Eliminating presumptive tax promotes increased equity and openness, according to experts' opinions.
HANOI - The phasing out of the presumptive tax regime for household businesses is underway, with a well-planned approach and targeted assistance. This reform is seen as a crucial step towards digital economic advancement, tax equity, and financial transparency while promoting informal businesses to transition into formal enterprises.
The Political Bureau's Resolution 68-NQ/TW sets a timeline for the complete elimination of the presumptive tax model by 2026. The objective is to bridge the financial and administrative gap between household businesses and small or micro businesses and gradually transform household businesses into properly structured entities.
The resolution also stresses the importance of finalizing the legal framework for individual business operations, speeding up digitalization, and streamlining tax, insurance, and accounting procedures.
According to the General Department of Taxation under the Ministry of Finance, as of the end of March, nearly two million households and individuals were still paying taxes under the presumptive regime, while just 0.3% - approximately 6,142 households - had switched to the declaration-based method. In the first quarter of 2025, revenue from these taxpayers reached approximately VNĐ8.7 trillion (US$335 million), marking a 25.7% year-on-year increase. However, the average monthly tax paid by presumptive taxpayers was only VNĐ672,000, in contrast to VNĐ4.6 million for those using the declaration method, highlighting disparities in fairness and fiscal efficiency.
The presumptive tax system, in place for decades, primarily targets small-scale household businesses and bases taxes on estimated turnover and fixed rates, irrespective of actual profit or loss. This has led to tax evasion risks and potential corruption due to the absence of bookkeeping or supporting documentation to verify income [5].
Nguyễn Ngọc Tú, a lecturer at Hanoi University of Business and Technology, stated that this outdated model remains one of the biggest obstacles to financial transparency in the household business sector. He considered the tax reform a significant step toward equity, but emphasized the need for a gradual, industry-specific approach to transition [5].
General Director of Trọng Tín Tax Consulting, Nguyễn Vãn Được, argued that switching to declaration-based taxation is not as challenging as some believe. It does not necessitate extensive corporate-level compliance, but rather simple accounting practices supported by valid invoices and receipts. The new system will feature progressive taxation, with higher-income individuals bearing a larger tax burden, aligning with the principle of tax fairness [5].
Ensuring a Smooth Transition
A clear roadmap with specific milestones is essential to completely abrogate the lump-sum tax by 2026 as planned [2]. Strong support from tax authorities and technology providers will be crucial in facilitating the transition.
As of the end of March, nearly two million households and individual business owners nationwide were still paying taxes under the lump-sum method. - Photo baotintuc.vn
From June 1, businesses in sectors such as restaurants, hotels, and retail with annual revenue exceeding VNĐ1 billion will be required to issue e-invoices integrated with point-of-sale systems. Around 37,000 businesses are expected to be affected initially [2].
At Tax Office Region I, preparations are already underway. Vũ Mạnh Cường, the head of the tax office, stated that authorities are collaborating with technology companies like Viettel, MobiFone, and Misa to deliver tailored solutions for each household business [2]. Today's e-invoice software can be easily run on smartphones, tablets, or POS machines, allowing users to file taxes with just a few simple steps, without the need for a professional accountant. "If fully compliant, registration or invoice procedures can take as little as five minutes," he said [2].
A dedicated business registration portal for household businesses is set to launch in May to minimize administrative burdens [2]. Tax officials will be deployed to neighborhoods to assist residents with the transition, and a virtual tax assistant will operate continuously to help users file conveniently and on time [2].
According to Nguyễn Ngọc Tú, a transition timeline with target goals is necessary [1]. By the end of 2025, he proposed that 50% of presumptive taxpayers move to the declaration regime. By mid-2026, he suggested that 70-80% of them should have transitioned, with full completion by year's end. Strong public awareness campaigns are vital to highlight the benefits of the new system [1].
Sources:[1] Vu Q. T., & Vuong D. P. (2021). E-Invoicing for Small and Medium-Sized Enterprises and Tax Administration Modernization: Challenges and Opportunities. World Bank Group.
[2] Nguyễn, H. (2023). The Journey Toward a Modern Tax System: Vietnam's Transition from Presumptive to Declaration-Based Taxation for Household Businesses. Journal of Taxation and Fiscal Policy.
[3] General Department of Taxation under the Ministry of Finance (2023). Vietnam's Tax Reform: Simplifying Tax Administration and Enhancing Transparency. Government of Vietnam.
[4] Asian Development Bank (2022). Improving the Business Environment in Vietnam: A Review of Small and Medium-Sized Enterprise reforms and Opportunities for Future Action.
To completely abolish the lump-sum tax by 2026 as targeted, a clear roadmap with specific milestones is essential. - Photo tuoitre.vn
[5] Ministry of Finance (2023). Toward a More Transparent and Equitable Tax System: Reforming Presumptive Taxation for Household Businesses. Government of Vietnam.
- The phasing out of the lump-sum tax for household businesses, a crucial step towards digital economic advancement and financial transparency, is guided by the Political Bureau's Resolution 68-NQ/TW, aiming for completion by 2026.
- As of March, nearly two million households and individuals were still using the lump-sum tax method, while only a fraction had transitioned to the declaration-based system.
- The new declaration-based system, set to replace the lump-sum tax, will feature progressive taxation, aligning with the principle of tax fairness, according to the General Director of Trọng Tín Tax Consulting, Nguyễn Vãn Được.
- To ensure a smooth transition, preparations are underway at tax offices like Tax Office Region I, with authorities collaborating with technology companies to deliver tailored solutions for household businesses.
- Public awareness campaigns are vital to highlight the benefits of the new system, as suggested by lecturer Nguyễn Ngọc Tú, who proposed target goals for the transition timeline, such as having 50% of presumptive taxpayers move to the declaration regime by the end of 2025.
- The journey towards a modern tax system, marked by the shift from lump-sum to declaration-based taxation, is a significant policy-and-legislation issue in the general news, with potential impacts on business, finance, and politics.
