Starting from June 1, 2025, household businesses generating over VND1 billion ($38,460) in annual revenue and operating in the retail or consumer services sectors are required to issue e-invoices through cash registers linked to the General Department of Taxation (GDT)’s data system, under Decree No. 70/2025/ND-CP on invoices and documentation.

While the Decree aims to strengthen tax oversight, it affects only a small fraction of targeted businesses. According to the Ministry of Finance (MoF), of the more than 5 million household businesses nationwide, only around 37,000, or less than 1 per cent, cross the VND1 billion revenue threshold.

The threshold has become a pivotal point in the government’s roadmap to tighten tax compliance among small-scale enterprises. However, experts argue that although the policy appears sound in principle, it has yet to win over affected business owners and has failed to fully reconcile tax administration goals with the need to nurture long-term revenue sources for the State budget.

Shop owners speak out

On Xa Dan Street in Hanoi, home to countless Mom & Pop stores, snack stands, and mini-marts, Ms. Trinh Thi Quynh, the 42-year-old owner of a small supermarket, shared her concerns about the new policy after nearly a decade of experience in retail.

“Prices fluctuate constantly these days, especially for food, snacks, and beverages,” she said. “Sometimes I buy stock in the morning at one price, then find it a few per cent higher by the afternoon. In the end, I only make about 5-10 per cent profit on each item. Some months are good, but many others are slow. When products near their expiry date, I have to discount or bundle them just to break even.”

While her annual revenue may exceed VND1 billion, she added, the actual profit is marginal. “If I have to declare full taxes, invest in a POS [point-of-sale] system, install sales software, and print e-invoices, I honestly couldn’t manage it,” she said. “It’s expensive and complicated, and my profits just don’t cover the extra cost.”

Her story is far from unique. Many household businesses, especially in food services and convenience retail, may cross the VND1 billion a year revenue line but operate on razor-thin margins. The mandate to issue e-invoices and pay taxes based on gross revenue has sparked growing anxiety among these business owners, who fear they may fall into a “high revenue, low profit or even loss” trap.

At a recent workshop on the draft Law on Tax Administration, held by the GDT, Mr. Nguyen Van Duc, Deputy Head of the Legal Department at the Ho Chi Minh City branch of the Vietnam Chamber of Commerce and Industry (VCCI), noted that the implementation of Decree No. 70 has raised serious concerns among small businesses, particularly those exceeding the VND1 billion threshold. He emphasized that this threshold has become a critical “dividing line”, placing many small-scale traders, especially in sectors like food and beverage (F&B) and retail, under intense pressure.

A survey conducted previously by VCCI highlighted the disconnect: only 11 per cent of household businesses fully understand their tax obligations, while 68 per cent admit to having only a vague understanding and 21 per cent are completely in the dark. Meanwhile, 66 per cent worry about rising costs, 56 per cent predict lower revenue, and 64 per cent fear a sharp fall in profits. Unsurprisingly, the group most concerned is precisely those with revenue above VND1 billion, who are most directly affected by Decree No. 70.

Many also question whether revenue is an appropriate basis for taxation, arguing that the line between “small-scale trader” and “taxable business” is becoming increasingly blurred, especially when reported revenue fails to reflect actual income.

In Hanoi’s Old Quarter, 40-year-old Ms. Nguyen Thu Huyen, who has a juice stand on Hang Dau Street, faces a dilemma in regard to minimum tax thresholds. “My drinks are priced between VND30,000 and VND35,000 ($1.15 and $1.35) a cup, and I sell 10-20 cups a day, which is about VND600,000 ($23) in daily revenue,” she explained. “With the current tax threshold of VND100 million ($3,846) a year, that means even selling just ten cups a day makes me subject to both value-added tax (VAT) and personal income tax.”

She added that even if this threshold was raised to VND200 million ($7,690) a year, it’s not as many sales as it seems. “Every smoothie needs fresh fruit, clean ice, a disposable cup, and a straw, then there’s the cost of sourcing ingredients plus rent in the Old Quarter,” she said. “After all that, there’s hardly any profit at all.”

Policy effectiveness under scrutiny

Feedback on the ground has raised pressing questions about existing tax revenue thresholds and calculation methods, signaling the need for a serious policy review if the recent new regulations are to be effectively implemented.

At a recent workshop, Ms. Nguyen Van Chi, Deputy Chairwoman of the National Assembly’s Economic and Financial Committee, expressed support for a transition from a presumptive tax regime to a declaration-based regime for household businesses. She emphasized this as a step towards greater transparency and fairness in tax administration.

However, she questioned the effectiveness of expanding the scope of tax declarations. Without careful planning, she warned, it could significantly drive up administrative costs without producing a meaningful increase in tax revenue.

She urged the GDT to carefully weigh whether to focus efforts on managing businesses that contribute the most to the budget or to extend oversight to a broader pool of small businesses that generate minimal revenue. Before switching fully to the declaration model, she called for a clear quantitative impact assessment to avoid unnecessary disruptions for both tax authorities and taxpayers.

Importantly, she stressed that if taxable revenue were to rise significantly under the declaration system, the current tax rates would also need to be re-evaluated to better reflect actual conditions. If the change leads to major shifts in budgetary revenue sources, a revision of the Law on the State Budget might be necessary to ensure legal consistency across the financial system.

From a practical standpoint, Ms. Nguyen Thi Cuc, Chairwoman of the Vietnam Tax Consultants’ Association, noted that, starting in 2026, individuals and household businesses with annual revenue of VND200 million ($7,690) or less will be exempt from VAT and personal income tax. While this proposed threshold is double the current VND100 million ($3,845), she argued that even this adjustment is still out of step with real-world business conditions. She recommended raising the exemption threshold to VND400-500 million ($15,385-$19,230).

Notably, her proposal is also tied to changes in tax policy for salaried workers. The MoF is currently proposing to raise the family deduction to VND186 million ($7,155) a year and the dependent deduction to VND6.2 million ($238.45) a month. Any adjustment to the tax-exemption threshold for household businesses, she suggested, should be aligned with these changes to ensure consistency and fairness across tax policies.

While Ms. Cuc supports the idea of raising the exemption threshold, she also flagged a potential issue: if household businesses fall outside the tax net, their inputs would no longer be subject to VAT, which could disadvantage buyers. To address this, she proposed a mechanism that would allow exempt household businesses to still issue e-invoices on a per-transaction basis when requested by buyers. This would help maintain transaction transparency without imposing additional tax burdens on small operators.