VAT Exemption For Annual Revenue Of 200 Million VND Or Less: Detailed Guide For Business Households And Individuals From July 1, 2025

Effective from July 1, 2025, the amended Law on Value Added Tax (VAT) will officially come into force. This is an important period that requires transparency and consistency in tax policy implementation, especially concerning regulations related to VAT exemption for business households and individuals with low revenue.

Clarifying the criteria for determining this revenue level is extremely necessary to ensure uniform application nationwide.

Who Is Eligible For VAT Exemption Under The New Law?

According to the provisions in Clause 25, Article 5 of the Law on VAT, entities eligible for VAT exemption include:

• Goods and services of business households and individuals with annual revenue of 200 million VND or less.

In addition, several other cases are also eligible for VAT exemption, including:

• Assets of non-business organizations and individuals, which are not sold by VAT taxpayers.
• National reserve goods sold by the national reserve agency.
• Fee and charge collections according to the law on fees and charges.

How Is Taxable Revenue Currently Determined?

Currently, the determination of revenue for VAT and Personal Income Tax (PIT) calculation for business households and individuals is specifically guided by Circular No. 40/2021/TT-BTC of the Ministry of Finance.

According to this Circular, revenue is determined as the total amount arising from the sale of goods and provision of services, including bonuses, support, discounts, surcharges, additional charges, and compensation received during the tax period, regardless of whether the money has been collected or not.

Why Are More Detailed Regulations On The Exempt Revenue Level Needed?

Although there are already regulations on the 200 million VND revenue threshold and general revenue determination methods, the Ministry of Finance believes that to fully synchronize with the system of law on tax administration and create a strong legal basis, more detailed regulations are needed on how to specifically determine the revenue level of business households and individuals eligible for VAT exemption according to the new regulations.

The issuance of these detailed regulations aims to correctly implement the content assigned in the Law on VAT, while ensuring consistency and avoiding overlap between the Law on VAT and the Law on Tax Administration. This will help:

• Tax authorities and taxpayers have a basis for uniform application.
• Minimize difficulties and issues that may arise during practical implementation.

What Does The Draft Decree Clarify Regarding Exempt Revenue?

In the draft Decree detailing the implementation of a number of articles of the amended Law on VAT, which is currently being drafted, Clause 25, Article 3 provides detailed regulations on non-taxable entities. Specifically, the draft states:

Goods and services of business households and individuals with annual revenue of 200 million VND or less are considered non-taxable for VAT.

More importantly, the draft emphasizes that the determination of the annual revenue level of business households and individuals for applying this regulation shall comply with the provisions of the law on tax administration.

Benefits Of These Detailed Regulations

According to the Ministry of Finance, these detailed regulations bring many practical benefits:

• From a legal perspective: They ensure consistency with the Law on VAT and related legal provisions, and do not conflict with international commitments to which Vietnam is a member.
• From a socio-economic perspective: Clearly determining the revenue threshold does not generate additional compliance costs or tedious administrative procedures for taxpayers. At the same time, this regulation does not hinder the production and business activities of organizations and individuals.

The supplementation and clarification of revenue determination methods in the draft Decree is a solution consistent with the authority delegated by the National Assembly, significantly contributing to ensuring enforceability, transparency, and consistency in VAT administration, particularly for small-scale business households and individuals in Vietnam.