Abolition Of The Lump-Sum Tax On Business Households By 2026 – Strategic Solution For Private Economic Development

On May 4, 2025, the Politburo issued Resolution No. 68-NQ/TW on the development of the private sector, which includes a notable policy directive: to abolish the lump-sum tax regime for household businesses no later than 2026.

Context And Objectives

After nearly 40 years of Đổi Mới (Renovation), Vietnam’s private sector has continuously grown in both quantity and quality, becoming one of the key drivers of the socialist-oriented market economy. However, this sector still faces major obstacles—particularly its small scale, weak competitiveness, and inability to reach its full potential to become a core force of the national economy.

According to the Resolution, the main reasons hindering private sector development include:

• Inadequate awareness of the role of the private economy;
• Institutional and legal bottlenecks;
• Insufficiently strong leadership and direction;
• Insecure property rights and business freedom;
• Difficulties in accessing key resources (capital, land, technology, high-quality human resources);
• Ineffective support policies and high business costs.

Reform Directions And Solutions

To foster robust and sustainable development of the private sector, the Politburo has emphasized the need for comprehensive, breakthrough solutions to transform perceptions, unify actions, and reform governance. Among the prominent solutions is the abolition of the lump-sum tax regime, which has been identified as a significant barrier to the transition from household businesses to formal enterprises.

Why The Lump-Sum Tax Should Be Abolished

1. Lack of transparency and potential for misconduct
   The lump-sum tax is determined mostly based on estimated revenue rather than actual transactions, creating space for “dual tax rates” and off-the-record arrangements between businesses and tax officials.
2. Does not reflect true business capacity
   Some household businesses with high income pay very low tax, while others with modest income are subject to unreasonably high tax rates.
3. Distorts the competitive landscape
   Formal enterprises are subject to strict tax compliance, while lump-sum taxpayers often receive preferential treatment, prompting some companies to fragment operations to avoid taxes.
4. Inconsistent with digital transformation goals
   The lump-sum tax contradicts efforts to digitize the tax sector and does not encourage transparent, well-documented business practices.

The Significance Of Abolishing The Lump-Sum Tax

• Encouraging business transparency
  Household businesses will be required to properly manage records and revenue, creating a solid foundation for transitioning into full-fledged enterprises.
• Improving tax collection efficiency
  The state can ensure more accurate and adequate tax collection based on real data instead of estimates.
• Establishing a fairer business environment
  Household businesses and formal enterprises will be managed under a unified framework, reducing inequalities and promoting healthy competition.
• Aligning with international tax reform and integration
  Eliminating the lump-sum tax brings Vietnam’s tax system closer to international standards and supports broader financial sector reforms.

Strategic Implications

The abolition of the lump-sum tax is not merely a technical tax administration adjustment—it represents a strategic shift, underscoring strong political commitment to fostering business model transformation, enhancing transparency, and building a more equitable competitive environment.

This is a necessary step aligned with the requirements of digital transformation and international integration, contributing to the realization of the Party’s 13th National Congress goal of turning the private economy into a true driving force of the national economy.

TPM encourages household and individual businesses to proactively prepare for the transition, especially in areas such as accounting, invoicing, and tax obligations. To ensure a smooth and compliant transition process, it is essential to work with certified and experienced tax agents.

If you are a household or individual business owner seeking support with tax filing, bookkeeping, financial reporting, or transitioning to an enterprise model, please contact TPM Tax Agency for tailored consultation and dedicated support throughout the transformation journey.