Vietnam’s Personal Income Tax Law overhaul expected in October

Vietnam’s Ministry of Finance is finalizing draft revisions to the Personal Income Tax (PIT) Law, for parliament approval at its session in October.

At the ministry’s regular press meeting on Wednesday, Truong Ba Tuan, deputy director of tax policies, fees and charges supervision, said his ministry (MoF) is working on a draft proposal for a replacement PIT Law.

According to the official, the MoF is closely following the timeline assigned by the government to ensure the submission as scheduled.

Previously, many experts suggested that the law should be revised in 2025 so it could take effect at the beginning of 2026.

The PIT Law was passed on November 20, 2007 and took effect from the beginning of 2009. The law was amended in 2012 and 2014. However, several provisions are now considered outdated and in need of revision, such as the family circumstance-based deduction.

The current PIT-deductible threshold, which became effective in July 2020, is VND11 million ($419.68) for the taxpayer and VND4.4 million ($168.2) per dependent.

A dependent is defined as a person below working age or of a working age but with low or no income.

The progressive tax brackets applied to salaried workers are also seen as no longer in line with current economic conditions.

Tuan said the MoF has reported to the government its plan to overhaul the law, focusing on six key areas.

Specifically, the ministry will refine regulations on taxable and exempt income, such as those related to high-tech workforce development and green growth promotion. It will also revise calculation methods to better reflect current trends and economic conditions.

In addition, the ministry plans to review and adjust the family circumstance deduction to align more closely with current living standards and macroeconomic conditions.

Certain essential expenses, such as education and healthcare, may be incorporated into the deduction to ease the burden on taxpayers.

The progressive tax bracket structure is also under review, with a simplified and more streamlined design being considered to replace the current seven-tier system.

The MoF will reassess the taxable income threshold for household and individual businesses.

It plans to propose the National Assembly, the country's legislature, grant the government authority to adjust this threshold over time, rather than setting a fixed amount in the law, allowing for greater flexibility across different economic periods.

“After a unified proposal is finalized, the ministry will consult the public, including individuals, communities, and businesses,” Tuan said.

Personal income tax, collected from salaried workers and business individuals, is the third-largest source of government revenue after value-added tax (VAT) and corporate income tax.

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 ($190.79). The highest rate of 35% is for taxable income of at least VND80 million ($3,052).

Last year, Vietnam’s total state budget revenue surpassed VND2 quadrillion ($76.29 billion) for the first time. Personal income tax collections were estimated at VND189 trillion (about $7.21 billion), up 20% from the previous year.

The tax accounted for more than 9.3% of total budget revenue, up from 5.3% in 2011.