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| A customer browses items on display at a Co.opmart in Rach Gia ward, An Giang province__Photo: Le Huy Hai/VNA |
Over 2.1 million workers nationwide will be exempt from personal income tax starting in 2026, as Vietnam raises the family circumstance-based deductions to VND 15.5 million per month for a taxpayer and VND 6.2 million per month per dependent. The long-awaited adjustment, aimed at easing the burden on wage earners, is also expected to increase disposable income and stimulate domestic consumption amid persistent inflation and rising living costs.
Policy adjustment aligns with income and price realities
The National Assembly Standing Committee has approved the Government’s proposal to raise the family circumstance-based deductions for personal income tax (PIT) starting from the 2026 tax year.
Under the new regulation, the deduction for a taxpayer will rise from VND 11 million to VND 15.5 million per month, while that for each dependent will increase from VND 4.4 million to VND 6.2 million per month. In the context of persistent inflation and rising living expenses, the adjustment is regarded as a necessary step, reflecting the State’s effort to ensure that fiscal policy remains responsive to economic realities.
According to the Ministry of Finance (MOF), which drafted the proposal, the reform is based on a comprehensive assessment of income and price movements during 2020-25.
Statistics show that the consumer price index (CPI) has risen by more than 21 percent, while both income and GDP per capita have increased by 40-42 percent. Against that backdrop, maintaining the previous deduction levels, the ministry noted, had caused the tax regime to lag behind actual living standards, narrowing the disposable income of wage earners, particularly those in the middle-income bracket.
In his presentation before the National Assembly Standing Committee, Deputy Minister of Finance Nguyen Duc Chi said the Government had considered two scenarios. Under Scenario 1, the deductions would rise to VND 13.3 million per month for a taxpayer and VND 5.3 million per month per dependent, cutting budget revenue by around VND 12 trillion a year. However, those levels were deemed insufficient to offset the increase in prices and the cost of living over the past five years. Scenario 2, the higher adjustment, with an estimated VND 21 trillion in annual budget loss, was therefore selected as more appropriate, given current income levels and people’s welfare needs.
“The Government chose the second option because it is necessary to ease taxpayers’ obligations amid rising living costs and declining real income due to inflation,” Chi emphasized, adding that while the adjustment may reduce budget revenues in the short term, it will, in the long run, stimulate consumption, broaden the tax base, and promote economic growth.
The National Assembly’s Committee for Economic and Financial Affairs stated that the new thresholds bring PIT policy closer to actual income and price developments and reflect the principle that tax should only be levied on income exceeding essential living needs. Committee Chairman Phan Van Mai remarked that the revision was “needed to support citizens and ensure fairness in income regulation.”
Alongside endorsing the higher deduction plan, the National Assembly Standing Committee decided that the new level will apply from the 2026 tax year rather than 2025, as some deputies suggested.
As estimated by MOF, an earlier application would have resulted in millions of low-income-bracket taxpayers qualifying for tax refund, creating an overwhelming volume of refund cases. Tax experts agreed that postponing the implementation of the new deductions to 2026 is reasonable, given that the current tax administration system is not yet equipped to process such a surge in tax refund requests.
Although taxpayers will have to wait another year, the early adoption of the resolution in late 2025 is still viewed as a positive move, allowing individuals and businesses to plan wages, year-end bonuses, and salary adjustments accordingly. Experts recommend that companies consider deferring payment of the 2025 bonuses to January 2026 so that such payments are counted as 2026 income, thereby qualifying for the new deductions and legally maximizing benefits for employees.
According to MOF’s calculations, under the new deduction thresholds, a person without dependents will pay PIT only when his monthly income exceeds VND 17.285 million; a person with one dependent, VND 24.22 million; and a person with two dependents, VND 31.155 million. These figures mark not merely a fiscal measure but an official recognition of the new urban living standard after years of price escalation and eroded real earnings.
Broad impacts on income, consumption and tax reform
The increase in the family circumstance-based deductions is expected to produce significant ripple effects - easing the burden on taxpayers, increasing disposable income, stimulating domestic demand, and shaping the forthcoming PIT reform.
Speaking with Tuoi Tre Online, Ly Kim Chi, Chairwoman of the Ho Chi Minh City Food and Foodstuff Association, said that in a period when consumer demand has weakened and production costs are rising, the new deductions “will boost people’s purchasing power and, in turn, give businesses greater confidence to produce more.”
A representative from Vissan JSC. also described the measure as a “bright spot,” enabling enterprises to realign their production and retail strategies with emerging market demand.
In addition to easing the tax burden, experts emphasized the need to broaden the income brackets in the progressive tax schedule. This revision will be a key item in the draft amended Law on Personal Income Tax, tabled for National Assembly debate and adoption at the 10th session.
Currently, the Government is presenting two alternative tax-bracket structures. Scenario 1 divides taxable income, calculated in Vietnam Dong, into five bands: up to 10 million; over 10 million to 30 million; over 30 million to 50 million; over 50 million to 80 million; and over 80 million per month. Scenario 2, also with five bands, expands the ranges to up to 10 million; over 10 million to 30 million; over 30 million to 60 million; over 60 million and100 million; and over 100 million per month.
Hoang Van Cuong, a member of the National Assembly’s Committee for Economic and Financial Affairs, suggested an even broader structure. i.e., up to 30 million for the first band, over 30 million to 60 million for the second, over 60 million to 100 million for the third, over 100 million to 160 million for the fourth, and above 160 million for the top bracket. According to him, widening the bands is essential to create a fairer and more sustainable tax system, one that not only nurtures revenue sources but also boosts economic growth.
“The taxable-income thresholds should be at least doubled as compared to the current levels to match rising prices and per-capita income,” he told Tuoi Tre.
MOF’s latest data show that as of the end of September, PIT revenue reached VND 177.474 trillion, equivalent to 98.4 percent of the annual target. Compared to the same period last year, PIT collections over the first nine months rose by 24.6 percent, or about VND 35 trillion.
In sum, the adjustment of the family circumstance-based deductions not only lightens the tax burden on wage earners but also demonstrates the State’s proactive approach to adapting fiscal policy to economic and social changes. With greater disposable income, domestic consumption and labor-market vitality are expected to strengthen, paving the way for a more equitable, flexible, and people-centered personal income tax system in the years ahead.- (VLLF)
