Handling and Procedures for Household Business Tax Settlement 2026

From 2026, according to Decision 3389/QD-BTC, the lump-sum tax regime for household businesses will be officially abolished. This is a revolutionary change in tax management, particularly affecting how household businesses in Vietnam settle their taxes.

The particularly important point is that Group 2 and Group 3 are required to perform annual tax settlement – a completely new requirement compared to current regulations. Understanding the documentation and settlement procedures for each revenue group is a prerequisite for household businesses to comply with the law and avoid tax risks.

Concepts Household Businesses Must Grasp

According to Article 79 of Government Decree 01/2021, a household business is understood as follows:

Official Definition:

• Subject: Individuals or members of a registered household for establishment
• Legal Liability: Liable unlimitedly with all their assets

IMPORTANT NOTE: Unlimited liability means that all your personal assets (regardless of personal bank accounts or business accounts) can be used to pay the obligations of the household business.

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Important Legal Characteristics:

• ✅ No legal entity status - You are an individual, not a legal entity
• ✅ Establishment limit - An individual/household can only establish 01 single household business
• ✅ Member restrictions: Cannot simultaneously be the owner of a private enterprise; Cannot be a general partner of a general partnership

Classification of Household Businesses by Revenue (From 2026)

Decision 3389/QD-BTC divides household businesses into 3 groups based on annual revenue:

Documentation and Settlement Procedures by Group

GROUP 1: Annual Revenue Under 100 Million VND

Characteristics:

• Tax Method: Fixed tax rate by industry
• Annual Tax Settlement: NOT mandatory
• Declaration: Quarterly or annually (optional)

Documents to Prepare:

• 📄 Simplified VAT and Personal Income Tax declaration forms
• 📄 Household Business Registration Certificate
• 📄 Proof of revenue (if required by tax authorities)

Procedure:

1. Submit tax declarations periodically (quarterly/annually)
2. Pay tax at the fixed tax rate
3. No need to prepare financial statements

Advantages: Simple procedures, no time spent on detailed report preparation

GROUP 2: Annual Revenue From 100-500 Million VND

Characteristics:

• Tax Method: Declared based on actual revenue and expenses
• Annual Tax Settlement: MANDATORY (major change from 2026)
• Declaration: Quarterly

Annual Tax Settlement Documents (NEW):

Personal Income Tax Settlement Declaration (Form 02/QTT-TNCN)

Basic accounting records:

• Income and expenditure ledger
• Inventory tracking ledger (if any)
• Fixed asset ledger (if any)

Supporting documents:

• Sales and service invoices
• Proof of eligible expenses (purchase invoices, rent, electricity bills...)
• Bank statements (business account statement)

NEW REQUIREMENT: Must have a separate bank account for business activities to easily track and prove revenue and expenses

Annual Tax Settlement Procedure:

Step 1: Summarize all revenues and expenses for the year

• Collect all sales invoices
• Collect all valid expense documents

Step 2: Prepare the tax settlement declaration

• Fill in complete revenue and expense information
• Calculate taxable income = Revenue - Eligible expenses
• Determine the tax payable according to the progressive tax bracket

Step 3: Submit the settlement documents

• Submit directly at the managing Tax Department
• Or submit through the electronic system (if you have a digital signature)
• Deadline: Before March 31 of the following year

Step 4: Pay tax (or claim refund)

• If insufficient: Pay the remaining tax
• If overpaid: Process for refund or carry forward to the next period

ADVICE: It is recommended to open a separate bank account for business from the beginning of the year to easily track and have clear supporting documents for settlement

GROUP 3: Annual Revenue From 500 Million VND Upwards

Characteristics:

• Tax Method: Declared like a business
• Annual Tax Settlement: MANDATORY (similar to Group 2 but more rigorous)
• Declaration: Monthly
• Accounting: Professional accounting services are encouraged

Annual Tax Settlement Documents (DETAILED):

Personal Income Tax Settlement Declaration (Form 02/QTT-TNCN)

Complete accounting record system:

• General ledger
• Revenue detailed ledger
• Expense detailed ledger
• Inventory tracking ledger
• Fixed assets and depreciation ledger

Basic financial statements:

• Income statement
• Trial balance

Complete supporting documents:

• All input/output invoices
• Economic contracts (if any)
• Business bank account statements (MANDATORY)
• Payment documents via bank

⚠️ MANDATORY: Must have a separate bank account for business activities and prioritize non-cash payments for clear documentation

Annual Tax Settlement Procedure:

Step 1: Close accounting books at year-end

• Summarize all business transactions
• Verify the validity of supporting documents
• Reconcile with bank statements

Step 2: Prepare financial statements

• Income statement
• Determine taxable profit
• Adjust for any ineligible expenses (if any)

Step 3: Prepare the settlement declaration

• Declare full revenue and expenses
• Calculate personal income tax based on the progressive bracket
• Reconcile with taxes temporarily paid during the year

Step 4: Submit documents and settle

• Submit documents before March 31 of the following year
• Pay any outstanding tax (if any) within 10 days of submitting the settlement declaration
• Or process for a tax refund

RECOMMENDATION: Group 3 should hire a professional accountant or use accounting software to ensure accuracy and full compliance

Comparison of Changes Before and After 2026

Benefits of Correct Tax Settlement

• ✅ Legal Compliance: Avoid administrative penalties for tax violations (fines from 10-20% of underpaid tax)
• ✅ Financial Transparency: Easily manage actual revenue, expenses, and profits of the household business
• ✅ Legal Tax Savings: Eligible expenses can be deducted, potentially reducing the tax payable compared to the old lump-sum tax (for Groups 2, 3)
• ✅ Easier Loan Access: Financial statements help banks/credit institutions assess repayment ability
• ✅ Foundation for Growth: Clear accounting records serve as a basis for conversion to a business later

Important Notes to Remember

Regarding legal liability:

• Remember that you have unlimited liability - all personal assets can be used to pay tax obligations
• All funds received into personal or business accounts are considered household revenue

Regarding bank accounts:

• Groups 2 and 3 SHOULD open separate bank accounts for business from the beginning of the year
• Limit cash transactions, prioritize bank transfers for clear documentation
• Do not mix personal and business funds

Regarding documentation:

• Keep all valid invoices and expense documents (with VAT if applicable)
• Expenses without supporting documents will not be deductible when calculating tax
• Store documents for at least 5 years

Regarding deadlines:

• Annual tax settlement: Before March 31 of the following year
• Payment of underpaid tax: Within 10 days from the date of submitting the settlement declaration
• Late submission will incur a penalty of 0.03%/day for late payment