Resolution 68 proposes to abolish the flat tax on business households from July 1, 2026 in Vietnam

On May 12, 2020, the Government issued Resolution No. 68/NQ-CP with the goal of reducing and simplifying at least 20% of regulations and compliance costs related to business activities in the period of 2020-2025. In particular, this Resolution aims to reduce administrative procedures, create favorable conditions for individual business households and small businesses. One of the notable contents is the proposal to abolish flat tax for business households from July 1, 2026. In this context, it is necessary to study and evaluate the impact of the elimination of flat tax on business households. This is not only a request from the Government but also an opportunity for management agencies, businesses and the community to participate in building a modern, transparent tax system and in line with the trend of market economic development.

Abolishing flat tax for business households and individuals from 01/07/2026 in Vietnam (expected)

The Draft Resolution on a number of specific mechanisms and policies to promote private economic development, presented in Article 10, Clause 6, proposes a series of tax and fee support measures, with the goal of creating favorable conditions for innovative start-ups and individual business households.

Tax and fee support according to the Draft Resolution:

• Corporate income tax exemption: In the first 03 years and 50% reduction in the next 02 years for income from innovative start-up activities of innovative start-up enterprises, innovative start-up investment fund management companies, start-up support intermediaries, etc creative support. The determination of the tax exemption or reduction period shall comply with the provisions of the law on corporate income tax.
• Exemption from personal income tax and corporate income: For individuals and organizations with income from the transfer of shares, capital contributions, and the right to contribute capital to innovative start-up enterprises
• Personal income tax exemption: In the first 03 years and 50% reduction in the next 02 years for incomes from salaries and wages of experts and scientists received from innovative start-up enterprises, research and development centers, innovation centers, and intermediary organizations to support innovative start-ups.
• Corporate income tax exemption: For small and medium-sized enterprises for 03 years from the date of issuance of the first business registration certificate.
• Expenses for training and retraining human resources: Of large enterprises for small and medium-sized enterprises participating in the chain are included in the deductible expenses to determine taxable income when calculating corporate income tax.
• Abolishing the form of tax payment by the presumptive tax method: For business households and individuals from July 1, 2026. Business households and individuals shall apply the method of tax declaration and calculation in accordance with the law on tax administration.

Thus, the draft Resolution has proposed the elimination of flat tax for business households from July 1, 2026, in order to facilitate the transition to tax declaration and calculation methods in accordance with the law on tax administration.

Regulations on tax payment by the declaration method when paying presumptive tax for business households and individuals in Vietnam

In case of tax abolition, business households and business individuals will switch to paying tax by the declaration method, specified in Article 5 of Circular 40/2021/TT-BTC. Concrete:

• Subjects of application: The declaration method applies to large-scale business households and individuals and business households and individuals that have not yet met the large scale but choose to pay tax according to the declaration method.
• Tax declaration period: Business households and individuals that pay tax according to the declaration method shall declare tax on a monthly basis. Except for business households and individuals that have just started business and business households and individuals that meet the criteria for quarterly tax declaration and choose to declare tax on a quarterly basis according to the provisions of Article 9 of Decree 126/2020/ND-CP
• Determination of taxable turnover: If a business household or individual determines that the taxable turnover is not suitable for reality, the tax authority will fix the taxable turnover according to the provisions of Article 50 of the Law on Tax Administration 2019
• Accounting, invoices and vouchers: Business households and individuals that pay taxes by the declaration method must comply with the accounting, invoices and vouchers regime. In case business households and individuals doing business in the field or business line have grounds to determine the turnover as certified by the functional agency, they are not required to do so
• Tax finalization: Business households and individuals that pay tax by the declaration method are not required to make tax finalization.

Thus, after abolishing the flat tax, business households and business individuals will switch to the method of declaring and fully fulfilling tax obligations in accordance with the law.

Regulations on tax payment by the declaration method when paying presumptive tax for business households and individuals

According to Article 5 of Circular 40/2021/TT-BTC, business households and individuals can choose the tax declaration method, applicable in the following cases:

For business households and individuals applying the declaration method, there are specific regulations as follows:

• Tax declaration period: Make monthly tax declarations, except for cases where they are newly established or meet the criteria for quarterly tax declaration and choose to declare quarterly tax as prescribed in Article 9 of Decree 126/2020/ND-CP.
• Determination of taxable turnover: If the taxable turnover is not in accordance with reality, the tax authority will fix the taxable turnover according to the provisions of Article 50 of the Law on Tax Administration 2019.
• Accounting, invoices and vouchers: The accounting, invoices and vouchers regime must be implemented. In case there are grounds for determining turnover as certified by the authorities, the accounting regime may not be required.
• Tax finalization: Tax finalization is not required.

Tax bases for business households and individuals in Vietnam

Taxable revenue

Turnover for VAT and PIT calculation for business households and individuals is the total revenue from production and trading of goods and services, including:

Tax rate on sales

• The VAT and PIT rates are applied in detail to each field and business according to the guidance in Appendix I issued under Circular 40/2021/TT-BTC
• In case of operating in many fields, business lines, business households and individuals, declare and calculate tax at the tax rate applicable to each field and business line. If the taxable turnover of each field or business line cannot be determined or is determined to be inconsistent with business reality, the tax authority will fix the taxable turnover of each field and business line in accordance with the law on tax administration.

Determination of payable tax amount

• Payable VAT: VAT calculation turnover x VAT rate
• Payable PIT: PIT calculation revenue x PIT rate

In particular, VAT and PIT calculation revenue is determined according to the guidance in Section 1, the VAT and PIT rates according to the guidance in Appendix I issued together with Circular 40/2021/TT-BTC.

If you have any difficulties or questions related to Resolution 68 proposing to abolish the flat tax on business households from July 1, 2026, please contact Viet An Tax Agent for the most specific advice.