Vietnamese taxpayers' personal deduction proposed to rise to $706 per month

Several provinces, cities, and ministries in Vietnam have proposed raising the deduction when calculating personal income tax to the highest level of VND18 million ($706) per month.

Currently, the deduction for taxpayers is VND11 million ($431) per month, and for each dependent is VND4.4 million ($173), which have been in place since July 2020.

These figures are increasingly seen as inadequate, as the cost of living continues to rise and becomes increasingly "expensive".

In response to the draft revised Law on Personal Income Tax, the central province of Ha Tinh proposed increasing the deduction to VND18 million ($706) per month, and for dependents to VND8 million ($314) each per month.

The northwestern province of Son La suggested raising the deductions to VND16 million and VND5 million, respectively, while the central province of Ninh Thuan proposed VND14 million and VND6 million.

Many provinces and ministries have also proposed adding deductions for expenses related to education, healthcare, housing, voluntary social insurance, and investments in human development.

Special provisions for single parents or those caring for family members with serious illnesses were also suggested.

The northern province of Bac Giang argued that deductions should reflect the living conditions of different regions, rather than using a uniform level across the country.

Sharing this view, the Ministry of Information and Communications suggested aligning deductions with the minimum wages being applied to the four regions.

The Ministry of National Defence suggested raising the deductions to VND17.3 million and VND6.9 million, respectively.

The ministry explained that in 2020, when the current deduction levels were set, the base wage was VND1.49 million ($58) per month. However, after five years, while the base wage increased to VND2.34 million ($92) - an increase of over 57% - the personal deductions remain unchanged.

Moreover, some proposed the Ministry of Finance revise the progressive tax rate structure. According to Ninh Thuan province, the tax system should include more appropriate progressive levels to ensure the higher-medium income earners do not incur a tax burden while high-income earners pay tax fairly.

The gap between tax levels should be wider to ensure fairness, the south-central province argued.

The Ministry of Home Affairs recommended that the drafting agency fully assess the socio-economic impact of the personal deduction policy and examine deductions for charitable and humanitarian contributions.

In response, the Ministry of Finance confirmed that the draft law already considers increasing the personal deductions for taxpayers and dependents.

The adjustments are intended to better align with recent developments in the consumer price index and macroeconomic conditions, while easing the tax burden on taxpayers, it noted.

The finance ministry proposed including specific deductions for healthcare and education expenses. It suggested reducing the current seven tax brackets to a more suitable number, potentially widening the taxable income gap between the brackets.

This approach would better regulate taxes for high-income earners and make tax declarations and payments more convenient, it said.

The ministry stated that the draft revised Law on Personal Income Tax is expected to come to the National Assembly, the country's legislature, for review in October 2025 and be passed in May 2026.