The Ministry of Finance (MOF) has recently disclosed its proposals on major amendments to the Personal Income Tax (PIT) Law, covering changes to the taxable income threshold, deduction for dependants of taxpayers, partially progressive tariff and tax settlement and administration regulations.
Accordingly, the monthly taxable income threshold would be lifted to VND 6 million from the current VND 4 million, while the monthly deduction for each dependant would rise to VND 2.4 million from the current 1.6 million.
If the MOF’s proposals are approved, it is estimated that about 70% of taxpayers currently at the first tax rate would be tax free, 70% of taxpayers currently at the second tax rate would pay PIT at the first rate and similarly with the remaining tax rates.
With regards to the partially progressive tariff, the MOF intends to abolish the seventh tax rate of 35%. This means that monthly income exceeding VND 52 million would be subject to the highest tax rate of 30%.
In response to public comments that the abolishment of the highest tax rate would benefit only high-income earners, the MOF explained that most taxpayers subject to this rate were top-salaried managers and highly skilled workers and such move could help the domestic labor market prevent brain drain and lure overseas talents. Additionally, as the current corporate income tax rate of 25% was expected to be adjusted down to 22% and 23% by 2015 and 2020, respectively, the PIT rate of 35% should be removed to assure correlation between these taxes.
The revised tax law, scheduled for application from January 2014, will be submitted to the Government this May and the National Assembly this October.-