Small businesses concerned over new tax rules
Experts said taxing profits would be ideal, but is too challenging due to household businesses' lack of accounting systems. Most operate informally, without financial statements or detailed cost tracking, making profit figures difficult to verify and vulnerable to manipulation.
HÀ NỘI New tax rules requiring household businesses to pay based on revenues rather than profits have sparked concerns among small business owners, who argue that the flat-rate system does not accurately reflect the financial picture of their operations.
From 1 June, household businesses with annual revenue of VNĐ1 billion (US$38,350) and higher must declare and pay tax based on their actual turnover, in line with new Government regulations to increase transparency and prevent tax loss.
Same revenue, different profit
Hai Lệ, who runs a grocery shop in Long Biên District, Hà Nội, said she had prepared early for the change after being notified by local tax officials. Her store remains stable, but she questions the fairness of the tax method, according to the local news website znews.vn.
“I understand the need to improve tax transparency, but taxing revenue instead of profit doesn’t reflect how much we earn,” she said. “Some businesses may have the same revenue but vastly different costs.”
Lệ explained that with a monthly revenue of around VNĐ70 million, her operating costs, including electricity, staff wages and rent, leave her with a modest net profit. Yet the tax is calculated on total revenue, not what remains after expenses. She also suggested a preferential tax rate during the transition period to help small businesses adjust and comply.
Business owners in the food and beverage sector, who currently pay 4.5 per cent of revenue in tax, are also questioning the flat-rate approach.
“Our rent, ingredients and wages take up most of our earnings. If tax is based only on revenue without considering these costs, it penalises small operators like us,” said a café owner in Hà Nội's Đống Đa District.
Starting 1 January 2026, the presumptive tax method, where businesses pay a fixed annual amount, will be scrapped and replaced with a full declaration model based on actual revenue.
Currently, under Circular 40/2021, household businesses are taxed at a fixed percentage of their revenue, depending on their sector. For retail, the total tax rate is 1.5 per cent, including 1 per cent VAT and 0.5 per cent personal income tax. A business with VNĐ500 million in annual revenue must pay VNĐ7.5 million in tax, even if its profit is far lower or negative due to high operating costs.
Experts said taxing profits would be ideal, but is too challenging due to household businesses' lack of accounting systems. Most operate informally, without financial statements or detailed cost tracking, making profit figures difficult to verify and vulnerable to manipulation.
“Not all household businesses are equally profitable,” said one tax consultant. “Two shops might each make VNĐ1 billion in revenue, but one could be losing money while the other enjoys a high profit.”
Transparency
Authorities say taxing revenue is easier to track and less prone to fraud. The rollout of mandatory electronic invoicing this month for businesses earning over VNĐ1 billion annually is expected to improve oversight further. According to Decree 70/2025, these businesses must now issue e-invoices and declare tax based on actual revenue.
Experts argue that the long-term solution is to increase transparency through real-time data and digital systems. Widespread adoption of electronic invoicing and tax data integration will make it easier to track income accurately, paving the way for a fairer, profit-based tax model.
“Until we can reliably calculate profits, revenue remains the practical option. But it shouldn’t be the end goal,” a tax consultant said. “We need a roadmap that gradually brings household businesses closer to corporate tax standards, where profit matters more than just turnover.” VNS
Administrative bottlenecks hinder business closures
HCM CITY Many businesses in HCM City face difficulties completing dissolution procedures due to administrative delays, particularly in tax finalisation, according to a report by the HCM City Union of Business Associations (HUBA).
HUBA noted that businesses flagged as tax risks often experience prolonged procedures when attempting to close, leading to cases where companies have ceased operations but remain legally active. The association described this as a situation where businesses are “no longer operating but not yet formally dissolved”.
Other administrative challenges were also highlighted. Business registration requires a valid, legally compliant address, but some applications are declined for proposing locations in apartment buildings, including commercial floors. Certain sectors require professional certifications, which remain difficult to obtain due to low pass rates.
Tax regulations continue to present significant challenges. Enterprises must maintain full accounting records and meet strict documentation requirements, particularly when working with partners deemed to be at tax risk. Errors can result in administrative penalties and, in some cases, legal consequences.
HUBA also reported ongoing issues related to land use. Some small businesses have built facilities on agricultural land under private ownership. While this practice has existed for years, recent enforcement has tightened, limiting access to necessary certifications and licences. As a result, some firms face potential disruption and difficulties accessing credit or expanding operations.
A HUBA survey found that 75 per cent of enterprises had unsold inventory, 67 per cent were experiencing overdue debts and 50 per cent requested credit access or interest rate reductions. In 2025, approximately VNĐ180 trillion in corporate bonds will mature, posing liquidity challenges, particularly for the real estate sector.
HUBA proposed continued administrative reform, improved public service accountability and credit support measures to ease current pressures on the business community.
