Besides worrying about tax increases, after a week of implementing regulations requiring electronic invoices for direct sales to customers and connecting point-of-sale systems to the tax authorities, many businesses are concerned about being subject to retroactive tax collection after filing their tax returns.
Many households report annual revenues of tens of billions of VND.
Ms. Tran Nguyen, who specializes in wholesale and retail sales of seafood and meat in Tan Binh District, Ho Chi Minh City, said that after the regulation requiring business households to switch from lump-sum tax to declared tax was implemented, she and her husband worried that the amount of tax they have to pay will increase and that they will face retroactive tax collection while their business is becoming increasingly difficult.
“Previously, the tax advisory council calculated my household's revenue at 90 million VND/month, multiplied by a tax rate of 1.5%, resulting in a flat-rate tax payment of 1,35 million VND/month. Since the beginning of June, the supplier increased the price of crab and squid by 5,000 VND, to 275,000 VND/kg and 365,000 VND/kg respectively. With the price increase plus the need for full invoices, the revenue for tax calculation will likely increase to approximately 150 million VND/month, raising the tax payable to 2,2 million VND/month instead of 1,35 million VND/month,” Ms. Nguyen calculated.
However, Ms. Nguyen's concern is not just the tax increase, but "my husband and I are worried about whether the tax authorities will use the revenue after the declaration to collect back taxes for the previous months when we paid lower fixed-rate taxes."
This is not just Ms. Nguyen's problem, but a concern shared by many business owners when they spoke to Thanh Nien newspaper reporters. According to Mr. Le Van Tuan, Director of Keytas Accounting and Tax Company, the method of calculating flat-rate tax and declared tax is no different. For the same revenue, the tax rate remains unchanged, such as 1.5% for goods and 4.5% for restaurants, so the tax amount is the same. The only difference is that previously it was calculated based on flat-rate revenue, while now, with the shift to declared tax, it is calculated based on actual revenue.
“However, when calculating based on actual revenue, it may be higher than the previously estimated revenue. Therefore, some households are apprehensive and react by closing their businesses to see how the implementation will work. They are also worried that if their actual revenue is revealed, the amount of tax payable will not only be higher but they may also be subject to retroactive collection for the previous period,” Mr. Tuan explained. According to Mr. Le Van Tuan, the tax authorities recently stated that if actual revenue is 50% higher than the estimated revenue, the estimated revenue must be adjusted upwards to increase the tax payable. Since actual revenue is often many times higher than the estimated revenue, everyone is now hesitant to issue actual invoices. “Regarding whether or not to collect retroactive tax, there should be clear written guidance to reassure businesses,” Mr. Tuan suggested.
Small business owners are anxiously closing their shops en masse, saying, "Selling is like playing hide-and-seek."
During a meeting with 1,000 business owners nationwide via in-person and online platforms last weekend, lawyer Tran Xoa, Director of Minh Dang Quang Law Firm, observed that business owners are not only worried about the upcoming tax increase but also about being required to pay back taxes from the past when their true revenue is revealed. Several cases shared that the tax authorities had announced they would be required to pay back taxes for the years 2022, 2023, and 2024 amounting to billions of dong, with even the lowest amount being 400 million dong.
“The tax authorities have discovered that some households have annual revenues of 20 billion VND, 30 billion VND, and in some cases up to 52 billion VND… based on invoices issued by companies selling goods to these households. The tax authorities should provide clear written information after business households declare their actual revenue, stating whether they will be subject to retroactive tax collection for previous years and months, so that they can feel secure,” Mr. Tran Xoa suggested.
Proposal to waive the tax and legalize the existing inventory.
A week after the implementation of the point-of-sale system connection with the tax authorities, the main concern for businesses is the lack of invoices and receipts for existing inventory. To cope, many small traders in some temporary markets close down when market management and tax authorities conduct inspections. Ms. Pham Lan (a clothing seller in Tan Binh District, Ho Chi Minh City) admitted that the garment manufacturer she works for refuses to issue invoices, leaving her in a difficult situation. The garment factory also purchases fabric, needles, thread, and accessories without input invoices. “They also pay a flat-rate tax, but they are afraid that requesting invoices from the tax authorities would increase their taxable revenue, so they absolutely refuse,” she explained.
Mr. Le Van Tuan suggested accepting inventory from the previous period, when household businesses lacked invoices to prove their input costs. Accordingly, household businesses could conduct inventory checks and finalize figures from the previous period. From June 1, 2025, if they have switched to declaring their income as household businesses, or from January 1, 2026, when all household businesses, regardless of revenue, must switch to declaring their income, they will be required to have input invoices. This would allow household businesses a transitional period. Mr. Tuan also acknowledged that this could lead to the legitimization of goods without verifiable origin on the market, but stated that there is no other option.
Furthermore, Mr. Le Van Tuan also suggested not collecting back taxes from household businesses for the previous period because the longer this continues, the more likely they are to abandon their business operations. This is not good for either the households or the state. At the same time, he proposed that the authorities study adjusting and reducing the tax rate. Household businesses are family-run operations, relying on labor for profit, so the current tax rate is quite high. If all the expenses incurred by the household business, including labor, are deducted, their profits are not as high as they appear.
Meanwhile, lawyer Tran Xoa informed that the tax authorities have been reviewing businesses selling goods to household businesses to determine their true revenue. To evade detection, household businesses have reduced their purchases to obtain invoices during inspections, while buying goods without invoices or documentation on the market at lower prices to make a profit. Therefore, this implementation of input-output invoice declarations will contribute to combating counterfeit, fake, and unregistered goods on the market.
Sharing the same view, Dr. Nguyen Ngoc Tu, a lecturer at Hanoi University of Business and Technology, emphasized: Compliance with invoices and supporting documents by taxpayers will contribute to combating counterfeit and fake goods in the market. Goods must have a clear origin. Therefore, consumers should also request complete invoices and supporting documents from sellers when purchasing goods. However, to avoid shocking tax increases for businesses and to encourage actual tax declarations, Dr. Tu suggested that state agencies should consider exempting or reducing 50% of the tax for the first two years of tax declaration or exempting personal income tax altogether.
Furthermore, during the initial implementation phase, support for software deployment is needed, along with exemption from administrative penalties for violations in invoice usage, and time for guidance. Penalties should only be imposed if businesses intentionally violate the regulations after guidance. “The goal of requiring businesses to declare actual taxes this time is not necessarily to increase revenue, but rather to promote a digital economy and transparent, fair tax management… To help businesses adapt to these tax changes, there should be policies to support them,” Mr. Nguyen Ngoc Tu stated.
Household businesses with annual revenues of tens of billions of VND should upgrade to enterprises.
Taxpayers should comply with regulations and should not try to evade revenue as before or purchase goods from unofficial sources, because now the tax authorities have a complete database to review the revenue of household businesses. When violations are detected, the amount of back taxes and penalties can be up to 1.5 times the amount of tax evaded. For household businesses with high revenue, tens or hundreds of billions of dong per year, they should consider converting to a company, which will be more beneficial because they can deduct expenses (rent, salaries, social insurance, etc.), not to mention policies encouraging household businesses to convert to companies such as tax exemptions for 3 years…
- Lawyer Tran Xoa
Article source: Thanh Nien Magazine