Top personal income tax rate in Vietnam proposed to remain at 35%

The highest personal income tax (PIT) rate in Vietnam is expected to remain at 35%, even as the government proposes reducing the number of tax rates from seven to five.

Under the draft amended Law on Personal Income Tax, presented to the National Assembly at its ongoing session on Monday by Minister of Finance Nguyen Van Thang, the lowest tax rate would be 5% for monthly income up to VND10 million ($379).

The highest rate of 35% would apply to income above VND100 million ($3,797) per month, as compared to the current threshold of VND80 million.

Previously, some experts had said that a maximum PIT rate of 20-25% would be more appropriate for Vietnam, given its modest average income levels and the need to promote savings and investment.

The draft law also revises regulations on personal and dependent deductions, as well as deductions for charitable and humanitarian contributions. The government would be authorized to adjust deduction levels based on price and income fluctuations.

According to a resolution adopted by the National Assembly Standing Committee on October 17, the personal and dependent deductions would increase to VND15.5 million ($588) and VND6.2 million ($235) per month, up VND4.5 million and VND 2.2 million from the current levels, respectively.

With these new deduction levels, an individual earning VND17 million ($645.5) per month (with no dependents) would not be required to pay PIT starting from the 2026 tax year, after accounting for insurance contributions and personal deductions.

The draft law also revises PIT rules for individual business households. Those with annual revenue below VND200 million ($7,594) would not be subject to PIT, ensuring consistency with the Law on Value-Added Tax (VAT).

In addition, the tax rates on certain digital content and online entertainment activities, such as the supply of digital products and game services, would increase from 2% to 5%.

According to Phan Van Mai, Chairman of the parliament's Economic and Financial Committee, several members expressed concern about the rationality of the proposed income thresholds and tax rates.

He noted that some taxable income categories under the draft could increase the PIT burden for certain taxpayers, while others would see lower obligations compared to the current law, potentially affecting tax equity among income groups.

Regarding family deductions, he held that in most countries, such adjustments are not made frequently or automatically, and should not be delegated too flexibly to the government.

Therefore, he recommended that the specific deduction amounts be stated directly in the law, while allowing the government to propose adjustments to the National Assembly Standing Committee when necessary.

Mai added that this approach aligns with the current Law on Personal Income Tax, ensuring both practicality and legislative consistency.

If approved by the legislature at the end of the current session, the amended Law on Personal Income Tax would take effect on July 1, 2026.

However, provisions related to business income, the progressive tax schedule, and income from wages and salaries may come into force earlier, right on January 1, 2026, to align with the effective date of the new deduction levels.