The ongoing debate about the potential reintroduction of a flat tax for small businesses in Vietnam has gained traction, especially as the country prepares for new tax regulations in 2026. During a recent press conference held by the Ministry of Finance, Deputy Director Mai Son revealed that several associations and experts are advocating for the continuation of a flat tax system for businesses with annual revenues below 5 billion VND.

The Institute of Economics, Resources and Environment (IEER) has submitted a proposal urging authorities to explore solutions that would support domestic consumption and stimulate economic growth during the 2026-2027 period. According to their analysis, retail sales and service revenue have increased by approximately 10.1% compared to the same period last year. However, consumer purchasing power has not fully recovered, as many households continue to tighten their spending due to rising living costs.

Many small businesses are still struggling to adapt to the new tax and electronic invoicing regulations. The fluctuations in fuel and raw material prices on the international market have also increased operational costs, affecting production and consumption activities. In light of these challenges, the IEER has recommended maintaining the flat tax system for businesses earning less than 5 billion VND annually, while encouraging self-reporting and electronic invoicing when transactions occur.

Additionally, the proposal includes enhancing guidance and support for businesses at the grassroots level, while strictly addressing cases of tax evasion rather than treating violations as administrative offenses. This sentiment was echoed by Nguyen Van Than, a member of the National Assembly and President of the Vietnam Association of Small and Medium Enterprises, who suggested a tax framework for businesses with revenues between 500 million and 5 billion VND per year.

Currently, businesses with revenues below 500 million VND are exempt from taxes. However, this threshold equates to just over 40 million VND per month, which many consider too low for various business activities. With approximately 5.2 million small businesses in Vietnam, the tax policy must be tailored to their specific needs.

Over the years, most small businesses, particularly smaller entities, have operated under a cash management system, often lacking comprehensive records of revenue and expenses. The transition to a system based on actual revenue reporting and electronic invoicing starting in 2026 poses significant challenges for many businesses, particularly in terms of document storage and compliance with new regulations.

For businesses with revenues of 1 billion VND or more, the introduction of electronic invoicing also incurs additional costs for investment and operational systems, as well as requiring certain technological skills. Many traditional market vendors and small-scale agricultural producers often lack valid incoming invoices, complicating tax compliance.

Despite the push for a flat tax system, Deputy Director Mai Son noted that eliminating the flat tax in favor of a reporting system is not a new initiative. This approach has been outlined in Resolution 68-NQ/TW on the development of the private economy and further specified in Resolution 198/2025/QH15, along with various action programs from the government.

Son emphasized that the new reporting system reflects the actual business activities and addresses the issue of fluctuating revenues that were not timely updated under the previous flat tax mechanism. Initial data indicates that about 98% of businesses required to report have complied within the deadlines and regulations.

Tax authorities are closely monitoring the implementation process to assist taxpayers, especially during the initial transition phase, to minimize errors arising from unfamiliarity with the new rules. The current policy direction is deemed appropriate and aligned with ongoing reforms in tax management.

Legal expert Tran Xoa argued that reverting to a flat tax mechanism may not align with the reform goals outlined in the resolutions from the Communist Party and the National Assembly. He proposed raising the tax exemption threshold for small businesses from 1 billion VND to around 2.5 billion VND per year, which would ensure fairness in tax obligations across different groups.

According to Xoa, this adjustment would help small businesses overcome initial technological and cost barriers while encouraging compliance with invoicing and tax reporting regulations. Experts agree that carefully considering the choice between flat taxes, fixed taxes, or actual revenue reporting is essential to facilitate small businesses while ensuring transparency in production and management practices.

Phạm Viết Thuận, director of IEER, believes that for small businesses, maintaining a flat tax system remains a viable solution at this stage. He suggests that businesses could fulfill their tax obligations through a fixed tax and report revenues to pay taxes at rates appropriate to their specific sectors. This approach would ease management efforts and align with the characteristics of most small businesses today.