HM&P lawyer contributes opinions on the Draft Decree on household business management

The Ministry of Planning and Investment is currently finalizing a separate Draft Decree on household businesses to establish a distinct legal framework from enterprises. The Draft is expected to facilitate household businesses by differentiating them from the regulations originally designed for enterprises. However, as assessed by Lawyer Nguyen Nhat Duong, representing HM&P Law Firm (“HM&P”) in The Saigon Times, there are still many shortcomings that may affect its feasibility in practice and require thorough consideration.

The necessity of a separate decree for household businesses

Previously, household businesses were regulated under Decree No. 01/2021/ND-CP and accompanying circulars on enterprise registration, despite not fully possessing the characteristics of enterprises, such as legal person status, charter capital, or a clear organizational structure. According to Lawyer Duong, rigidly applying enterprise regulations imposes administrative burdens and does not align with the nature of household businesses. Therefore, issuing a separate decree is essential to provide clearer distinctions and a more suitable legal framework aligned with practical operations.

Key innovations in the Draft Decree on household businesses

The Draft introduces several significant provisions that, according to Lawyer Duong, will greatly impact the establishment and operation of household businesses:

• Standardization of business identification numbers: Currently, household businesses have two separate identification numbers issued by business registration authorities and tax authorities, leading to overlapping management. The Draft proposes a single identification number, similar to enterprises, to simplify administrative procedures.
• Reform of registration procedures: Household businesses may submit applications online instead of being limited to in-person or postal submissions. Additionally, registration authorities will not be allowed to request additional documents beyond the prescribed requirements, ensuring transparency and saving time.

Issues in the Draft that require adjustments

Despite its reformative aspects, Lawyer Nguyen Nhat Duong has identified several provisions that may not fully align with the practical operations of household businesses:

• Business classification codes: Requiring household businesses to use industry codes under the VSIC system could be challenging due to their small scale and lack of legal expertise. A more flexible approach to industry classification should be considered.
• Interagency data integration: The Draft lacks clear provisions on coordination among tax authorities, business registration offices, and social insurance agencies, which could lead to overlapping management and increased administrative burdens.
• Personal information identification: The requirement for personal information to match exactly with the National Database could prolong the registration process in cases of minor discrepancies, causing inconvenience for household businesses.
• Sanctions for violations: Revoking an entire business license for a violation in one business sector could adversely affect other legally operating sectors. A more appropriate approach would be to suspend only the specific violating business activity instead of canceling the entire license.

Lawyer Nguyen Nhat Duong acknowledges that while the Draft Decree introduces positive reforms, it still requires further adjustments to ensure feasibility. Improving the legal framework necessitates coordination between regulatory authorities and household businesses to foster a transparent and efficient business environment. HM&P remains committed to assisting enterprises in navigating legal challenges, ensuring compliance, and adapting to new policies for sustainable growth.