenue minus expenses). A 15 percent tax rate would apply, similar to the corporate income tax rate under the Corporate Income Tax Law 67/2025 for businesses with annual revenue below VND3 billion.

All household and individual businesses would pay tax based on actual income. Those with low income would pay little or nothing if no income is generated. The revenue threshold would not significantly affect the tax obligations of those required to pay this method. If a business cannot determine its expenses, it would continue paying tax based on revenue.

For individuals who lease real estate, considered non-regular business activity under contract (excluding accommodation services), the draft specifies that those with annual revenue above VND500 million will only apply the revenue-based tax method. This means they would not need to determine expenses, offset income among multiple properties, or finalize their annual tax returns.

Lowering tax rates and reducing brackets for wages and salaries

MOF has also reviewed and revised the progressive tax bracket for wage and salary income. The number of brackets is reduced from seven to five, the gap between brackets is widened, and two tax rates are revised. This ensures reductions for all taxpayers across all brackets and avoids sudden jumps between tax levels.

To comply with the National Assembly’s authority to regulate core tax matters as stipulated in the Constitution, the ministry has proposed incorporating family-circumstance deductions directly into the law, while authorizing the Government to request adjustments from the Standing Committee of the National Assembly based on price and income fluctuations.

Income-based taxation for household businesses

MOF has proposed an income-based PIT calculation mechanism for household businesses. Experts agree this is a reasonable direction but warn that if the tax rate is too high, it could cut into profits and cause financial difficulties.

Reasonable tax policy encourages compliance

Regarding the amended Personal Income Tax Law, the ministry plans to propose that household and individual businesses with revenue above the tax-exempt threshold be taxed based on income (revenue minus expenses).

Specifically, individuals with annual revenue above the threshold and up to VND3 billion would be taxed at the same rate as small businesses with annual revenue under VND3 billion (15 percent).

If individuals with revenue under VND3 billion cannot determine expenses, they may continue paying tax based on revenue ratios (0.5 percent, 1 percent, 2 percent depending on the business fields).

A key change is that household and individual businesses may deduct the tax-exempt threshold before calculating tax, instead of paying tax from the first dong of revenue.

Nguyen Ngoc Tinh, Vice Chair of the Tax Advisory and Agency Association in HCMC, praised the ministry for adjusting PIT policies to tax household and individual businesses based on actual profit and revising tax ratios.

He noted that adjusting tax rates based on actual market profit margins for each sector is entirely appropriate. Only then can tax collection be sustainable and reflect the true contribution of the household-business sector.

Tinh emphasized that raising the tax-exempt revenue threshold creates fairness between household businesses and wage earners. “A reasonable tax policy is what encourages compliance,” he said. “An unsuitable policy will not be sustainable and becomes an obstacle.”

He added that not all household businesses have the resources, personnel, or technology to apply full accounting methods. Therefore, allowing the simplified revenue-based tax method remains appropriate.

Nguyen Van Duoc, Director of Trong Tin Accounting and Tax Consulting, said the ministry’s approach aligns with the principle that tax should only be imposed when actual income is generated. This is consistent with reform trends that emphasize simplicity and transparency.

However, he noted that PIT policy for household businesses must be aligned with corporate income tax. The draft decree guiding the Corporate Income Tax Law sets revenue-based tax rates lower than those currently applied to household businesses. Therefore, PIT for household businesses should be designed to ensure fairness and reduce tax pressure.

Nguyen Le