FROM JANUARY 1, 2026, PERSONAL INCOME TAX EXEMPTION FOR HOUSEHOLD BUSINESSES WITH ANNUAL INCOME BELOW VND 500 MILLION

From 2026 onwards, tax legislation introduces significant amendments affecting household businesses. One major change is the establishment of an annual revenue threshold of VND 500 million for determining tax obligations. Under the new regulations, household businesses with revenue below this threshold are exempt from Value-Added Tax (VAT) and Personal Income Tax (PIT). However, they remain subject to certain administrative obligations under the Law on Tax Administration.

This article summarizes and analyzes the current legal framework. It helps household businesses understand their rights, obligations, and key legal considerations when applying the regulations from 2026.

1. Household Businesses with Annual Revenue of VND 500 Million or Less Are Not Subject to VAT and PIT

Tax policy reform aims to support the small-scale economic sector and reduce compliance burdens for household businesses. The 2024–2026 tax legislation introduces significant adjustments regarding the revenue threshold for tax liability. One of the most impactful and widely applicable changes is the establishment of an annual revenue threshold of VND 500 million as the basis for determining tax obligations applicable to household businesses and individual businesspersons.

1.1. Exemption from Value-Added Tax (VAT)

Clause 25, Article 5 of the Law on Value-Added Tax 2024 (No. 48/2024/QH15), as amended by Point (b), Clause 1, Article 1 of the Law Amending the Law on Value-Added Tax 2025, specifies cases not subject to VAT, including:

• Goods and services supplied by household businesses and individual businesspersons with annual revenue of VND 500 million or less;

• Assets sold by organizations or individuals not engaged in business activities and not being VAT taxpayers;

• National reserve goods sold by national reserve authorities;

• Fees and charges collected in accordance with the laws on fees and charges.

This provision reflects the legislative policy that low revenue should not trigger VAT liability. It reduces compliance costs and avoids situations where tax collection costs exceed the revenue collected.

1.2. Exemption from Personal Income Tax

In parallel with value-added tax (VAT), the Law on Personal Income Tax 2025 also introduces corresponding amendments.

Pursuant to Clause 1, Article 7 of this Law, it is stipulated that:

• Resident individuals engaging in production and business activities with an annual revenue of VND 500 million or less shall not be subject to personal income tax (PIT);

• The Government shall be responsible for proposing to the Standing Committee of the National Assembly adjustments to the revenue threshold for PIT exemption, ensuring its alignment with the socio-economic conditions in each period.

From 2026, business households and individual businesspersons with annual revenue not exceeding VND 500 million will be exempt from both VAT and PIT. However, the absence of tax liability does not equate to a full exemption from tax administration obligations. Taxpayers must still comply with obligations regarding management, declaration, and substantiation of revenue, as further analyzed in the following sections.

2. Business Households with Annual Revenue Below VND 500 Million Must Report Actual Revenue

In addition to bookkeeping obligations, the new Law on Tax Administration 2025 introduces a requirement for business households to proactively report their revenue, even where they are not subject to taxation.

Pursuant to Clause 1, Article 13 of this Law, the mechanism for tax declaration and revenue reporting is prescribed as follows:

2.1. Cases Not Subject to Taxation

• Business households and individual businesspersons shall self-determine that their annual revenue derived from production and business activities falls within the category not subject to VAT and not liable to PIT;

• They are required to notify the tax authority of the actual revenue generated during the year, in accordance with the form and timeline prescribed by the tax authority.

2.2. Cases Subject to Taxation

• Business households shall self-assess taxable revenue;

• They shall calculate and pay VAT and PIT in accordance with applicable regulations.

2.3. Cases Involving the Use of E-Invoices

Where business households use electronic invoices or e-invoices generated from cash registers connected to the tax authority’s data system:

• The tax administration system shall automatically generate tax returns;

• Tax declaration and calculation shall be carried out based on e-invoice data and other relevant data sources.

From 2026 onwards, business households with annual revenue below VND 500 million must report their actual revenue, even if they are not liable to pay taxes.

3. Business Households with Annual Revenue Below VND 500 Million Are Not Required to Use E-Invoices

As a general principle, the law on invoices stipulates that invoice issuance is an obligation arising upon the sale of goods or provision of services. However, this obligation does not mean electronic invoices must be used in all cases.

3.1. Principles of Invoice Issuance

Clause 1, Article 4 of Decree No. 123/2020/NĐ-CP, amended by Clause 3, Article 1 of Decree No. 70/2025/NĐ-CP, mandates that sellers issue invoices when selling goods or services, including promotions, gifts, or internal consumption.

This applies to all entities, including business households with annual revenue below VND 500 million.

3.2. Cases Where the Use of E-Invoices Generated from Cash Registers Is Mandatory

Clause 1, Article 11 of Decree No. 123/2020/NĐ-CP, amended by Clause 8, Article 1 of Decree No. 70/2025/NĐ-CP, requires business households using e-invoices generated from cash registers connected to the tax authority’s system if they meet these conditions:

• Having annual revenue of VND 1 billion or more;

• Operating in sectors such as retail, food and beverage, or services directly provided to consumers.

Business households with annual revenue below VND 500 million are not subject to mandatory use of electronic invoices.

4. Business Households with Annual Revenue Below VND 500 Million Are Not Mandatorily Required to Have Input Invoices

Clause 1, Article 3 of Decree No. 123/2020/NĐ-CP defines an invoice as a document issued by the seller to record sales of goods or services. The law does not prescribe a specific penalty for failing to possess input invoices.

However, from a practical compliance perspective, the absence of input invoices may give rise to significant legal risks. Where a business household is unable to substantiate the lawful origin of goods, it may be subject to administrative sanctions under Article 17 of Decree No. 98/2020/NĐ-CP, as amended by Decree No. 96/2023/NĐ-CP and Decree No. 24/2025/NĐ-CP. Fines can reach up to VND 100 million, depending on the nature and severity of the violation.

Accordingly, although input invoices are not legally mandatory in all circumstances, maintaining proper documentation evidencing the lawful origin of goods remains a critical risk-management measure for business households.