Should a household business become a limited company? Tax, books and costs compared

It depends on who buys from you. For a retail shop with VND 4 billion a year in revenue that sells mostly to consumers, staying a household business usually means less tax and lower accounting fees. Becoming a limited company pays off when many customers are businesses that need VAT invoices, when your purchases come with full VAT invoices, or when the new company qualifies for three years of corporate income tax exemption. The numbers for each case are below.

Why this question reaches English-speaking readers

A household business (hộ kinh doanh) is a registration only Vietnamese citizens can hold. We get this question from foreign spouses and partners of Vietnamese shop owners, and from founders who want to put money into a business a Vietnamese friend already runs. A foreign co-owner cannot be added to a household business. If that is your plan, the business becomes a company first, and bringing in foreign capital is then its own registration step, which a law firm handles. We do the accounting side.

The question has also become more common since 1 January 2026, when lump-sum tax for households ended and every household started declaring its own revenue (Decree 68/2026/NĐ-CP). A household with VND 3 billion to under 50 billion in revenue (group 3) now pays personal income tax on profit, so it already keeps expense records much like a company does.

Worked example: an online shop with VND 4 billion in revenue

Assumptions:

• Sells homeware through marketplaces and Facebook, VND 4 billion a year in revenue before tax.
• Cost of goods VND 3 billion, all with VAT invoices from suppliers.
• Other costs VND 600 million: warehouse rent, marketplace fees, delivery, three staff, all documented.
• Profit before tax VND 400 million. The owner takes no salary from the company.

What the table hides:

VAT is the biggest difference. A household pays VAT as a fixed share of revenue, 1% for distributing goods. A company pays output VAT minus input VAT. The rate is 8% until 31 December 2026 (Resolution 204/2025/QH15); if it returns to 10% in 2027, that line becomes about VND 100 million. If rent and marketplace fees also carry VAT invoices, the company figure drops a little. Retail customers rarely accept a price rise for tax, so the gap comes out of your margin.

Tax on profit is roughly even at VND 4 billion. A group 3 household pays 17% PIT on income; a company with revenue above VND 3 billion and up to 50 billion pays 17% CIT (CIT Law 67/2025/QH15). At VND 3 billion or less, the company rate is 15%. How the VND 1 billion household threshold is treated in the calculation after Decree 141/2026/NĐ-CP is still being checked against the original text, so treat the household figure as an estimate.

The exemption column only applies if you qualify. Resolution 198/2025/QH15 exempts small and medium companies from CIT for three years from their first enterprise registration certificate, and secondary sources say this covers household businesses that convert. Decree 20/2026/NĐ-CP sets out the details. Conditions include how long the household operated before converting and whether the legal representative already runs another active company. We check them against your documents before we put the exemption into a tax plan. Do not budget on it before someone has.

When converting makes sense

• Most of your revenue comes from businesses. Many companies buying gifts, supplies or materials only buy from sellers who issue VAT invoices. Losing one or two large orders a quarter can cost more than the extra VAT.
• Purchases carry full VAT invoices and margins are thin. With a low margin, output minus input VAT at 8% can come to less than 1% of revenue. The example shop has a 25% margin, so it is not there.
• You need co-owners, a bank loan in the company’s name, or separation from personal assets. This includes the foreign partner case above.
• You qualify for the three-year exemption and expect to be profitable in those years.

When to stay a household business

• You sell to consumers who never ask for a VAT invoice. Eateries, bakeries, grocery shops.
• Most purchases come without invoices. A company without input invoices cannot deduct the VAT or count the cost.
• Revenue is under VND 3 billion. A group 2 household can choose PIT as a share of revenue or 15% of income, and its books are simpler. The household groups are explained in our household business tax guide.
• You do not want annual financial statements. Every company files financial statements and a CIT finalization by 31 March of the following year. That is a fixed cost every year, explained in our article on year-end finalization.

The conversion, in the order we do it

1. Close the household’s numbers. Total revenue for the year so far, file the household’s last quarterly return, pay what is due, count the stock.
2. Register the limited company. A company can be registered as a conversion from a household business, filed with the household’s registration certificate. We confirm the document list for your case. About three working days if the file is complete.
3. Seal, digital signature, e-invoices and bank account in the company’s name. Each item and its price is in our article on company setup costs in 2026.
4. Move stock and equipment to the company with invoices. The household issues an invoice to the company for remaining stock. Without it, the company sells goods its books show no cost for.
5. Change the name on marketplaces, payment gateways, the warehouse lease and supplier contracts. Marketplaces often take a few weeks to approve company documents.
6. Close the household once the company has taken its first order, not before.

For our clients this takes four to six weeks, mostly waiting on marketplaces and the bank. The story of an online shop that became a company in early 2026 walks through each step and what was hard.

Where people usually slip

Closing the household before the company can sell. A fabric shop in Bến Thành market closed its household on the 1st and had no company e-invoices until the 9th. Eight days without lawful sales, with wholesale buyers waiting.

Moving stock without an invoice. The company sells goods with no recorded cost, so book profit and CIT come out higher than reality.

Keeping the personal bank account. Old habits. Company sales go into the company account.

Budgeting on the exemption before checking it. One client planned around three tax-free years while the legal representative still ran another active company. According to VCCI’s summary of the draft guidance, that case may not qualify.

Forgetting that an owner takes money out differently. In a household, profit after tax belongs to the owner. In a company, money reaches the owner as salary or dividends, each with its own tax and paperwork.

If you want the table redone with your own figures, bring the latest quarterly return and book a free 30-minute call. Setup is on the company setup page; monthly prices are on pricing.

Sources and update

Checked on 4 October 2026.

• End of lump-sum tax, self-declaration for households: Decree 68/2026/NĐ-CP.
• VND 1 billion threshold and the four household groups: Decree 141/2026/NĐ-CP amending Decree 68/2026/NĐ-CP. The calculation above the threshold is still to be checked against the original text.
• 1% VAT rate for households distributing goods: MISA SME’s summary based on the VAT Law and Circular 69/2025/TT-BTC.
• CIT rates of 15%, 17% and 20%: CIT Law 67/2025/QH15.
• VAT at 8% until 31 December 2026: Resolution 204/2025/QH15.
• Three-year CIT exemption for new SMEs: Resolution 198/2025/QH15; Decree 20/2026/NĐ-CP. Conditions read through secondary sources; checked case by case.
• Household bookkeeping: Circular 152/2025/TT-BTC.