The Ministry of Finance is drafting rules to increase the deductible amount for personal income tax (PIT) to better reflect inflation, Finance Minister Ho Duc Phoc said Thursday.
Speaking on the sidelines of the ongoing National Assembly session, he said that the current PIT tax-deductible amount, which became effective in 2020, is VND11 million ($447.8) for the taxpayer and VND4.4 million ($179.1) per person dependent on the taxpayer.
The dependent person is defined as people below working age and people at working age but with low or no income. These figures are deemed equivalent to minimum living condition and 40% of minimum living condition requirements, respectively.
However, the deductible base is outdated, especially considering high inflation in the post-pandemic era, Phoc said. He noted that even VND12 million ($488.5) cannot suffice to meet minimum living conditions in urban areas. Based on the goal of raising the wage by 7-8% annually, authorities would calculate new PIT exemption figures, he added.
The finance ministry has proposed that the National Assembly add changes in the draft rules to the parliament’s agenda, which only features laws related to value-added tax (VAT), corporate income tax (CIT) and excise tax.
Lawmaker Tran Van Lam agreed with the finance minister, emphasizing that the current PIT rules were “outdated by decades.”
Vietnam’s tax revenues reached VND1,460 trillion ($59.43 billion) in 2022, up 8.5% year-on-year and exceeding the target by 24.3%, according to the General Department of Taxation. PIT revenue was VND167 trillion ($7.11 billion) or 38% above the target. Despite being the highest-ever collection, PIT accounted for only 11.4% of total tax revenues.
Vietnam’s current PIT is between 5% and 35% of the taxable amount. The lowest rate of 5% is for taxable income of up to VND5 million ($203.5). The highest rate of 35% is for taxable income of at least VND80 million ($3,257).