Shall individual/household businesses with an annual revenue of VND 200 million be required to pay personal income tax in Vietnam from January 1, 2026?

Shall individual/household businesses with an annual revenue of VND 200 million be required to pay personal income tax in Vietnam from January 1, 2026?

Pursuant to Clause 1, Article 17 of the Law on Value-Added Tax 2024 (effective from July 1, 2025) regarding the amendment and supplementation of Clause 1, Article 3 of the Law on Personal Income Tax 2007 as follows:

Amending and supplementing Clause 1, Article 3 of the Law on Personal Income Tax No. 04/2007/QH12, which has been amended and supplemented by Law No. 26/2012/QH13 and Law No. 71/2014/QH13

“1. Income from business activities, including:

a) Income from the production and trading of goods and services;

b) Income from independent professional activities of individuals with a license or practicing certificate in accordance with the law.

Income from business activities mentioned in this clause does not include income from households or individuals engaged in production and business with revenue below the level specified in Clause 25, Article 5 of the Law on Value-Added Tax.”

Concurrently, based on Clause 25, Article 5 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), which stipulates the subjects not subject to value-added tax as follows:

Subjects not subject to tax

...

25. Goods and services of households or individuals engaged in production and business with an annual revenue of VND 200 million or less; assets sold by organizations or individuals not engaged in business and not taxpayers of value-added tax; national reserve goods sold by national reserve agencies; fees and charges collected as prescribed by the law on fees and charges.

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Additionally, according to Clause 2, Article 18 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), regarding the effective date of implementation as follows:

Effective date

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2. Regulations regarding the revenue level of households or individuals engaged in production and business that are not subject to tax under Clause 25, Article 5 of this Law, and Article 17 of this Law shall take effect from January 1, 2026.

...

Therefore, as of January 1, 2026, individual/household businesses with an annual revenue of VND 200 million or more will be required to pay personal income tax.

What are the current regulations regarding the principles of calculating personal income tax for individual/household businesses in Vietnam?

According to Article 4 of Circular 40/2021/TT-BTC which stipulates the principles of calculating personal income tax for individual/household businesses under current regulations, the following apply:

- The principles of tax calculation for individual/household businesses are carried out according to the current legal provisions on personal income tax (PIT) and other relevant legal documents.

- individual/household businesses with an annual revenue from production and business activities of VND 100 million or less in a calendar year are not required to pay PIT according to legal provisions on PIT. individual/household businesses are responsible for declaring taxes accurately, truthfully, and completely and submitting tax files on time; they are liable before the law for the accuracy, truthfulness, and completeness of the tax files according to regulations.

- In the case of individual/household businesses operating under the form of a group of individuals or a family household, the revenue threshold of VND 10 million/year or less to determine that an individual is not required to pay PIT is determined for one (01) sole representative of the group of individuals or family household in the taxable year.

What are the tax calculation bases for PIT in individual/household businesses in Vietnam?

According to Article 10 of Circular 40/2021/TT-BTC, which stipulates the tax calculation bases for PIT in individual/household businesses as follows:

The basis for tax calculation for individual/household businesses is the taxable revenue and the tax rate calculated on the revenue.

(1) Taxable revenue

The taxable revenue for PIT for individual/household businesses is the revenue, including tax (in the case where tax is applicable), of the total amount from sales, processing, commissions, service provision incurred during the tax period from activities of production, business of goods, services, including incentives, support for meeting sales targets, promotions, trade discounts, payment discounts, financial support in cash or in-kind; subsidies, surcharges, extra charges, additional fees entitled under regulations; compensation for contract violations, other compensations (only included in PIT taxable revenue); other revenue enjoyed by the individual business without differentiating whether money has been collected or not.

(2) Tax rate calculated on revenue

- The tax rate calculated on revenue includes the specific PIT rate applied to each field, profession as guided in Appendix 1 issued with Circular 40/2021/TT-BTC.

- In case individual business operates in multiple fields, professions, the business shall declare and calculate tax according to the tax rate calculated on revenue applicable to each field, profession. If the individual business cannot determine the taxable revenue of each field, profession, or determines it inappropriately compared to the actual business, the tax authority shall determine the taxable revenue of each field, profession according to the legal provisions on tax administration.