Vietnam’s finance ministry proposes raising personal deduction to $588 per month

Vietnam’s Ministry of Finance has proposed raising the personal income tax deduction to VND15.5 million ($588) per month and the dependent deduction to VND6.2 million ($235).

This is included in the draft resolution on adjusting personal and dependent tax deductions that the Standing Committee of the National Assembly - Vietnam’s legislature - sent to the Ministry of Justice for review.

Currently, the deduction for taxpayers is VND11 million ($417) per month, and for each dependent is VND4.4 million ($167), 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". Since 2020, per capita GDP has expanded at an average rate of around 40-42%.

In its proposal, the Ministry of Finance said a taxpayer earning VND15 million ($569) per month would pay no personal income tax after deducting social, health, and unemployment insurance contributions. For a monthly income of VND20 million ($758), the tax liability would amount to roughly VND120,000 ($4.55) after insurance deductions.

In the case of one dependent, an individual earning VND25 million ($948) per month would owe VND33,750 ($1.28) in personal income tax, while an income of VND35 million ($1,326) would incur a tax of VND265,000 ($10.05). If allowances, benefits, or voluntary pension contributions are deducted before calculating tax, the liability would be lower, or potentially zero.

With the proposed deduction, most taxpayers in the current first tax bracket would move into the non-taxable category, representing 95% of current first-bracket filers. Meanwhile, a number of individuals in the second bracket would shift to the first bracket or become exempt from tax. Similarly, taxpayers in all other brackets would see their personal income tax liabilities reduced.

Personal income tax revenue is projected at roughly VND84.48 trillion ($3.2 billion), down VND21 trillion ($796.04 million) a year from current levels. The number of taxpayers would fall to 2.21 million, a decline of 2.18 million as many shift from the first bracket into the non-taxable category.

Earlier this year, in response to the draft revised Law on Personal Income Tax, several provinces, cities, and ministries have proposed raising the deduction when calculating personal income tax to the highest level of VND18 million ($682) per month.

The above-said draft resolution will be reviewed, and if approved, it would take effect for the 2026 tax year.