Updated guidelines on tax obligations for household businesses from 2025

When establishing a household business, understanding tax obligations is essential. A clear grasp of applicable taxes, calculation methods, and exemption criteria will enable household businesses to proactively plan finances and ensure legal compliance.

I. Legal Basis

The current tax regulations applicable to household businesses are stipulated under:

• Law on Tax Administration No. 38/2019/QH14
• Decree No. 139/2016/NĐ-CP and Decree No. 22/2020/NĐ-CP (on business license fee)
• Circular No. 92/2015/TT-BTC (on presumptive taxation)
• Decree No. 126/2020/NĐ-CP and Decree No. 70/2025/NĐ-CP (on tax administration)

Notably, from June 1, 2025, household businesses with annual revenue of VND 1 billion or more in sectors such as restaurants, hotels, and retail will no longer be subject to presumptive tax. Instead, they must:

• Use point-of-sale (POS) machines connected to tax authorities
• Transition to declaration-based taxation

Accordingly, the applicable tax methods for household businesses include:

• Declaration-based method: for large-scale households or those opting in voluntarily
• Per-transaction method: for infrequent or non-fixed-location business operations

II. Key Tax Types Applicable to Household Businesses

1. Typically, household businesses are subject to three main types of taxes:

• Business license fee: Payable annually, based on annual revenue.
• Value-added tax (VAT): Applied under either the presumptive method or the declaration method.
• Personal income tax (PIT): Calculated based on revenue, using industry-specific rates.

In addition, certain specific business sectors may be subject to additional taxes such as natural resource tax and environmental protection tax.

2. The elimination of presumptive tax represents a transformative step in tax administration for household businesses. The objectives are to:

• Enhance transparency and fairness
• Reduce tax revenue loss
• Encourage formalization into registered enterprises

However, many household businesses still lack knowledge in accounting and management, making bookkeeping and tax declaration a significant barrier. Therefore:

🧩 The tax authorities have taken, are taking, and will continue to take the following actions:

• Review tax exemption thresholds to reflect living standards and reduce the burden on small household businesses
• Develop free applications to support accounting, tax declaration, and tax payment
• Organize training programs on financial, accounting, and tax management
• Reduce compliance costs by at least 30% through digital procedures
• Establish support networks to assist household businesses in transitioning to formal enterprises

A. What Happens After Presumptive Tax Is Removed?

From June 1, 2025, around 37,000 household businesses with annual revenue of VND 1 billion or more in sectors such as:

• Food & beverage
• Hospitality (hotels, guesthouses)
• Retail
• Passenger transport
• Beauty, entertainment, etc.
  must switch from presumptive to actual declaration.

Key changes include:

• Recording of accounting books (revenue, expenses, cash balance, tax obligations)
• Full issuance and storage of invoices and receipts
• Equipping POS systems linked to tax authorities, and issuing e-invoices
• Monthly or quarterly tax declarations (vs. fixed annual payments previously)

🔎 Although VAT and PIT rates remain unchanged, tax payable will now accurately reflect actual revenue—adjusting dynamically with business performance.

Illustrative Example:

• Before June 1: A restaurant with presumptive annual revenue of VND 1 billion
  → Tax payable: 4.5% × VND 1 billion = VND 45 million/year (~VND 3.75 million/month)
• After June 1:
  • If actual revenue rises to VND 200 million/month → Tax = VND 9 million/month
  • If revenue drops to VND 80 million/month → Tax = VND 3.6 million/month

1. Applicable Tax Rates by Sector

2. Business License Fee Rates

Annual license fee is based on average annual revenue:

First-year exemption applies for household businesses established after February 25, 2020.
Note: Revenue used to determine license fee applies from January of the year following establishment.

B. Preumptive Tax Calculation Method

Definition:
Presumptive tax is a flat tax imposed monthly or quarterly by tax authorities, based on estimated revenue and business type.

From 2025 onward:
Only small, infrequent, or non-fixed-location businesses may continue using this method. Businesses with VND 1 billion+ in revenue must adopt declaration-based taxation.

Calculation formulas:

• VAT = Taxable Revenue × Applicable VAT Rate
• PIT = Taxable Revenue × Applicable PIT Rate

Household businesses earning VND 100 million/year or less are exempt from both VAT and PIT.

C. Tax Exemption Scenarios

A household business may be exempt from license fee, VAT, and PIT if it meets one of the following:

• Annual revenue is below VND 100 million
• Operates infrequently or without a fixed location
• Engaged in salt production, aquaculture, or fishing logistics services

D. Frequently Asked Questions

1. What taxes do household businesses have to pay?
   → Business license fee, VAT, and PIT. Some cases may incur other industry-specific taxes.
2. Who is exempt from the business license fee?
   → Those with:

• Revenue ≤ VND 100 million/year
• Irregular business activities or no fixed location
• Aquaculture, salt production, or fishing logistics activities
• Newly established after February 25, 2020 (exempt in the first year)

3. When is revenue counted for determining license fee liability?
   → From January of the following year after establishment (if first-year exemption applies)

Need expert consultation on choosing the right tax declaration method, e-invoice setupvia POS, or first-time tax registration?
KMC is ready to support you!

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📧 Email: info@kmc.vn
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