Supporting small traders in tax reform transition

ĐBP - Lump-sum taxation has long been a common method for collecting taxes from small and informal household businesses in Vietnam. However, this model is increasingly seen as outdated, lacking transparency and fairness. In response, a shift toward taxation based on actual revenue, linked with e-invoices generated from point-of-sale (POS) systems, marks a breakthrough in tax reform. Yet, the transition has posed challenges for many traders in Điện Biên province, who are unfamiliar with digital tools and new processes. Prompt and close support from tax authorities is crucial to help small business owners embrace change and feel secure in their operations.

Lump-sum taxes are calculated based on estimated revenue, profit margins, and business conditions. While convenient in the absence of detailed data, this method has proved unfair. Many traders report having to pay fixed monthly taxes regardless of poor sales or low consumer demand. In some cases, businesses of similar type and scale are taxed at different levels, leading to perceived inequality and potential for abuse.

Nguyễn Thị Nguyệt, a vendor in Mường Thanh ward, pays about VND 600,000 in taxes monthly. She expressed concern that the fixed tax rate doesn’t reflect her actual business performance: “There are times when customer traffic is low and sales are halved, but my tax amount remains the same, with no consideration for reduced income.” The inflexible nature of lump-sum taxes has placed a burden on small traders during economic downturns.

Market management forces inspect goods in Mường Nhé commune.

To promote a fair and transparent business environment, the National Assembly has passed Resolution No.198/2025/QH15, which abolishes lump-sum taxation for individual and household businesses starting in 2026. Meanwhile, Decree No.70/2025/NĐ-CP, amending Decree No.123/2020/NĐ-CP on invoices and records, mandates that from June 1, 2025, all businesses with annual revenue of VND 1 billion or more must stop using lump-sum taxation and instead issue e-invoices via cash registers connected to the tax system.

Điện Biên currently has around 20,000 household businesses. Transitioning to actual-revenue-based tax collection and e-invoicing is a necessary step toward greater transparency in tax administration. This approach enables authorities to better monitor business activities and fosters fairness by ensuring that taxes are paid based on actual earnings, addressing the issue of those who "earn less paying more while others underreport and evade taxes."

However, many local traders are still struggling to adapt to the new system. Some have responded by raising prices; others at markets such as Noong Bua, Central Market 1, Him Lam Plaza, and shops along Võ Nguyên Giáp and Nguyễn Chí Thanh streets have even temporarily shut down out of concern. Some have attempted to avoid digital taxation by refusing bank transfers, accepting only cash, or instructing customers to use vague transaction descriptions like “loan repayment” or “delivery fee”.

L.T.T., a trader at Noong Bua Market, shared: “Since June 1, when the new e-tax rules took effect, many vendors have been anxious. We’re unfamiliar with the procedures for tax declaration, using POS systems, or issuing e-invoices. Some of us chose to close temporarily to wait for more guidance and prepare for changes.”

E-invoice implementation poses difficulties for traders in remote areas. In photo: Locals shop at a grocery store in Sín Thầu commune.

A representative from Tax Department Zone IX (covering Sơn La, Điện Biên, Lai Châu) emphasized that refusing non-cash payments or requesting vague payment descriptions does not reduce tax obligations, in fact, these are red flags for possible tax evasion. Additionally, demanding extra fees for non-cash transactions may constitute a violation of the law. Rather than dodging tax, the focus should be on adapting to new policies, understanding them fully, and complying with obligations.

The abolition of lump-sum taxes is a significant milestone in tax reform, paving the way for a more equitable and transparent business environment. Proper implementation will not only reassure small traders but also stimulate the development of the private sector. Yet in provinces with limited resources like Điện Biên, implementation remains a challenge, many traders are unfamiliar with digital tools and lack the skills for e-tax filing.

To use e-invoices via POS systems, household businesses must invest in cash registers, receipt printers, compatible sales software, register their systems, and obtain a digital signature for invoice issuance. Only after completing these steps and receiving tax authority approval can they legally issue e-invoices. This process requires both initial investment and new technical skills, a steep learning curve for those used to traditional sales methods.

To ease the transition and build trust, the government needs a clear and gradual roadmap, avoiding sudden disruptions. Functional agencies should establish advisory and technical support systems, and provide detailed guidance on the rights and responsibilities under the new tax regime. Temporary tax relief should be considered for those affected by natural disasters or other hardships. Special attention should also be given to traders in remote areas without access to digital infrastructure.

Nguyễn Thị Vân, a vendor at Central Market 1 in Điện Biên Phủ ward, has been in business for over 10 years. She acknowledges that issuing e-invoices from a POS system is a new workflow that requires learning, but sees its value: “Previously, I paid a fixed tax. Now that it’s abolished, I’ve registered to declare and pay taxes based on my actual revenue. This system benefits traders, because now we only pay tax when we actually make sales,” she added.

By 2026, all household and individual businesses must declare taxes based on actual revenue. Though not all are currently required to use e-invoices (except those earning over VND 1 billion annually), early preparation in awareness, skills, and tools is critical. Understanding the rules helps ensure legal compliance and allows traders to continue their businesses with confidence and sustainability throughout this transition.

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