As per the agenda for the 10th session of the 15th National Assembly, delegates are scheduled to hear the proposal and the verification report on the draft (revised) Law on Personal Income Tax this November 4.
Group discussions on the bill are slated for the afternoon of November 5. The draft law is, unsurprisingly, drawing significant public attention, particularly on the hot-button issue of raising the family (personal) deduction threshold.
Commenting on the proposal to allow for separate, additional deductions for essential expenses like education, healthcare, and other necessary costs instead of general lump sum, Chairwoman Nguyen Thi Cuc of the Vietnam Tax Consultants’ Association (VTCA) said that some nations set a basic minimum level, often tied to the average income, and that’s the base deduction.
Then, specific costs for healthcare, education, or even rent are tacked on. The second way, which many countries including Vietnam use, is to not separate these costs but to calculate a single, fixed lump sum that’s meant to cover everything.
She personally believes Vietnam should consider separating out some of these major expenses. It’s an issue of equality. There might be two people with the exact same income, but if one has children in school, their expenses are clearly much higher. That’s why it’s essential to consider an additional family deduction for education and health expenses, one that sits on top of the basic deduction for the taxpayer and their dependents.
As to the matter of great gaps of incomes and expenses between different localities and the necessity to adjust tax payment deduction accordingly to be fair, the Chairwoman shared that this isn’t really equitable either. What about the people in mountainous regions, for example, who say they’d also like to move to the city to live? It’s because of these messy, circular arguments that the whole “regional factor” for deductions was ultimately scrapped during the law-drafting process.
Answering the question whether it is wiser to shorten the frequency of family deduction adjustment to better keep pace with price fluctuations and economic growth instead of every five years, Chairwoman Nguyen Thi Cuc informed that under the current regulations, which took effect in tax year 2020, the deduction for a taxpayer is VND11 million (US$418) per month, and for each dependent, it’s VND4.4 million ($167) per month.
Now, regarding the family deduction, the new draft law proposes assigning the Government to set this level, allowing it to be adjusted based on the socio-economic situation in any given period. This aligns with the push for decentralization and devolution of power.
In fact, the Government recently submitted a proposal for the National Assembly Standing Committee to issue a resolution adjusting the levels. Accordingly, the proposed new deduction is VND15.5 million ($589) per month for the taxpayer and VND6.2 million ($235) per month for a dependent, to be applied from the 2026 tax year.
It's important to understand that this deduction doesn't necessarily have to increase every single year. It’s an assumed level, not a “livable wage” calculation. For instance, the first bracket of the remaining income above is taxed at only 5 percent. This means 95 percent of that taxable income, plus the entire deduction, is available for spending. So, the argument that the deduction itself is “not enough to live on” isn’t really a reasonable one.
If Vietnam were to “hard-code” an annual adjustment into the law, it would be very difficult. What if prices fluctuate wildly one year, but then are stable the next? How do the State handle that? That’s why the Chairwoman believes this is a matter best left to the Government to decide. It shouldn’t be rigidly fixed in the law.
On the topic of family deductions, the verifying agency, namely the Committee for Economic and Financial Affairs, reported that the majority opinion requests the law should specify the exact deduction amounts for taxpayers and dependents, just as the current law does, to ensure proper authority, clarity, and transparency.
However, a separate group of opinions reportedly agrees with assigning the Government to set the level, but with a catch. They suggest the law should at least stipulate a minimum and maximum deduction range, establishing the basic principles for the Government to follow.
