Steps for Decision-Making for Household Businesses with Revenue Exceeding VND 3 Billion 

1. Revenue above VND 3 billion – why is it becoming a major concern for household businesses?

Revenue exceeding the VND 3 billion threshold is increasingly becoming a significant pressure for many household businesses, particularly due to concerns surrounding personal income tax calculated on profits. This is not merely a cost issue, but also a long-term sustainability question regarding the viability of the household business model itself.

From this reality, many household business owners begin to raise very practical questions:

• Is the household business model still truly suitable in the coming period?
  
• Or is it time to transition to a corporate/business entity model in order to optimize costs and tax obligations in a lawful and more sustainable manner?
  

At present, legal guidance documents are still not sufficiently clear, especially regarding regulations on deductible expenses and future tax determination methods. This lack of clarity has caused many household businesses to remain passive in financial and tax planning.

From a cautious and long-term perspective, TOPA approaches this issue by assessing each case individually and designing tailored solutions for each business model—helping household businesses become more proactive, regardless of which tax calculation method may be applied in the future.

2. Core principles that must be correctly understood under tax law

Before comparing business models, household businesses need to clearly understand a fundamental principle:

Profit = Revenue – Tax-deductible expenses

In which tax-deductible expenses are a relatively new concept and are still widely misunderstood by many household businesses today. This is also the area where the greatest risks arise during inspections, audits, tax finalization, or tax arrears recovery.

3. Steps household businesses should take when projected revenue exceeds VND 3 billion

Step 1. Review and audit all Revenue – Expenses (the most critical step)

Review all revenue and expenses

Revenue note:
All revenue must be recorded in the household business account, not transferred into personal accounts.

Household business expenses should be categorized into the following groups:

• Expenses with VAT invoices (invoices issued by enterprises)
  
• Expenses with sales invoices bearing tax authority codes (invoices issued by household businesses)
  
• Expenses without invoices or without tax authority–verified documents in Vietnam, which can be further subdivided into:
  
  • Advertising expenses on certain platforms (Facebook, TikTok, or other platforms)
    
  • Personnel/employee hiring costs
    
  • Payments to individuals where no invoice can be obtained
    

Currently, many household businesses have not proactively worked with suppliers to obtain invoices, instead waiting for clearer legal guidance. From TOPA’s perspective, this represents a very significant risk, because from 2026 onwards, having valid invoices will become a mandatory requirement and a key safeguard in many arising situations.

Step 2. Build a projected tax obligation calculation while maintaining the household business model

After fully listing all revenue and expenses, household businesses should prepare a tax calculation table for all payable taxes, and should not overlook additional incurred costs, such as:

• Social insurance contributions for employees
  (In reality, many household businesses currently do not sign labor contracts with their employees.)
  
• Additional costs required to obtain valid invoices from suppliers
  

Example for a trading household business:

	Amount inclusive of VAT	Amount exclusive of VAT	Value Added Tax (VAT)	Conditions	Incurred costs
Revenue	1.000.000.000	1.000.000.000	10.000.000
Costs	885.400.000	885.400.000			24.500.000
Expenses with VAT invoices	400.000.000	400.000.000	0		20.000.000
Expenses with sales invoices issued by household businesses	300.000.000	300.000.000			4.500.000
Expenses without invoices (purchases from individuals)	20.000.000	20.000.000
Salary expenses	150.000.000	150.000.000		10 employees with an average salary of VND 15 million, with social insurance contributions of VND 7 million per month
Social insurance contributions	15400000	15.400.000
Profit		114.600.000
Taxes
Value Added Tax (VAT)	10.000.000
Corporate Income Tax (CIT)	19.482.000

Step 3. Prepare a projection scenario if converting to a business enterprise model

Similar to Step 2, household businesses should prepare a projected financial and tax calculation table for the scenario in which they convert to a corporate/business enterprise model.

	Amount inclusive of VAT	Amount exclusive of VAT	Value Added Tax (VAT)	Conditions	Incurred costs
Revenue	1.000.000.000	925.925.926	74.074.074
Costs	885.400.000	855.770.370			24.500.000
Expenses with VAT invoices	400.000.000	370.370.370	29.629.630		20.000.000
Expenses with sales invoices issued by household businesses	300.000.000	300.000.000			4.500.000
Expenses without invoices (purchases from individuals)	20.000.000	20.000.000
Salary expenses	150.000.000	150.000.000		10 employees with an average salary of VND 15 million, with social insurance contributions of VND 7 million per month
Social insurance contributions	15400000	15400000
Profit		70.155.556
Taxes
Value Added Tax (VAT)	44.444.444
Corporate Income Tax (CIT)	11.926.444	Tax exemption for the first 2 years upon conversion from a household business

4. Why Steps 2 and 3 are extremely difficult if household businesses lack tax knowledge

Steps 2 and 3 may appear to be simple spreadsheet exercises, but in reality, they are very challenging for household businesses because most are not accustomed to distinguishing between actual cash expenses and tax-recognized (tax-deductible) expenses. This often leads to inaccuracies in profit determination and tax obligation calculations.

Just a single error—such as incorrect revenue recognition, misclassification of expenses, or omission of arising costs like social insurance contributions or invoice formalization costs—can significantly distort the comparison results between the household business model and the enterprise model.

Therefore, in order to make the right decision, household businesses must perform Step 1 thoroughly and accurately to obtain data that truly reflects reality. Only then can they rely on professional accounting and tax consultants to prepare the projections in Step 2 and Step 3 in a careful, compliant, and appropriate manner.

5. Conclusion: The choice of business model must not be driven by emotion

Preparing a comparative analysis between the household business model and the enterprise model enables household businesses to:

• Clearly understand their actual tax liabilities
  
• Anticipate additional arising costs
  
• Proactively plan their future financial strategy
  

More importantly, this decision should not be based on intuition or emotion, but must be grounded in data, tax law, and real risk exposure.

ARTICLES FOR HOUSEHOLD BUSINESSES:

Comparison between converting to an Enterprise and remaining a Household Business with revenue exceeding VND 3 billion

Personal Income Tax Law Amendment 2025: What Should Household Businesses Pay Attention To?

How Will the 2026 Tax Law Impact Household Businesses on E-commerce Platforms?