At its 50th session on the morning of October 17, the National Assembly Standing Committee discussed and approved a resolution to adjust the personal income tax family deduction. Under the new policy, the deduction for taxpayers will rise from VND11 million (US$417) to VND15.5 million per month, while the deduction for each dependent will increase from VND4.4 million to VND6.2 million per month, an adjustment of roughly 40 percent.
This change will take effect in the 2026 tax year, with final settlements due in the first quarter of 2027.
According to the Ministry of Finance, this increase is expected to reduce annual state budget revenue by around VND21 trillion. For reference, personal income tax revenue in 2024 was VND186.3 trillion, accounting for 9.12 percent of total state revenue.
Under current personal income tax law, if the Consumer Price Index (CPI) fluctuates by more than 20 percent compared to when the law took effect or was last adjusted, the Government must propose a new deduction level to the Standing Committee. Since the last adjustment in 2020, the CPI is projected to rise over 21 percent by the end of 2025, triggering the need for a revision.
Associate Professor and legal expert Dinh Dung Sy stated that based on the CPI and per capita income growth in recent years, a 40 percent adjustment is reasonable. However, the dependent deduction of VND6.2 million per month remains low. In developing countries like Vietnam, where many citizens struggle with modest incomes, a more suitable deduction for dependents should be around 50 percent of the taxpayer’s own deduction roughly VND7.5 million per month.
Other experts also suggested that deductions and tax thresholds should vary across regions and taxpayer groups, as minimum wages are already regionally differentiated.
By 2025, citizens are expected to face mounting challenges from natural disasters, inflation, and rising living costs (with CPI projected to exceed 21 percent). Therefore, the policy should help taxpayers accumulate savings, encourage consumption, and support economic growth. Delaying the adjustment until the 2026 tax year, with finalization in early 2027, would leave taxpayers struggling for another year while living expenses continue to soar.
Tax policy should stay ahead of inflationary trends. Implementing the new deduction for the 2025 tax year (with 2026 settlements) would be both timely and practical, providing much-needed relief for citizens and businesses. More importantly, it would show that fiscal policy truly acts as a companion to taxpayers helping stabilize society and sustain long-term state revenue.
