I. Legal basis

• Decision No. 3389/QD-BTC of 2025
• Official Dispatch No. 4948/CT-NVT of 2025
• Amended Law on Personal Income Tax of 2025

II. How are household businesses classified into four (04) groups under the new tax policy applicable from the 2026 tax period?

In 2025, the Tax Authority issued Official Dispatch No. 4948/CT-NVT on the organization and implementation of the Scheme entitled “Transformation of the Tax Administration Model and Methods for Household Businesses upon the Abolition of the Presumptive Taxation Regime.” Accordingly, household businesses shall be classified based on revenue scale in order to apply appropriate tax policies, management methods, accounting regimes, and invoice forms, comprising the following four (04) groups:

• Group 1: Household businesses with total annual revenue of less than VND 200 million;
• Group 2: Household businesses with total annual revenue ranging from VND 200 million to VND 3 billion;
• Group 3: Household businesses with total annual revenue exceeding VND 3 billion up to VND 50 billion;
• Group 4: Household businesses with total annual revenue exceeding VND 50 billion.

In addition, the amended Law on Personal Income Tax adjusts the non-taxable revenue threshold for household businesses and individual business operators from VND 200 million per year to VND 500 million per year, and allows this threshold to be deducted prior to calculating tax based on a percentage of revenue. At the same time, the non-taxable revenue threshold for value-added tax is correspondingly increased to VND 500 million.

Accordingly, household businesses and individual business operators with annual revenue of less than VND 500 million may be understood as not being subject to personal income tax and value-added tax.

Therefore, based on the foregoing provisions, the four (04) groups of household businesses under the new tax policy are determined as follows:

• Group 1: Household businesses with total annual revenue of less than VND 500 million;
• Group 2: Household businesses with total annual revenue ranging from VND 500 million to VND 3 billion;
• Group 3: Household businesses with total annual revenue exceeding VND 3 billion up to VND 50 billion;
• Group 4: Household businesses with total annual revenue exceeding VND 50 billion.

Group 1, comprises household businesses with total annual revenue of up to VND 500 million. This group is entitled to the most significant incentives, as it falls within the scope of exemption from personal income tax (PIT) and value-added tax (VAT). In terms of administrative procedures, this group is only required to declare revenue once per year (no later than 31 January of the following year). Requirements regarding accounting regimes and the use of electronic invoices are not mandatory, thereby minimizing compliance costs for small-scale household businesses, street vendors, and family-based business operations.

Group 2, for household businesses with annual revenue exceeding VND 500 million and up to VND 3 billion, tax obligations begin to diverge. Such household businesses are required to apply a mandatory accounting regime and file tax declarations on a quarterly basis. Notably, personal income tax may be calculated under two alternative methods: either based on a percentage of revenue after deducting the non-taxable threshold, or at a rate of 15% on taxable income (i.e., revenue less expenses). With respect to invoice management, the regulations draw a clear distinction: household businesses with annual revenue exceeding VND 1 billion are required to use electronic invoices, whereas those with revenue below VND 1 billion are encouraged, but not required, to do so. This serves as an important transitional step enabling household businesses to become familiar with cash flow transparency prior to expanding their scale of operations.

Group 3, household businesses with annual revenue exceeding VND 3 billion and up to VND 50 billion are subject to a personal income tax rate of 17% on taxable income. The use of electronic invoices is mandatory. With respect to accounting regimes, household business owners may elect to apply either the accounting regime applicable to household businesses or the accounting regime applicable to micro-enterprises and small enterprises.

Group 4, This group comprises household businesses with annual revenue exceeding VND 50 billion—a scale comparable to, or even surpassing, that of many small and medium-sized enterprises. This group is subject to the highest level of tax regulation, with a personal income tax rate of up to 20% on taxable income (i.e., revenue less expenses). Group 4 is required to declare and pay value-added tax (VAT) on a monthly basis, rather than quarterly or annually. The use of electronic invoices is mandatory, and the accounting regime is standardized in a more professional manner. The progressive tiering of tax rates (from tax exemption to 15%, 17%, and 20%) demonstrates a clear policy orientation of the tax authorities to encourage large-scale household businesses to transition to the enterprise model, thereby ensuring transparency and fairness in the business environment.

III. Steps for transitioning from the presumptive taxation method to the tax declaration method

• Determine the household business classification: Review actual revenue for 2025 and projected revenue for 2026 to select the appropriate tax calculation method, accounting regime, and tax declaration software.
• Conduct inventory verification: Carry out an inventory of goods on hand (if any and if revenue exceeds the applicable threshold).
• Register for the use of electronic invoices: If projected annual revenue is VND 1 billion or more, register for the use of electronic invoices.
• Prepare accounting records and books for household businesses exceeding the tax exemption threshold.
• Update business registration and tax registration information through the single-window mechanism or directly with the tax authority.
• Register a separate bank account dedicated to business activities (if not already in place).
• Declare taxes using the appropriate declaration forms corresponding to the applicable tax calculation method and business sector, and submit electronic declarations via the eTax Mobile system.

Household businesses are required to register for an electronic identification account on the VNeID platform, use a digital signature in accordance with Decree No. 23, and update their Citizen Identity Card (CCCD) information with the tax authority in order to facilitate the performance of administrative procedures in electronic form.

IV. Conclusion

The classification of household businesses based on revenue scale, linked to the new tax exemption threshold increased to VND 500 million per year and applicable from the 2026 tax period, represents a fundamental shift in the State’s approach and methodology in tax administration for the household and individual business sector. This mechanism not only ensures the principles of fairness and transparency in the fulfillment of tax obligations but also significantly reduces the compliance burden for small household businesses with low income.

By designing four (04) groups of household businesses with differentiated levels of tax obligations, accounting regimes, and invoice management requirements, the new tax policy establishes a regulatory framework tailored to the scale, capacity, and tax risk of each business. In particular, the exemption from personal income tax (PIT) and value-added tax (VAT) for household businesses with annual revenue of up to VND 500 million not only provides social support and encourages business start-ups, but also contributes to enhancing voluntary compliance and honesty in revenue declaration.

Conversely, for household businesses with large revenue, the new regulations strengthen requirements regarding tax declaration, accounting, and the use of electronic invoices, while applying progressive tax rates based on revenue groups. This serves as an important foundation for narrowing the management gap between household businesses and enterprises, limiting the phenomenon of “enterprise-like household business forms,” and creating incentives for transitioning to the enterprise model when conditions are met.

In the context of the abolition of the presumptive taxation regime and the transition to tax administration based on declarations, household businesses need to proactively review their revenue, prepare accounting records, establish appropriate technological infrastructure, and adopt suitable compliance measures to avoid legal risks once the policy takes effect. A thorough understanding of the regulations, correct selection of the applicable management group, and full fulfillment of tax obligations will not only enable household businesses to operate in a stable and sustainable manner but also contribute to building a transparent and equitable business environment in line with the reform-oriented objectives of the new tax system.

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