HANOI: The Personal Income Tax Law will be revised in 2025, following the proposed timeline submitted to the government and reported to the National Assembly (NA) Standing Committee.
Finance Minister Ho Duc Phoc said that the ministry was currently conducting a review and assessment of tax laws, including the Personal Income Tax Law.
It is anticipated that the report would be submitted to the NA for feedback in October 2025 and approval in May 2026.
Under the existing provisions of the Personal Income Tax Law, individuals are obligated to pay personal income tax on earnings from salaries and wages.
Taxable income is the amount after deducting tax-exempt items, such as social insurance, health insurance and unemployment insurance.
Individuals are required to pay taxes in accordance with the regulations only if they generate taxable income.
The Personal Income Tax Law, effective from Jan 1, 2009, stipulates a monthly deduction of four million dong, or 48 million dong a year, for taxpayers, as well as a deduction of 1.6 million dong per month for each dependent.
The revised law on personal income, effective from July 1, 2013, states that the deduction amount for taxpayers is nine million dong per month, or 108 million dong per year, while the deduction for each dependent is 3.6 million dong per month.
On June 2, 2020, the NA Standing Committee issued a resolution which adjusted the family circumstance deductions for personal income tax.
As per the resolution, the deduction for taxpayers increased to 11 million dong per month, or 132 million dong per year, and the deduction for each dependent amounted to 4.4 million dong per month.
Economists emphasise the importance of personal income tax policies in redistributing resources according to the different stages of economic and social development.
In addition to other revenue sources, personal income tax contributes to the state budget, supporting various needs such as investment, national security, social welfare and poverty reduction.
However, there are concerns the current family circumstance deduction is no longer suitable given the actual cost of living.
Relying solely on consumer price index (CPI) fluctuations to determine the deduction is considered inadequate. Hence, it should also consider the evolving consumer needs of the population.
According to Associate Professor Dr Dinh Trong Thinh of the Academy of Finance, adjusting the family circumstance deduction amount only when inflation changes by 20% is overly rigid.
Tax policies should not be solely linked to inflation since people’s living standards improve each year.
Instead, policymakers need to adopt a new mindset and create appropriate tax policies that incentivise labour creativity.
Associate Professor Dr Pham The Anh, head of the Economics Department at the National Economics University, said that the current family deduction level was too low and no longer aligned with reality.
Over the past decade, the cost of living, especially in major cities, has risen significantly. In contrast, the taxable income threshold had only risen by two million dong to 11 million dong, representing a 20% increase that does not adequately match the CPI. — Viet Nam News/ANN
