The issue of determining the tax basis applicable to individual business households is currently receiving significant attention in the process of improving tax policies and regulating individual business activities in Vietnam. Therefore, whether tax is calculated based on revenue or actual taxable income not only affects the tax obligations of individual business operators, but also relates to the fairness, transparency, and efficiency of the tax system.
1. What are taxable income and taxable revenue?
Legal basis: Point a Clause 2, Point a Clause 3 Article 7 of the Law on Personal Income Tax 2025; Clause 2 Article 4 of Decree No. 68/2026/ND-CP (as amended and supplemented by Clause 1 Article 1 of Decree No. 141/2026/ND-CP)
- Taxable income is determined by taking revenue generated from the sale of goods and services minus expenses related to production and business activities during the tax period.
- Taxable revenue is determined based on the portion of annual revenue exceeding VND 1 billion/year.
2. Deductible expenses in determining taxable income
Legal basis: Clause 1 Article 6 of Decree No. 68/2026/ND-CP (as amended and supplemented by Clause 1 Article 1 of Decree No. 141/2026/ND-CP)
Deductible expenses are actual expenses incurred in connection with production and business activities, provided that they are supported by lawful invoices and documents in accordance with regulations on invoices, accounting laws, and non-cash payment documents for payments valued at VND 5 million or more in accordance with VAT regulations, including:
- Expenses for raw materials, materials, fuel, energy, and goods used for production and business activities;
- Other expenses directly serving production and business activities.
3. Basis for calculating personal income tax applicable to individual businesses
Legal basis: Points a and b Clause 5 Article 4 of Decree No. 68/2026/ND-CP (as amended and supplemented by Clause 1 Article 1 of Decree No. 141/2026/ND-CP); Clauses 2 and 3 Article 7 of the Law on Personal Income Tax 2025
| Tax calculation based on taxable income | Tax calculation based on taxable revenue | |
|---|---|---|
| Personal income tax | Taxable income Γ Tax rate | Taxable revenue Γ Tax rate |
| Tax rates | – Annual revenue from over VND 1 billion to VND 3 billion: 15% – Annual revenue from over VND 3 billion to VND 50 billion: 17% – Annual revenue exceeding VND 50 billion: 20% | – Distribution and supply of goods: 0.5% – Services and construction without material supply: 2% – Asset leasing, insurance agency, lottery agency, multi-level sales agency: 5% – Manufacturing, transportation, services associated with goods, construction with material supply: 1.5% – Digital content products and services such as online entertainment, video games, digital movies, digital music, digital advertising: 5% – Other business activities: 1% |
Note: The above tax calculation methods only apply to resident individuals. (Legal basis: Clause 2 Article 2 of the Law on Personal Income Tax 2025)
4. Personal income tax calculation methods applicable to individual businesses
Legal basis: Clause 5 Article 4 of Decree No. 68/2026/ND-CP (as amended and supplemented by Clause 1 Article 1 of Decree No. 141/2026/ND-CP)
For income derived from individual business activities:
- Individuals with annual revenue from over VND 1 billion to VND 3 billion may choose between:
- Tax calculation based on taxable income; or
- Tax calculation based on taxable revenue.
- Individuals with annual revenue exceeding VND 3 billion are only permitted to apply the taxable income method.
This article helps readers:
- Clarify the concepts of taxable revenue and taxable income applicable to individual businesses under current tax regulations.
- Analyze deductible expenses when determining taxable income.
- Systemize the legal basis governing tax calculation methods applicable to individual businesses.
- Compare tax calculation methods based on taxable revenue and taxable income.
- Clarify applicable tax rates under each tax calculation method.
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