AMENDED LAW ON VALUE ADDED TAX 2025: FROM 01 JANUARY 2026, THE VAT REVENUE THRESHOLD FOR HOUSEHOLD AND INDIVIDUAL BUSINESSES IS INCREASED FROM VND 200 MILLION TO VND 500 MILLION PER YEAR

Recently, on 11 December 2025, the National Assembly passed the Law Amending and Supplementing a Number of Articles of the 2024 Law on Value Added Tax (“the Amended VAT Law 2025”). This Law focuses on addressing difficulties and obstacles arising in the practical application of the 2024 VAT Law, particularly those relating to the agricultural sector and household and individual businesses. The notable new points are as follows:

1. Increase of the VAT revenue threshold for household and individual businesses from VND 200 million to VND 500 million per year

Under the current regulations, households and individuals engaged in production and business activities with annual revenue of VND 200 million or less are not subject to VAT. This revenue threshold is considered no longer appropriate in light of current socio-economic development, especially given the increasing input costs and expanding scale of operations of household and individual businesses.

The Amended VAT Law 2025 raises the non-VAT taxable revenue threshold for household and individual businesses to VND 500 million per year. This threshold also corresponds to the level at which household businesses are exempt from VAT and personal income tax when the lump-sum tax regime is abolished and replaced by the self-declaration and self-payment tax mechanism starting from early 2026. This adjustment clearly reflects the policy orientation of supporting the household business sector, reducing tax burdens and administrative procedures, and contributing to a more favorable business environment for small-scale business entities.

2. Enterprises purchasing goods that are not subject to VAT for resale to other enterprises are not required to declare or pay VAT but are entitled to input VAT credit

Pursuant to the 2024 VAT Law, products such as crops, planted forests, livestock, aquaculture products, and aquatic products obtained from cultivation or capture that have not undergone processing or have only undergone ordinary preliminary processing, when sold by organizations or individuals directly engaged in production or capture, as well as at the importation stage, are classified as not subject to VAT.

However, this provision did not clearly address whether enterprises or cooperatives purchasing unprocessed agricultural products for resale would also fall under the category of goods not subject to VAT, leading to inconsistent interpretation and application in practice.

The Amended VAT Law 2025 remedies this shortcoming by clearly stipulating that: enterprises and cooperatives purchasing products of crops, planted forests, livestock, aquaculture, or captured aquatic products that have not been processed into other products or have only undergone ordinary preliminary processing, and selling them to other enterprises or cooperatives, are not required to declare or calculate and pay VAT, but are entitled to credit input VAT.

This amendment aims to support and remove difficulties for enterprises in the agricultural sector and is of significant importance in ensuring consistency of tax policy throughout the agricultural supply chain, reducing costs for enterprises engaged in the procurement and distribution of agricultural products, thereby encouraging investment in agriculture and aligning with the nature of goods that have not undergone deep processing.

3. Abolition of certain provisions to ensure consistency with current regulations

The Amended VAT Law 2025 abolishes several provisions relating to VAT calculation methods and VAT refunds, specifically:

• Abolition of the provision stating that “households and individuals engaged in production and business activities who do not implement or do not fully implement accounting, invoicing, and documentation regimes in accordance with regulations shall pay VAT under the lump-sum tax method as prescribed in the Law on Tax Administration”: as from 01 January 2026, the lump-sum tax regime for household and individual businesses will be officially abolished; therefore, the removal of this provision is consistent with the changes in tax legislation.

• Abolition of one VAT refund condition for business establishments, namely: “the seller has declared and paid VAT in accordance with regulations in respect of invoices issued to the business establishment applying for a VAT refund.”

Given that all VAT invoices issued are currently linked to the tax authority’s system, the tax authority is fully capable of monitoring the issuance of invoices by enterprises. The removal of this condition is therefore entirely consistent with practical circumstances and facilitates greater convenience for enterprises.