Circular No. 11/CĐ-CT (2026): Major Changes to Taxation of Sole Proprietorships
1. General Information
On April 29, 2026, the Tax Department issued Circular 11/CĐ-CT to implement Decree 141/2026/NĐ-CP on amendments to tax policies for household businesses, individual businesses, and corporate income tax.
The Circular requires tax authorities nationwide to urgently organize the implementation, conduct publicity campaigns, and prepare the necessary conditions for enforcement, ensuring the new policies are applied uniformly and effectively.
2. Key Change: Raising the Tax Exemption Threshold to 1 Billion VND/Year
The most important point is:
- Increase the revenue threshold exempt from VAT and personal income tax for business households from 500 million VND to 1 billion VND per year.
This is a “pivotal” change that directly impacts the majority of small-scale business households, helping to:
- Reduce tax obligations;
- Increase the ability to accumulate and reinvest;
- Encourage the maintenance and expansion of business operations.
3. Introduce corporate income tax exemption policies
Directive on implementing new regulations:
- Businesses with annual revenue ≤ 1 billion VND are exempt from corporate income tax.
This regulation reflects the trend:
- Support for micro-enterprises;
- Creating a “buffer zone” between household businesses and enterprises;
- Encourage the transition to a formal business model.
4. Transitional Provisions: Handling Cases Where Taxes Have Already Been Paid
Circular clarifying practical situations:
- Business households that have paid taxes but have revenue ≤ 1 billion VND:
→ The taxes already paid will be handled in accordance with regulations (refund, offset, etc.). - Businesses that have provisionally paid corporate income tax for Q1 2026:
→ If eligible for tax exemption, they are not required to pay for subsequent quarters and the overpayment will be processed. - Tax period for 2025 extending into 2026:
→ Tax exemption applies to the period starting January 1, 2026, if eligible.
These regulations help prevent taxpayers from being disadvantaged during the policy transition period.
5. Implementation Requirements: System-wide Tax Coordination
The directive emphasizes:
- Tax authorities at all levels must organize widespread publicity to taxpayers;
- Prepare systems, data, and procedures for implementation;
- Ensure consistent application nationwide.
This highlights the urgency and broad scope of the policy.
6. Policy Significance
Directive 11/CĐ-CT is not merely a technical implementation document but carries clear policy significance:
- Reducing the tax burden on small businesses;
- Promoting business formalization;
- Facilitate the transition from household businesses to enterprises;
- Contribute to expanding the tax base in a sustainable manner.
7. Impact on businesses and the market
For business households:
- Most will be exempt from taxes if they are small-scale;
- Increase financial flexibility for business development;
For small businesses:
- Reduce tax burdens during the initial phase;
- Encourage the establishment of new businesses;
For the economy:
- Increase transparency and formalize the informal sector;
- Improving the business environment.
Circular 11/CĐ-CT 2026 is a key implementation step of the new tax policy under Decree 141, with a focus on raising the tax exemption threshold – supporting small businesses – and increasing flexibility in tax administration. This is considered one of the most notable reforms in current tax policy, directly impacting millions of business households and small enterprises in Vietnam.
