Criteria for Identifying Micro-Enterprises under the Law

What are the criteria for identifying micro-enterprises? What benefits do micro-enterprises enjoy? On what basis do micro-enterprises pay corporate income tax?

1. What are the criteria for identifying micro-enterprises?

Under clause 1, Article 5 of Decree 80/2021/ND-CP on micro-enterprises:

Criteria for identifying small and medium enterprises

1. Micro-enterprises in agriculture, forestry and fishery; industry and construction employ no more than 10 employees participating in social insurance on an annual average basis, and have annual total revenue not exceeding VND 3 billion or annual total capital not exceeding VND 3 billion.

Micro-enterprises in trade and services employ no more than 10 employees participating in social insurance on an annual average basis, and have annual total revenue not exceeding VND 10 billion or annual total capital not exceeding VND 3 billion.

Under the law, your company meets the criteria of a micro-enterprise operating in trade and services, including criteria on the average annual number of employees participating in insurance, revenue and investment capital.

Your enterprise is therefore subject to the regulations on small and medium enterprises.

2. What notable benefits do micro-enterprises enjoy?

Not required to issue written labor rules

Under clause 1, Article 69 of Decree 145/2020/ND-CP:

Labor rules

Labor rules under Article 118 of the Labor Code are prescribed as follows:

1. The employer must issue labor rules; if employing 10 or more employees, the labor rules must be in writing; if employing fewer than 10 employees, written labor rules are not required but the contents on labor discipline and material liability must be agreed in the labor contract.

Accordingly, the company is not required to issue paper labor rules, but provisions on labor discipline and material liability must be included in the labor contract.

Micro-enterprises enjoy simplified tax and accounting administrative procedures

Under clause 2, Article 10 of the Law on Supporting Small and Medium Enterprises 2017:

Tax and accounting support

2. Micro-enterprises enjoy simplified tax administrative procedures and a simplified accounting regime as prescribed by tax and accounting laws.

Micro-enterprises may assign an accounting officer and are not required to appoint a chief accountant.

Under Article 8 of Circular 132/2018/TT-BTC:

Organization of the accounting apparatus and accounting personnel

1. Micro-enterprises may assign an accounting officer and are not required to appoint a chief accountant. Micro-enterprises paying CIT as a percentage of revenue from selling goods and services may organize their own accounting work as prescribed in Chapter III of this Circular.

2. The assignment of accounting personnel by micro-enterprises must not violate Article 19 of Decree No. 174/2016/ND-CP dated 30/12/2016 of the Government detailing certain articles of the Law on Accounting.

3. Micro-enterprises may contract with accounting service businesses to hire accounting services or chief accountant services as prescribed. The list of entities qualified to trade accounting services is published and periodically updated on the Ministry of Finance’s electronic information portal.

Accordingly, the company is not required to appoint a chief accountant and may hire financial services, paying corporate income tax as a percentage of revenue from selling goods and services.

3. Must tax-paying micro-enterprises open accounting accounts?

Under clause 2, Article 10 of the Law on Supporting Small and Medium Enterprises 2017:

Tax and accounting support

2. Micro-enterprises enjoy simplified tax administrative procedures and a simplified accounting regime as prescribed by tax and accounting laws.

Also under Article 16 of Circular 132/2018/TT-BTC:

Accounting methods

1. A micro-enterprise paying CIT as a percentage of revenue from selling goods and services, if not wishing to do so, is not required to open accounting accounts but only records single entries in accounting books (recording arising economic operations only in the item to be monitored without reflecting contra accounts) to track revenue and income, taxes payable to the State, salaries and payroll deductions, etc., serving the determination of the enterprise’s tax obligations to the state budget.

2. Where a micro-enterprise paying CIT as a percentage of revenue from selling goods and services wishes to apply accounting accounts like enterprises paying CIT based on taxable income to serve its production/business management requirements, it may apply the provisions of Chapter II of this Circular.

Under these provisions, the company may choose to open or not open accounting accounts to track revenue and income, taxes payable to the State, salaries and payroll deductions, etc., serving the determination of the enterprise’s tax obligations to the state budget.

Notes on applying current legal provisions

This article belongs to the Enterprise & M&A Knowledge group and is presented for reference, helping readers understand the legal issue at an overview level before preparing dossiers or conducting transactions.

Legal provisions may change depending on timing, locality, dossier type and specific circumstances. Where it is necessary to determine the exact legal basis applicable to your dossier, you should contact an ANT Legal lawyer at 0966.475.966 for review and advice before proceeding.

Common risks to note

• Applying legal texts that have been amended, supplemented or replaced.
• Preparing incomplete dossiers, documents or evidence.
• Misunderstanding the applicable conditions, procedures, time limits or competent authority.
• Signing, filing or conducting transactions without fully assessing legal risks.

How can ANT Legal help?

ANT Legal assists in reviewing specific situations, checking dossiers, identifying the applicable legal basis, advising on handling plans, and representing you in working with individuals, organizations or competent authorities when necessary.

For quick advice, you may contact a lawyer at 0966.475.966.

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