More resources, lower compliance costs

With 480 out of 481 participating lawmakers voting in favour, the National Assembly passed a resolution on reducing by 30% the personal income tax and corporate income tax payable for the 2026 and 2027 tax years by individuals, business households, and enterprises with annual revenue of no more than 10 billion VND.

Under the resolution, resident individuals earning income from business activities will receive a 30% reduction in personal income tax payable if their annual revenue in the corresponding year does not exceed 10 billion VND. Enterprises and organisations established under Vietnamese law with revenue within the same threshold will also receive a 30% reduction in corporate income tax payable.

For enterprises currently enjoying tax incentives under existing regulations, the tax reduction will be calculated based on the tax payable after the incentives have been deducted. The resolution took effect on August 24, 2026, and applies to the 2026 and 2027 tax years.

According to calculations by the Ministry of Finance, the policy is expected to reduce state budget revenue by about 3.191 trillion VND in 2026 and 3.510 trillion VND in 2027, or approximately 6.701 trillion VND in total.

Assoc. Prof. Dr. Le Xuan Truong, Head of the Department of Taxation and Customs at the Academy of Finance, said the reduction in budget revenue would also represent resources retained by business households and enterprises with annual revenue of no more than 10 billion VND.

Beneficiaries could use the money to supplement business capital, invest in fixed assets, repay bank loans, pay suppliers, conduct market research, or develop new products. The policy would therefore both ease immediate financial pressure and create better conditions for maintaining and expanding operations.

According to Assoc. Prof. Dr. Le Xuan Truong, amid high energy prices, rising input costs and the potential for disruptions to global supply chains, the state's efforts to share the difficulties faced by small and micro enterprises and business households are highly significant. These groups generally have fewer financial resources and lower resilience to fluctuations than larger enterprises.

Alongside the tax reduction, raising the annual revenue threshold for choosing the simplified tax calculation method from 3 billion VND to 10 billion VND is also expected to have a significant impact.

Under the method of calculating tax as a percentage of revenue, business households only need to maintain simplified accounting records and do not have to account for input costs to determine taxable income. Many software applications currently also support recording revenue, calculating and declaring taxes, and connecting with tax authorities' electronic portals and the eTax Mobile application.

Assoc. Prof. Dr. Le Xuan Truong said raising the revenue threshold would bring nearly 20,000 additional business households into the scope of the simplified tax calculation method, in addition to more than 76,000 households with revenue of over 1 billion VND to 3 billion VND that have already applied the method.

Of the approximately 2.7 million regular and stable business households under the tax authorities' management, an estimated 2.6 million will be exempt from tax, 96,000 will apply the simplified tax calculation method, and only around 3,900 will pay tax based on taxable income, requiring them to account for both revenue and expenses.

Thus, nearly 20,000 households newly brought under the simplified method will see their costs of hiring accountants reduced along with the time spent on maintaining records, filing tax returns, and calculating tax.

The scope of application is not limited to business households and individuals. According to figures cited by Assoc. Prof. Dr. Le Xuan Truong, in addition to approximately 96,000 business households, around 865,115 enterprises are eligible to apply the simplified method of calculating corporate income tax.

This shows that the number of entities able to reduce their compliance costs is very large. The policy also reflects the state's enabling and supportive approach, helping strengthen incentives for investment, production development, and job creation.

Preventing the 10 billion VND threshold from becoming a “cliff edge”

Speaking to Nhan Dan Newspaper, Assoc. Prof. Dr. Ngo Tri Long, an economist and member of the Viet Nam Financial Consulting Association, said the tax reduction policy should be viewed as part of overall fiscal management. The issue is not simply the approximately 6.701 trillion VND reduction in budget revenue over two years but also whether the money retained can generate additional production, investment, and consumption.

For micro enterprises and business households, retained funds are often quickly channelled into operations through the purchase of raw materials and goods, payment of wages and premises rental, or supplementation of working capital. When these funds continue to circulate, they can generate revenue for other entities, sustain jobs, and return to the state budget through revenue from expanded economic activity.

According to Assoc. Prof. Dr. Ngo Tri Long, the question should shift from how much budget revenue is lost to how much additional economic activity the reduction generates in subsequent years. This is an approach aimed at nurturing revenue sources, with the health of enterprises and business households serving as the foundation for sustainable revenue generation.

This policy targets entities with annual revenue of no more than 10 billion VND, rather than providing across-the-board tax reductions. According to the report on the explanation, review, and revision of the draft resolution, at this threshold, around 99.86% of individuals and business households and more than 81.11% of enterprises will benefit from the policy.

Assoc. Prof. Dr. Ngo Tri Long said the small business sector has a large number of entities but typically has a thin financial “buffer”. Even a short period of declining revenue or sharply rising costs can force a business to scale back operations, suspend activities, or leave the market.

Therefore, the tax reduction is not long-term support for inefficient businesses but aims to ease financial pressure over a certain period, helping businesses with markets and capacity but insufficient resources to continue operating and developing.

The policy could also promote the formalisation of the business household sector. As tax administration increasingly shifts towards e-invoices, digital payments, and data-based declarations, transparency will increase. However, this process will only be sustainable if the benefits business households receive from compliance outweigh the costs incurred.

If full declarations, the use of invoices and compliance with accounting requirements merely increase their obligations, business households may become hesitant. Conversely, if these requirements are accompanied by simplified procedures, lower compliance costs, better access to credit, and appropriate tax policies, incentives for transition will be strengthened.

However, Assoc. Prof. Dr. Ngo Tri Long, noted that the 10 billion VND revenue threshold could create a “cliff edge” in terms of benefits. Entities with revenue of no more than 10 billion VND receive a 30% reduction in tax payable, however, if they exceed the threshold, they will no longer be eligible for the policy. This difference could encourage delayed revenue recognition, the splitting of business operations or the transfer of revenue to other entities.

The resolution stipulates that the tax reduction does not apply to enterprises formed through division or separation after the resolution takes effect if the combined revenue of the divided or separated enterprises in 2026 or 2027 exceeds 10 billion VND.

Sharing the view that abuse of the policy must be prevented, Assoc. Prof. Dr. Le Xuan Truong, said it was necessary to clearly define entities not eligible for the policy while establishing clear and simple procedures and methods for determining those eligible for the tax reduction. E-invoice data, tax identification numbers, payment accounts, and information on related parties should also be used to identify risks.

According to Assoc. Prof. Dr. Ngo Tri Long, after 2027, the policy's effectiveness should not be assessed solely based on the number of beneficiaries and the amount of tax reduced. It should also be assessed in terms of the number of enterprises remaining in operation, increases in revenue and investment, jobs maintained or created, the number of business households converting into enterprises, and the extent to which the taxpayer base has expanded.

If the approximately 6.701 trillion VND reduction in tax revenue helps many businesses survive, develop, create jobs, and participate more fully in the formal economy, this will be an effective fiscal policy. Conversely, if the incentives only deliver short-term benefits without improving production and business capacity, the policy should be reassessed.

In the long term, Assoc. Prof. Dr. Le Xuan Truong, proposed continuing to study amendments to regulations on the classification of small and medium-sized enterprises, providing a basis for applying support policies more suited to socio-economic conditions.

The ultimate goal is not to maintain a small business sector dependent on incentives but to help businesses strengthen their resilience, expand their scale, and become more sustainable taxpayers. In that case, the immediate reduction in revenue could become a resource for nurturing future growth and state budget revenue.