Other BriefingsVietnam’s Draft Personal Income Tax Law: Key Highlights and Business Implications
The Draft Law on Personal Income Tax (PIT) is one of the most significant legislative reforms discussed during Vietnam’s 10th National Assembly session, which started on October 20. The draft aims to overhaul existing regimes governing taxable income, exemptions and deductions, the progressive tax brackets, and the applicable tax rates for certain irregular income.
In late August 2025, Vietnam’s Ministry of Finance (MoF) released a substantially revised draft of the Personal Income Tax (PIT) Law, which was submitted for appraisal on August 29.
The proposal forms part of a broader tax policy refresh intended to modernize Vietnam’s tax code for a digital economy, simplify the PIT schedule, and rebalance tax burdens across income groups.
As the NA meetings continue, Vietnam’s lawmakers are discussing several key provisions of the draft, including personal and dependent deductions, charitable contribution deductions, and PIT on income from real estate transfers and gold transactions
To help affected stakeholders better understand the draft law, we discuss the most important provisions and outline what businesses, especially multinationals, payroll teams, and HR leaders, should prioritize.
Why this reform matters
The PIT reform is part of Vietnam’s 2025-2030 fiscal modernization roadmap, which seeks to widen the tax base while reducing inequality.
In line with this, the MoF has proposed a substantial increase to the basic dependent deduction. This move is intended to ease the financial pressure on low- and middle-income taxpayers, aligning with the government’s stated goal of promoting fairness and improving purchasing power across income groups.
The draft also complements ongoing reforms in the Corporate Income Tax (CIT) and Value Added Tax (VAT) frameworks, signaling the government’s commitment to building a cohesive, technology-enabled tax administration capable of managing a digitized, global workforce.
Key reforms of Vietnam’s Draft PIT Law
Simplified progressive tax brackets
The draft proposes reducing the number of progressive PIT brackets from seven to five and retaining a top statutory rate of 35 percent while raising thresholds for higher bands under some options. This adjustment aims to simplify filing, enhance transparency, and provide relief to low and middle-income earners, especially amid rising living costs and inflationary pressures.
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Proposal on Progressive Tax Brackets, Vietnam’s Draft PIT Law |
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Taxable income range |
Tax rate (%) |
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Over VND 5 million – 10 million (US$190–380) |
5 |
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Over VND 10 million – 30 million (US$380–1,140) |
15 |
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Over VND 30 million – 60 million (US$1,140–2,280) |
25 |
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Over VND 60 million – 100 million (US$2,280 – 3,800) |
30 |
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Over VND 100 million (US$3,800 and above) |
35 |
Adjusted family circumstance deductions
The draft amendment revises the principles for adjusting personal and dependent deductions, including:
- Personal deduction: increases from VND 11 million (US$418) to VND 15.5 million (US$589) per month; and
- Dependent deduction: increases from VND 4.4 million (US$167) to VND 6.2 million (US$236) per month.
Correspondingly, the new deduction thresholds will be as follows:
- Individuals without dependents earning VND 17 million (US$646) per month will not yet be subject to PIT;
- Individuals with one dependent will remain tax-exempt at an income level of VND 24 million (US$912) per month; and
- Individuals with two dependents will remain tax-exempt at an income level of VND 31 million (US$1,178) per month.
In addition, the draft law updates the principle for adjusting deduction levels. The current law authorizes the Standing Committee of the National Assembly to revise deductions only when the Consumer Price Index (CPI) fluctuates by more than 20 percent. However, this threshold has become inadequate amid faster changes in living costs and income levels. In practice, waiting for a 20 percent CPI increase could take more than five years, while expenses and incomes may vary more frequently.
To address this, the draft law empowers the government to adjust family circumstance deductions based on price and income fluctuations, ensuring timely and practical alignment with economic realities.
Vietnam to raise PIT deductions from March 2026
While the provisions on personal and dependent deductions under the draft PIT Law are under discussion, Vietnam’s National Assembly Standing Committee has approved a separate resolution to adjust these deduction levels.
Accordingly, starting March 2026, Vietnam will increase monthly PIT deductions to better reflect rising living costs and income levels, including:
- The standard deduction for taxpayers will rise to VND 15.5 million (US$589) per month; and
- The dependent deduction will increase to VND 6.2 million (US$235.5) per month.
This marks the first adjustment since 2020, representing a more than 40 percent increase from the current levels of VND 11 million (US$417.7) for taxpayers and VND 4.4 million (US$167) per dependent.
Under the new thresholds:
- Individuals earning up to VND 17.3 million (US$656.5) per month without dependents will not be taxed.
- Those with one dependent will remain tax-exempt at VND 24.2 million (US$919.7) per month.
- Those with two dependents will remain tax-exempt at VND 31.2 million (US$1,138) per month.
According to Deputy Minister of Finance Nguyen Duc Chi, the revision aligns with growth in per capita income, GDP, and average consumption, ensuring deduction levels remain in step with real living conditions.
The MoF estimates the change will reduce annual state budget revenue by approximately VND 21 trillion (US$797.4 million).
PIT reduction for high-tech professionals
The draft law introduces new PIT incentives to attract skilled talent, particularly in high-tech sectors such as advanced technology, IT, science and technology, digital transformation, and innovation.
Specifically, individuals working in enterprises or projects within high-tech, high-tech application, IT, innovation, and digital transformation fields will be eligible for a 50 percent PIT reduction on income from salaries and wages.
The measure aims to improve Vietnam’s tax competitiveness both regionally and globally, attract foreign experts, retain domestic talent, and lessen the tax load on high-tech professionals. This provides them with direct motivation to contribute, research, and innovate, thus encouraging sustainable and rapid economic growth.
Expanded deductions for education and healthcare expenses
The draft law introduces new deductible categories, allowing taxpayers to deduct certain education, training, and healthcare expenses before calculating taxable income. This revision preserves existing deductions, while expanding the scope to include essential personal expenses.
By permitting deductions for education and healthcare costs, the government aims to encourage individuals to invest in learning and skills development, while also supporting financial resilience in cases of illness.
Expanded taxable base for modern income types
The proposal clarifies and extends PIT coverage to income from digital platforms, e-commerce, and certain digital asset trading, such as cryptocurrency, in the PIT base. This extension addresses long-standing tax gaps in Vietnam’s fast-growing online economy, which generated over US$25 billion in platform-based revenue in 2024.
Additionally, the draft law also suggests a 0.1 percent PIT on each gold bullion transaction.
Reform of capital gains and securities taxation
The draft introduces clearer rules for PIT on capital and securities transfers, including alternative calculation methods that seek to treat long-term investors differently from short-term traders. This is aimed at improving fairness and removing distortions from the existing per-transaction flat measures.
Digital reporting and administrative modernization
The reform package aligns with Vietnam’s accelerated tax digitalization agenda: authorities plan to strengthen reporting, e-filing, and cross-platform information sharing to capture digital incomes. These are working proposals rather than final law. The MoF has indicated that the draft will proceed through appraisal and is likely to be tabled for parliamentary consideration in the final quarter of 2025.
Immediate implications for businesses
Tax withholding and payroll administration
If the PIT brackets and thresholds change, payroll withholding tables will be revised. Employers must be ready to quickly adapt payroll engines and employee communications to avoid over- or under-withholding and the associated reputational or compliance risks.
Multinational employers should coordinate global payroll vendors for patch releases and test payroll runs for any transition months.
Compliance burden for platform-based payments
Extending taxable incomes to digital platforms and e-commerce means online marketplaces, gig platforms, and marketplace sellers will face new reporting obligations. Companies that operate or aggregate payments (digital platforms, payment service providers) should prepare for enhanced data collection and reporting workflows, and consider revising merchant contracts to allocate tax compliance responsibilities.
Capital gains administration and investor reporting
The draft’s proposals for taxing capital and securities transfers may shift tax calculation approaches for individual investors, founders, and employees exercising equity awards. Firms with employee share plans, or those that facilitate secondary sales, should revisit plan documentation, tax withholding rules, and investor communications. Where the draft permits taxing on net taxable income rather than the transfer price, record keeping of purchase prices and costs will become critical.
Global mobility and assignment policy
If deductible items and thresholds change materially, net pay for expatriates and cross-border assignees may change. Employers should run “what if” scenarios for typical assignee profiles, update gross to net projections, and consider compensation adjustments or tax equalization policy tweaks.
Strategic and tax planning considerations
Review salary structures and benefits packaging
Because the draft contemplates broader definitions of taxable income and potentially higher top rates, firms should reassess whether components such as bonuses, allowances, fringe benefits, or non-cash perks remain tax-efficient. Consider restructuring remuneration (where commercially and legally appropriate) to balance employer costs with employee after-tax outcomes.
Strengthen record-keeping and systems integration
The move to digital reporting and the taxation of digital incomes means organisations must upgrade invoicing, merchant reporting, and tax reconciliation systems.
E-commerce platforms should ensure they can supply granular transaction data, including timestamps, buyer and seller identification, consideration, and fees, to meet future reporting needs.
Revisit equity-based compensation designs
Changes to capital gains and securities taxation can materially affect employees’ after-tax value from stock options and restricted shares. Consider alternative long-term incentive structures (e.g., deferred cash plans, phantom equity) and ensure plan documentation and grant letters reflect new tax calculation methods.
Engage proactively with tax advisers and trade bodies
The draft is still subject to final drafting and political negotiation. Employers and industry groups should feed into any public consultation windows and model the operational impacts of likely scenarios. Early engagement reduces execution risk and can influence outcome details such as implementation timelines and grandfathering arrangements.
See also: Vietnam Wages in 2025: Overview, Trends and Implications for Investors
Takeaway for businesses
Vietnam’s draft PIT Law represents a significant modernization of the personal tax framework, with simplified tax rates, an updated tax base to include digital income, enhanced treatment of capital gains, and accelerated digital reporting. For businesses, these adjustments are manageable if tackled early, including prioritizing payroll readiness, data systems, designing equity compensation, and actively engaging with tax advisors.
Since the draft is likely to advance quickly through legislative stages, time-sensitive planning is essential. Firms that act now to update systems, models, and policies will reduce implementation risk and protect employee experience during the transition.
(US$1 = VND 26,325)
With input from Vu Nguyen Hanh.
This article first appeared on Vietnam Briefing, our sister platform.
