Vietnam tax overhaul to exempt schools and aid SMEs

Finance Minister Nguyen Van Thang said tax authorities will rely on existing investment and business registration certificates, along with education law provisions, to determine which private schools qualify as not-for-profit and therefore eligible for corporate income tax exemption. He said the design is meant to keep the tax authority focused on collection and avoid overlap with other agencies, while giving legal clarity to schools that have long argued for predictable treatment.

The exemption is not trivial. The ministry estimates the policy will cost the budget more than 2,000 billion dong a year, underscoring the scale of the state’s willingness to subsidize parts of the education sector through the tax system rather than direct spending. The government is also extending the exemption to income from meal services supplied to schools and medical facilities, a move aimed at lowering operating costs in education and healthcare supply chains.

For small and medium-sized enterprises, the bigger change is administrative. Vietnam plans to raise the revenue threshold for firms that can use a simplified tax calculation method from 3 billion dong to 10 billion dong, a move the minister said would suit more than 90% of small businesses. That matters because the simplified method reduces compliance costs and can ease the burden on micro and small firms that often struggle with bookkeeping and profit-based assessments.

The policy direction is clear: broaden relief for sectors the government wants to encourage, while using the tax code to pressure underused assets. On idle land, the minister said the criteria for identifying abandoned or unused plots should be set in land law, not tax law, and that tax authorities must work with land and population databases to determine the status and size of each parcel. The aim is to reduce abuse, tax evasion and misclassification, but the approach also highlights the state’s reliance on better data integration to make tax enforcement more precise.

That has direct implications for property owners and developers holding land banks. If the authorities can better identify idle land through national land and population databases, carrying costs on speculative holdings could rise, encouraging faster development or asset sales. In a market where land use remains a critical input for housing, industry and agriculture, tighter enforcement could improve allocation efficiency but also pressure balance sheets for holders of long-dormant assets.

The broader legislative package also includes tax support for science, technology and innovation, and the government said it is preparing a separate resolution to promote the cultural industries. Together, the proposals suggest Hanoi is using tax policy as an industrial policy tool, offering targeted incentives to sectors seen as socially or strategically important while tightening compliance around assets that are seen as underutilized.

For investors, the key question is not just who pays less tax, but where the policy points the economy. Education providers and small firms stand to benefit from lower friction and stronger cash flow. Landholders with idle plots face greater scrutiny. And the budget will need to absorb the cost of the exemptions while relying on better enforcement elsewhere to keep revenues on track.

If the draft law is passed in its current form, the winners will be firms and institutions aligned with Vietnam’s growth priorities, while the losers will be owners of unproductive land and businesses that have benefited from weak tax administration. The next catalyst is parliamentary approval, followed by the details of how land status, not-for-profit eligibility and simplified tax access are enforced in practice.