Government Decree 398/2026: 30% Tax Reduction for Small Businesses and Individual Traders with Revenues Under VND 10 Billion
The Vietnamese Government has officially enacted Decree No. 398/2026, introducing a significant fiscal support measure that grants a 30% reduction in personal income tax and corporate income tax for eligible individuals and business entities. This targeted tax relief initiative is specifically structured for taxpayers whose annual revenues do not exceed VND 10 billion, covering the tax periods of both 2026 and 2027. By lowering the tax burden on micro, small, and medium-sized economic actors, the policy aims to foster economic resilience, stimulate domestic production, and accelerate post-recovery growth across various commercial sectors.
Scope of the 30% Tax Reduction Policy
Under the newly minted Decree 398/2026, the 30% tax reduction applies directly to the payable personal income tax and corporate income tax obligations for the 2026 and 2027 tax years. The regulation sets a clear threshold, ensuring that the relief is exclusively channeled toward smaller-scale commercial participants.
For individual business operators, the policy encompasses resident individuals engaged in production and business activities. This includes individuals who have formally registered to establish business households, as well as situations where household members authorize a designated representative to act on behalf of the business household. The calculation of the tax reduction is streamlined: it applies to the total personal income tax amount arising from all production and business activities of the individual taxpayer, irrespective of the specific method utilized to compute their personal income tax liabilities.
For corporate entities and organizations, the reduction applies to enterprises whose total annual revenue for the years 2026 and 2027 remains at or below the VND 10 billion ceiling. Eligible corporate beneficiaries include businesses established under the laws of Vietnam, cooperatives and cooperative unions operating in accordance with the Law on Cooperatives, public service units engaged in income-generating production and business activities, and other qualified organizations.
Key Regulations and Compliance Safeguards
To prevent potential exploitation of the policy through corporate restructuring, Decree 398/2026 outlines strict provisions regarding newly formed entities. Specifically, enterprises established pursuant to the Law on Enterprises as a result of corporate divisions or separations that take effect after the enactment of Resolution No. 43/2026 will generally be excluded from the tax reduction benefit if the combined annual revenue of the resulting post-division or post-separation entities exceeds the VND 10 billion threshold during 2026 or 2027.
The decree provides detailed compliance guidelines, instructing taxpayers on the precise execution of tax declarations. Businesses and individuals must utilize specific accompanying appendices to declare the tax reduction alongside their standard tax filings. Furthermore, the regulatory framework outlines the exact mechanisms for adjusting previously calculated tax liabilities, determining the precise amount of tax owed versus the amount exempted under the 30% reduction scheme. Taking effect retroactively from October 29, 2026, the decree governs the entirety of the 2026 and 2027 tax assessment periods.
Economic Background and Context
The introduction of Decree 398/2026 arrives at a critical juncture for Vietnam’s economy. In recent years, micro, small, and medium-sized enterprises (MSMEs) alongside individual business households have served as the foundational backbone of the national economy, contributing significantly to employment generation, supply chain stability, and local commerce. However, these grassroots economic units have also faced persistent headwinds, ranging from fluctuating global supply chains and rising operational costs to tightening domestic liquidity and uneven consumer demand recovery.
Fiscal stimulus measures of this nature reflect a proactive approach by Vietnamese regulatory authorities to alleviate financial pressures on the private sector. By directly targeting enterprises and business households with annual revenues under VND 10 billion—a bracket that typically operates with narrower profit margins and limited cash reserves—the government seeks to preserve vital working capital. This preserved capital can then be reinvested into business operations, inventory management, technological upgrading, and workforce retention.
Comparative Analysis of Previous Fiscal Interventions
Vietnam’s deployment of targeted tax reductions is consistent with past crisis-response and economic support frameworks implemented by the Ministry of Finance and the Government. During previous economic disruptions, such as the post-pandemic recovery phases, similar fiscal instruments—including corporate income tax reductions, value-added tax (VAT) cuts, and extensions for tax payment deadlines—proved instrumental in sustaining business solvency.
However, Decree 398/2026 introduces a refined approach by tightly binding the relief to the VND 10 billion revenue cap and extending the policy across a multi-year horizon (2026 and 2027). This multi-year framework offers unprecedented predictability for small business operators, allowing them medium-term financial planning capabilities that short-term, single-year relief measures cannot provide. Furthermore, by explicitly including individual business households—a segment that historically faced administrative complexities in accessing formal financial support—the policy achieves a more comprehensive socio-economic footprint.
Implications for Market Participants and Tax Administration
The implementation of Decree 398/2026 carries profound implications for both the business community and the General Department of Taxation. For taxpayers, the immediate liquidity enhancement translates to reduced operational strain. Business households that previously operated on the margins of formal compliance now have an added incentive to maintain transparent accounting records, given the direct financial benefits linked to structured tax declarations.
From an administrative perspective, tax authorities face the dual task of facilitating seamless compliance while rigorously enforcing the VND 10 billion revenue threshold and the anti-avoidance rules concerning corporate splits and divisions. Local tax branches are expected to ramp up dissemination efforts, offering guidance workshops and digital resources to ensure that eligible taxpayers can accurately file their reduced tax liabilities without encountering bureaucratic bottlenecks.
Broader Macroeconomic Outlook
Economists and financial analysts suggest that the injection of liquidity resulting from the 30% tax reduction will likely have a multiplier effect on local consumption and service sectors. When small businesses retain a higher percentage of their earnings, they are better positioned to maintain employment levels, thereby supporting household incomes across urban and rural communities alike.
As Vietnam continues to navigate its trajectory toward sustainable, high-quality economic growth, fiscal policies like Decree 398/2026 demonstrate a concerted effort to balance macroeconomic stability with grassroots enterprise empowerment. By safeguarding the financial health of businesses and individuals operating below the VND 10 billion revenue threshold, the government reinforces the resilience of the domestic market against external economic shocks while encouraging long-term entrepreneurial vitality.
