Legal framework for business households needed

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Handicraft products made at a business household in Ninh Binh Province

Business households are estimated to total around 5 million and play a significant role in the Vietnamese economy, contributing 30 percent to the country’s gross domestic product (GDP) and creating 10 million jobs.

As the Government of Vietnam set a target of having 1 million firms by 2020, 1.5 million by 2025 and 2 million by 2030, business households are identified as a major force for the country to achieve this goal.

However, there is a lack of legal framework for their operation and for promoting their development.

Under the established enterprise law, Vietnam now has about 700,000 firms while business households are not regulated as enterprises.

Mixed opinions were raised over whether business households should be recognised as a type of enterprise and included in the Law on Enterprise which was being amended. Some said that a separate legal framework should be developed for business households.

Nguyen Thi Cuc, Chairwoman of the Vietnam Tax Consultancy Association, said that business households should not be included in the regulations of the Law on Enterprise. “A separate legal framework for business households could be a better option to promote their development,” Cuc said, adding on the other side, policies to encourage business households to change into enterprise were also required.

Policies should be flexible to allow business households to choose the appropriate models for their operation, experts said.

Truong Thanh Duc, director of law firm Basico, said that forcing business households to operate as small or macro-sized enterprises would sound unreasonable.

Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management (CIEM), said that it was important to develop a legal framework which could create impetus for the development of the business households.

Hieu cited a survey finding of the Vietnam Chamber of Commerce and Industry (VCCI) that around 18 percent of existing firms developed from business households, adding that this was a natural process.

“We should not talk about how to transform business households into enterprises. Instead, it is better to figure out a way to treat business households fairly with other types of enterprises and give them a chance for development,” Hieu said.

Hieu said that a draft framework for business households would be made public for comments.

According to VCCI Chairman Vu Tien Loc, business households in Vietnam had not received adequate attention despite their significant role in the economy. Loc said that it was critical to remove barriers for them to develop, adding that business households would be the grounds for the development of Vietnam’s business community.  

Under a draft resolution by the National Assembly which the Ministry of Finance recently made public for comments, the ministry proposed tax exemptions for two years after first reporting taxable income for firms which transform from business households.

This aimed to encourage business households to transform into enterprises.