As outlined in the draft, individuals and households earning 200 million VND or more per year would become liable for tax starting January 1, 2026.

Nguyen Thu, who runs a morning sticky rice shop in Hanoi, said this threshold is too low. At an average price of 20,000 VND per box, selling just 28 portions a day would result in an annual income subject to a 4.5% tax rate.

“That’s 3% VAT and 1.5% personal income tax on gross revenue,” Thu said. “For small vendors like us, every extra dong we earn goes toward covering costs and surviving. Taxing us at that point feels excessive.”

Vendors selling 14 bowls of pho a day (priced at 40,000 VND), or 22 bánh mì sandwiches (priced between 20,000–30,000 VND), would also exceed the threshold and be subject to tax.

Van Tuan, a grocery store owner in Hanoi’s Hoang Liet Ward, agreed. “Selling two crates of beer, a few cartons of milk, and some snacks can easily bring in a few million dong,” he said. “Even 18–20 million VND in monthly sales pushes you past the line.”

Tuan explained that while revenue may appear high, profits are slim - often just 10% - making taxes on gross sales a heavy burden.

Raise the bar or lower the rate?

Dr. Nguyen Ngoc Tu, a lecturer at the Hanoi University of Business and Technology, also questioned the logic behind the 200 million VND threshold, calling it “too low for current economic conditions.”

He pointed out that value-added tax (VAT) is ultimately paid by consumers and merely collected by sellers. For household businesses not issuing receipts, VAT is embedded in the sale price. “The VAT is on consumption, not income,” Tu explained.

However, because low-income earners can’t afford complex tax filings and enforcement costs are high, Vietnam sets minimum revenue thresholds to decide who must pay tax.

“The 200 million VND limit is already defined in the revised VAT Law and is due to take effect in 2026,” Tu said. “Aligning personal income tax policy with it creates consistency. It’s hard to apply two separate thresholds to the same taxpayer group.”

Tu added that unlike salaried workers, household businesses are treated more like small enterprises, so taxing them based on revenue rather than income is a practical compromise.

Loopholes and challenges

According to Tu, the new limit may exempt around 2 million households - over 40% of the total. But without reliable reporting, some may underreport earnings to avoid taxes.

“Until the Finance Ministry finishes evaluating the reform’s impact, keeping the threshold at 200 million VND may be a prudent interim step,” he said.

Nguyen Van Duoc, CEO of Trong Tin Accounting & Tax Consulting, proposed a more generous exemption - 1 billion VND.

He argued that from 2026, personal deductions for salaried taxpayers will rise to 15.5 million VND/month for individuals and 6.2 million VND/month per dependent. Meanwhile, household businesses earning just 200 million VND/year would be taxed - with no deductions.

“This is unfair,” Duoc said. “Especially for those with two income sources - salary and self-employment - who enjoy both the family allowance and a tax-free revenue floor.”

To ensure parity, he proposed aligning the business exemption with the income tax deduction threshold - around 186 million VND/year.

“A 1 billion VND tax-free threshold also makes sense,” he added. “That’s the level at which businesses are required to use electronic invoicing systems under Decree 70/2025. It would streamline enforcement and make tax policy fairer and more consistent.”

Profit margins matter

Dr. Tu noted that while a 4.5% tax rate might seem small, the real issue lies in the profit margin.

For food vendors, where margins may be decent, the tax may be bearable. But for distributors and retailers operating on 5–10% margins, the current rates of 1% VAT and 0.5% personal income tax are just manageable.

However, in wholesale businesses where profits are only 1–2%, even a 1.5% tax may be too steep.

Nguyen Le