Key highlights of the draft decree guiding the law on personal income tax

by KMC Consulting Company Limited

Recently, the Ministry of Finance has been collecting public comments on the Draft Decree detailing a number of articles of the Law on Personal Income Tax. The draft consolidates a series of proposed changes to PIT applicable from July 1, 2026, as follows:

1. Addition of 05 categories of PIT-exempt income

Pursuant to Chapter III – Section 1 (from Article 18 to Article 38) of the Draft Decree, PIT-exempt income consists of 21 categories. Notably, the Ministry of Finance proposes to add the following 05 categories of PIT-exempt income from 2026:

  • Income from salaries and wages derived from performing scientific, technological, and innovation tasks;
  • Income from copyrights arising from scientific and technological tasks upon commercialization;
  • Income of investors, experts, and founders within the innovative startup ecosystem;
  • Income from salaries and wages of highly qualified digital technology industry personnel (PIT exemption for 05 years);
  • Income from salaries and wages of high-tech personnel engaged in research and development of high technologies or strategic technologies (PIT exemption for 05 years).

In addition, under Articles 41 and 42 of the Draft, the Ministry of Finance also proposes PIT exemptions for individuals who are highly qualified digital technology personnel and high-tech personnel for a period of 05 years with respect to income from salaries and wages in certain cases:

  • For highly qualified digital technology personnel:
    • Income from digital technology industry projects in centralized digital technology zones;
    • Income from R&D and production projects of key digital technology products, semiconductor chips, and artificial intelligence systems;
    • Income from training activities for digital technology industry personnel.
  • For high-tech personnel:
    • Income from R&D activities in high technologies included in the prioritized high-tech development list;
    • Income from R&D activities in strategic technologies under the lists of strategic technologies and strategic technology products.

2. Increase in the threshold for withholding PIT on irregular income

According to Clause 2, Article 50 of the Draft Decree, the threshold for withholding PIT on irregular income applicable to resident individuals without labor contracts or with contracts of less than 03 months has been increased.

Specifically, PIT withholding shall apply where income is from VND 3 million per payment or more. The withholding entity must withhold, declare, and pay PIT on behalf of the individual at a rate of 10% of income prior to payment.

This proposal increases the threshold by VND 1 million per payment compared to the current level of VND 2 million per payment under Point i, Clause 1, Article 25 of Circular No. 111/2013/TT-BTC.

3. Changes to regulations on income from salaries and wages

3.1. Increase in the maximum deductible contribution to voluntary pension funds

Pursuant to Clause 2, Article 8 of the Draft, income from salaries and wages includes remuneration and other monetary or non-monetary benefits received by individuals from organizations or individuals, including employers in any form.

The Draft stipulates that contributions to voluntary pension funds are deductible up to a maximum of VND 3 million/month, including both employer and employee contributions (if any), even in cases of participation in multiple funds.

Previously, Clause 8, Article 2 of Decree No. 12/2015/NĐ-CP only allowed a maximum deduction of VND 1 million/month.

3.2. Increase in the non-taxable threshold for mid-shift meal allowances

Under Point g, Clause 2, Article 8 of the Draft Decree, income from salaries and wages includes all benefits received from employers in cash or in kind.

The Draft clarifies that mid-shift or lunch allowances are considered taxable benefits. However, only the portion exceeding VND 1.2 million per employee per month is subject to PIT.

Accordingly, the portion within VND 1.2 million/month is excluded from taxable income.

Previously, Clause 4, Article 22 of Circular No. 26/2016/TT-BLĐTBXH capped meal allowances at VND 730,000/month; however, this provision was later repealed under Circular No. 003/2025/TT-BNV dated April 28, 2025.

3.3. Exclusion of severance and job loss allowances from taxable income

Point i, Clause 3, Article 8 of the Draft proposes:

Allowances such as hardship allowances, unemployment benefits, severance pay, and job loss allowances in accordance with the law shall not be included in taxable income.

Where enterprises provide severance or job loss allowances exceeding statutory levels as stipulated in financial regulations, internal policies, labor contracts, or collective labor agreements, the excess portion shall also not be subject to PIT.

Currently, any severance payment exceeding the statutory level under the Labor Code 2019 is subject to PIT.

This proposed change aligns with the Law on Personal Income Tax 2025 (No. 109/2025/QH15), providing greater support to taxpayers and reflecting the State’s sharing mechanism with employees in cases of job termination or loss.

4. Detailed provisions on taxable income from other sources

Article 16 of the Draft supplements detailed provisions on “other income” under Clause 10, Article 3 of the Law on Personal Income Tax 2025.

Such income includes:

  • Income from the transfer of Vietnam national domain names “.vn”;
  • Income from the transfer of greenhouse gas emission reductions and carbon credits;
  • Income from the transfer of auctioned vehicle license plates.

PIT in these cases is calculated at a tax rate of 5% on taxable income, where taxable income is the portion exceeding VND 20 million per occurrence (pursuant to Article 19 of the PIT Law 2025).

5. Additional cases where children over 18 qualify for dependent deduction

Previously, Clause 3, Article 12 of Decree No. 65/2013/NĐ-CP provided that children (including biological children, legally adopted children, stepchildren) aged 18 or above were eligible for dependent deduction only if they were “disabled and unable to work.”

Under Point b, Clause 2, Article 47 of the Draft, the Ministry of Finance proposes expanding this to include three cases:

  • Disabled persons;
  • Persons unable to work;
  • Persons lacking civil act capacity.

6. Exchange rate for PIT calculation in 2026

The Draft Decree proposes the following rules:

  1. Taxable income received in foreign currency must be converted into VND using the buying exchange rate of the commercial bank where the individual maintains a transaction account. If the individual does not have an account in Vietnam, the central exchange rate announced by the State Bank of Vietnam at the time the income arises shall apply.
  2. Taxable income received in non-cash form must be converted into monetary value and determined in VND based on the prevailing market price of such goods or services, or equivalent goods/services at the time the income arises.

 

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