Raising the threshold for VAT needs to be closer to reality

One of the issues that has attracted public attention recently is the proposed increase in VAT taxable revenue to 150 million VND/year. This regulation means that only individuals and business households with sales revenue of over 150 million VND/year will have to pay VAT, an increase of 50 million VND compared to the current regulation.

Need to continue reducing VAT to support businesses Reducing VAT contributes to promoting production and business, economic recovery

Many mixed opinions

According to the program of amending tax laws in 2024, the draft revised Law on Value Added Tax (VAT) will be submitted to the National Assembly for comments at the 7th session (taking place in May 2024) and approved at the 8th session (taking place in October 2024). To complete the draft law, the Ministry of Finance has announced and is soliciting comments on the content of this draft Tax Law with a number of proposed amendments and supplements. One of the contents that has received public attention recently is the proposed increase in VAT taxable revenue to VND 150 million/year. This regulation means that individuals and business households with sales revenue of over VND 150 million/year will have to pay VAT, an increase of VND 50 million compared to the current regulation.

On the other hand, according to experts, when the tax threshold is raised, it will motivate businesses and individuals to promote production and business activities, increasing revenue better. Mr. Nguyen Van Duoc, Head of the Advisory Board of the Vietnam Tax Consultants Association (VTCA), assessed that this is consistent with current practice. This is a good sign for business households and individuals. However, the tax threshold needs to be raised even higher to comply with the Law on Personal Income Tax and the poverty line stipulated in Decree 07/2021.

Việc nâng ngưỡng doanh thu chịu thuế GTGT đối với cá nhân, hộ kinh doanh đang còn nhiều ý kiến trái chiều

Raising the threshold of VAT taxable revenue for individuals,
Business households still have many conflicting opinions.

Meanwhile, the Vietnam Federation of Commerce and Industry (VCCI) said that according to many businesses, the taxable revenue threshold of VND150 million/year is still relatively low. Comparing between business individuals and salaried individuals will show the unreasonableness. Therefore, VCCI recommends considering amending the regulations on the taxable revenue threshold of business households and individuals, possibly raising the taxable revenue to about VND180 to VND200 million/year. The Ministry of Transport even proposed the VAT threshold at VND250 million; Trong Tin Accounting and Tax Consulting Company Limited proposed the tax-exempt revenue threshold from VND150 million to VND180 million or should be regulated openly and assigned to the Government to ensure flexibility and close adherence to reality.

Sharing his business experience, Mr. Nguyen Xuan Sinh - a food service business in Hanoi said that he was very happy about the increase in the VAT threshold, but according to his calculations, with a revenue threshold of 150 million VND/year equivalent to 420,000 VND/day, which means that he has to pay tax for every 10 meals/day he sells. This revenue is not enough to cover the cost of buying raw materials, renting premises, employees... for the facility. Therefore, according to Mr. Sinh, the VAT threshold of 150 million VND/year is unreasonable and unfair to businesses like him.

Ensure consistency and synchronization

Regarding this issue, the Ministry of Finance explained that since the 2013 amended VAT Law, which amended and supplemented a number of articles of the 2008 VAT Law, took effect, the consumer price index (CPI) has increased significantly. Adjusting the revenue from the sale of goods and services of individuals and business households to match price fluctuations is necessary. The VND150 million level is based on the inflation index and the actual situation; it does not create compliance costs, administrative procedures for taxpayers and transparency in tax management. A higher tax threshold will not encourage business households and individuals to switch to enterprises. Raising the tax reduction level higher will affect the state budget revenue at the local level, especially in localities with low revenue.

Regarding this concern, Mr. Nguyen Van Duoc said that the revenue threshold is not necessarily the reason why households consider choosing to establish a business, but they are more concerned about the institution, business environment, tax policy, and administrative procedures. The concern when converting to a business is the cost and time involved due to having to fully comply with regulations on invoices and documents, having enough accounting staff as well as reporting taxes according to regulations. Businesses have to pay many types of taxes including corporate income tax, VAT, social insurance and other expenses. Therefore, the authorities need to continue to review, research and implement reforms of legal regulations related to the fields of accounting and tax, creating fairness between types and sizes of businesses. Tax policies and administrative procedures must be favorable so that business households see the benefits and have the motivation to boldly convert to businesses.

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