The Ministry of Finance (“MOF”) had worked on the draft Law on Personal Income Tax (“PIT”) to replace the current Law on PIT, which has been effective from 1 January 2009 and subsequently amended in 2013 and 2020. The draft Law on PIT had been uploaded to the Government’s and MOF’s portals for public review, comments and suggestions.
We outline below the notable proposed changes, inter alia, in the Law on PIT, including latest updates and recommendations to the MOF:
- Incomes from capital transfer, real estate transfer, inheritance, gifts, investment (such as cryptocurrencies or digital assets), transfer of derivatives securities, online businesses, or transfer of intellectual property will be re-defined for tax assessment purposes. A proposal has been submitted to the MOF to revise the method of how the tax will be assessed and calculated on these incomes with reference to international practices.
- Tax-free incomes will further cover:
- Share dividend at agricultural cooperatives or individual farmers signing contracts with enterprises in the “big field” projects (currently taxed at 5%);
- Payments from volunteer pension fund and extra pension fund;
- Incomes from transfer of certificates of emission reduction or carbon credits;
- Interest income and income from the transfer of green bonds. As you may know, interest income is currently tax free. However, there was a proposal to apply tax on interest income that exceeds the minimum tax free threshold.
- Incomes of hi-tech workers at enterprises or projects that applied hi-tech agricultural and processing projects, which are encouraged or prioritized for development. We notice from the practice that it is quite challenging for companies and individuals to define what is considered as hi-tech; who are considered as hi-tech workers (whether freelance consultants, registered business individuals can also be qualified in addition to the employees under the labour contracts.
- The threshold of taxable business incomes (such as rent or lease of assets or houses/land) earned by business households or business individuals will increase from VND100 million/year to VND200 million/year to follow the same threshold of taxable business incomes of the Law on Value Added Tax from 1 July 2025.
- Deemed flat tax rates on incomes earned by individuals from the supply of goods or provision of services, such as digital entertainment, games, movies, music or photos or advertisement, etc. will be reviewed. It appears that the tax rates will be increased so that the individuals should pay more tax, making it fairer to those who pay PIT on employment incomes or business incomes. It appears that the taxation of these individuals may be confused with those registered business individuals but considered as hi-tech workers.
- Personal deduction and dependent deduction will be increased so that they leverages the taxpayers’ standard living costs and inflation over the years. Various recommendations provided to the MOF that the personal deduction of VND13-VND14 million/month and dependent deduction of VND5-VND6 million/month/person should be considered. We noticed various proposals submitted to the MOF that personal deduction and dependent deduction should vary from location to location due to the different standard living costs.
- PIT will be reduced by streamlining the progressive 7 tax brackets (ranging 0% to 35%) to 5 brackets. This attempt has been said to help to reduce tax burden for middle class income-earners in Vietnam.
The Government is expected to submit the draft Law on PIT to the National Assembly for comments at a meeting by the end of 2025 so that it could be ratified and passed in May 2026. It is anticipated that the new Law on PIT, if ratified and passed by the National Assembly in May 2026, will be effective from 1 January 2027. Local newspapers and business communities recommended that the processes should be faster so that the changes could be in place earlier than 1 January 2027.
Please contact us if you need any update or clarification.
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This update summarises the important and latest changes in legal, tax and related practices in Vietnam. The analysis or comments herein are of general nature and are not intended to be nor should it be relied upon as the legal advice for the specific cases of any individual or entity.
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