The actual revenue control of business households, traditionally reliant on self-reporting and subjective estimates, is gradually being replaced by a real-time digital monitoring system. This shift reflects both the State’s efforts to enhance management and the ongoing challenges posed by various forms of tax evasion.

As of June 1, 2025, Vietnam’s tax management system for business households entered a pivotal phase. This development marks not only a technological upgrade in tax administration, but also a significant policy milestone aimed at transforming the informal economic sector into one that is transparent and financially accountable. Policy landmark One of the most notable new regulations, effective June 1, 2025, requires business households with annual revenue of VND1 billion or higher to issue electronic invoices through point-of-sale (POS) systems. These invoices must be printed immediately upon transaction and transmitted in real time to the General Department of Taxation. This system is designed to ensure complete transparency in sales reporting, leaving no room for off-the-books transactions. In addition to business households, the regulation extends to sectors deemed at high risk of tax loss, such as food and beverage, retail, beauty care, repair, and lodging, even if businesses in these sectors generate less than VND1 billion annually but utilize cash registers. Alongside enhanced revenue monitoring, the regulation of deductible expenses is also being tightened. Starting July 1, 2025, all expenses deemed deductible for taxable income calculations must be supported by payment documents issued through banks or other non-cash methods. This policy aims to increase transparency in cash flow, combat fraudulent cost declarations, and accelerate the shift toward a cashless economy. In practice, the regulation also encourages business households to open formal bank accounts for their transactions, moving away from the use of personal accounts or cash as commonly seen in the past. More importantly, starting January 1, 2026, Vietnam will officially abolish the lump sum tax, a long-standing form of taxation based on negotiated fixed annual payments between taxmen and business households, which often leads to collusion. Under the new approach, business households must declare their actual revenues monthly or quarterly, issue invoices for every transaction, and calculate taxes based on a fixed percentage specific to each business sector. To ease the transition, from July 1 to December 31, 2025, business households earning between VND100 million and VND1 billion annually—and not yet required to use electronic invoices via POS systems—may choose between the declaration method and the lump sum tax. This transitional measure is designed to give smaller business households time to prepare in terms of staffing, technological infrastructure, and accounting practices before fully shifting to the new system. Under Circular 40/2021/TT-BTC, business households with annual revenue below VND100 million remain exempt from value-added tax and personal income tax. However, once revenue exceeds this threshold, taxes must be paid based on a fixed percentage tied to the specific line of business. In tandem with reforms to the tax collection mechanism, the Government is advancing a policy to transition five million business households into registered enterprises. This initiative aims to broaden the formal economic sector, safeguard the interests of business owners, and bolster State management capabilities. Newly established enterprises may benefit from a range of incentives, including corporate income tax exemptions during their initial years, waivers of business license fees, free issuance of tax codes, support for adopting accounting software and e-invoicing solutions, and simplified guidance for business registration procedures. Various tax evasion tricks and treatment Despite ongoing reforms, many business households continue to engage in common forms of tax evasion. Some request customers to make payments in cash or transfer funds via bank accounts with misleading descriptions such as ‘wedding gift,’ ‘savings deposit,’ or ‘personal debt payment’ to avoid detection. Others divert payments through accounts belonging to relatives or employees to obscure actual cash flows. Issuing invoices only upon request—or not at all—is also a popular practice. Additionally, some business households register multiple businesses under different names to keep their revenues below taxable thresholds or outside the scope of mandatory electronic invoicing. Misreporting business types to benefit from lower tax rates is another tactic. Moreover, the use of fake input invoices to inflate expenses and reduce taxable income is prevalent, and in some cases, this practice is exploited to legitimize unreported activities in the e-commerce space. In response, the tax authorities have implemented a comprehensive suite of technical and professional measures. These include the mandatory use of electronic invoices with certified verification codes, direct connection to the tax agency’s system, and cross-verification of transaction data sourced from commercial banks, e-wallets, e-commerce platforms, delivery services, and sales management software providers. The tax authority also leverages a risk assessment system to classify business households by risk level for targeted inspections. Mobile inspection teams are actively deployed in areas with dense business activity, equipped to conduct real-time monitoring, on-the-spot checks, and video documentation to gather evidence. Additionally, the public is encouraged to report violations through hotlines and anonymous whistleblower channels. Despite ongoing reforms, several practical challenges persist. The adoption of electronic invoicing remains incomplete in remote and underserved areas, while cash remains the dominant mode of payment among the public. Efforts to trace financial flows through the accounts of relatives or employees of business households are also constrained by legal privacy protections. Furthermore, local tax authorities face resource limitations that hinder their ability to conduct large-scale inspections. A more fundamental issue lies in public perception—awareness of tax obligations among business households remains uneven, with many still viewing taxation as a burden rather than a legal and social responsibility. Some international experiences International tax administration practices offer good lessons. Japan has implemented the ‘My Number’ personal identification system, which links individuals’ bank accounts, properties, and income sources to track irregular financial activities. In Mexico, artificial intelligence is used to cross-check e-commerce order volumes with declared revenues to identify potential tax evasion. France and Spain have adopted a fiscalization model that requires invoices to be issued from cash registers directly connected to the systems of tax authorities, ensuring transparency at the point of sale. Meanwhile, countries like Singapore and South Korea integrate tax data with financial, insurance, and business registration systems to enable multi-channel risk monitoring. Drawing from both international experience and Vietnam’s current landscape, it is clear that tax reform for business households must go beyond mandatory regulations. A comprehensive support mechanism—encompassing financial, technological, and communication assistance—is essential. This includes substantial investment in technical infrastructure such as invoicing software, internet-connected cash registers, and digital skills training for business households. Equally important is fostering a culture of tax compliance through widespread communication campaigns, community-based education, and transparent incentive policies. A modern tax ecosystem must strike a balance between enforcement, encouragement, support, and technology to avoid the scenario where the tax authority combats evasion in isolation. Ultimately, an effective tax system is not only one that maximizes collection but also fosters the perception that tax payment is fair, reasonable, and convenient. In doing so, tax reform can ensure sustainable budget revenues while cultivating a transparent, competitive, and resilient business environment.

(*) Phuoc & Partners Law Company Limited