Millions of "business households" with revenues between $8,000 and $120,000 USD may soon be required to adopt formal accounting, marking a significant move towards economic formalization.
HANOI — Vietnam's vibrant economy, long characterized by the dynamism of its "business households" (hộ kinh doanh), may be on the verge of a significant regulatory transformation. The Ministry of Finance is actively discussing a sweeping proposal that would fundamentally change the rules of the game for millions of small-to-medium-sized enterprises.
The focus of the discussion is a new accounting regulation targeting businesses with annual revenue in the "middle-tier" a critical bracket ranging from 200 million VND (approx. $8,000 USD) to 3 billion VND (approx. $120,000 USD).
This move signals a decisive shift away from simplified, presumptive tax models and towards a more formal, transparent, and modern economic structure.
Why This Matters: The "Grey Area"
For decades, business households which include everything from popular street-side phở stalls and family-run cafés to local manufacturing workshops and retail shops have operated under a simplified tax system. Many in this bracket currently pay a "presumptive" or "flat-rate" tax based on estimated revenue, a system that is easy to manage but lacks transparency.
The government's proposal stems from a growing recognition that this "middle-tier" is no longer "micro." These businesses are a powerful economic engine, but their current accounting methods create challenges:
The Tax Gap: Authorities believe a significant amount of tax revenue is lost due to the difficulty of accurately assessing the true income of these businesses.
Lack of Data: The national economy struggles to capture accurate data from this massive sector, hindering effective policy-making.
Unlevel Playing Field: Formally registered companies (SMEs) face a higher compliance burden (full accounting, VAT, audits), creating an unfair advantage for less-transparent household businesses with similar revenues.
What Would the New Policy Change?
While still under discussion, the proposal is expected to move these businesses from "presumptive" taxation to "declarative" accounting.
Instead of simply paying a flat rate, these business owners would likely be required to:
Maintain Formal Books: This means tracking all revenue, expenses, and inventory.
Issue and Store Invoices: Mandating the use of proper invoices (potentially electronic invoices, or hóa đơn điện tử) for transactions.
File Declarations: Submit periodic reports on their actual financial performance, much like a formal company.
This represents a seismic shift from a "cash-in-a-drawer" mindset to a fully documented financial system.
The Ground-Level Impact: A "Necessary Headache"?
For Vietnam’s millions of small business owners, the proposal is being met with a mix of understanding and apprehension.
The Challenges (The "Headache"):
Compliance Costs: Owners fear the new costs of hiring an accountant or subscribing to accounting software.
Complexity: A pho shop owner, a master of noodles, may feel overwhelmed by the prospect of balance sheets and VAT declarations.
Increased Tax Bill: The primary fear is that transparency will lead to a higher tax burden. "If they know exactly what I make, my taxes will go up," is a common sentiment.
The Opportunities (The "Necessary"): However, experts argue this formalization is a crucial step for the businesses themselves.
Access to Credit: With formal financial records, a business household can far more easily apply for and receive bank loans to expand, buy new equipment, or hire staff.
Better Management: Accurate bookkeeping provides owners with real insights into their own profitability, cash flow, and costs, allowing them to make smarter business decisions.
Professionalization: This step is the bridge for a successful "hộ kinh doanh" to transition into a formal, sustainable company (SME).
The Big Picture: Vietnam's Maturing Economy
This proposed policy is not happening in a vacuum. It is a key piece of Vietnam's broader national strategy, which includes digital transformation and economic formalization. By bringing this massive "grey economy" into the light, the government aims to build a more resilient, transparent, and fair economic foundation that can attract further international investment.
The coming months will be critical as regulators gather feedback from business associations and the public. The key challenge will not be if this change happens, but how the government supports its implementation potentially through subsidized accounting software, training programs, and a phased-in, multi-year roadmap to ensure its millions of small business owners are brought along, not left behind.