On 30 June 2026, the Government issued Decree No. 253/2026/ND-CP detailing the implementation of the 2025 Law on Personal Income Tax ("PIT").
Key highlights of the Decree are as follows:
by KMC Consulting Company Limited
1. Taxable income
Article 6 of Decree No. 253/2026/ND-CP specifies the categories of PIT-taxable income, including income from business activities, salaries and wages, capital investment, capital transfers, real estate transfers, prizes, royalties, franchising, inheritance, gifts, and other income.
The Decree also clarifies the scope of taxable income as follows:
- For resident individuals, taxable income includes income arising both within and outside Vietnam, regardless of where the income is paid or received.
- For non-resident individuals, taxable income includes only income arising in Vietnam, regardless of where the income is paid or received.
In addition, where Vietnam has entered into a Double Taxation Agreement ("DTA"), the provisions of the applicable DTA shall prevail.
2. Meal allowance
Under Point g, Clause 2, Article 8 of the Decree, the portion of meal allowances provided by employers that exceeds VND 1.2 million per employee per month will be subject to PIT.
3. Severance and job-loss allowances not subject to PIT
Pursuant to Point i, Clause 3, Article 8 of the Decree, where an employer provides severance or job-loss allowances exceeding the statutory level in accordance with its financial regulations, internal policies, labour contract, or collective labour agreement, the excess amount will not be treated as taxable income for PIT purposes.
Under the current regulations, any severance allowance exceeding the level prescribed by the 2019 Labour Code is generally subject to PIT.
4. Conditions for PIT exemption on overtime pay
Article 26 of the Decree provides that income from overtime work, night shifts, and payments for unused annual leave will be exempt from PIT, provided that such payments comply with the conditions and working-hour requirements prescribed under labour laws.
Employers are required to maintain supporting documents clearly identifying overtime or night-working hours and the corresponding payments. Where no separate schedule is prepared, employers must substantiate such payments through payroll records, attendance records, labour contracts, or other valid supporting documents.
5. Additional dependants eligible for family circumstance deductions
The Decree expands the category of eligible dependants by including children (including biological children, legally adopted children, stepchildren of either spouse) aged 18 years or older who fall into one of the following categories:
- Persons lacking civil act capacity;
- Persons with disabilities; or
- Persons incapable of working.
6. 10% PIT withholding on irregular income from VND 5 million per payment
Article 50 of the Decree provides that resident individuals who do not enter into labour contracts or who enter into labour contracts with a term of less than three months (including payments made after termination of employment) are subject to 10% PIT withholding where each payment is VND 5 million or more.
7. Deduction of up to VND 47 million for medical and education expenses
Clause 2, Article 49 of the Decree allows resident individuals to deduct certain medical and education expenses from taxable employment income, including:
- Medical expenses incurred at healthcare facilities in Vietnam that fall within the scope of the health insurance reimbursement list, up to VND 23 million per year; and
- Education and training expenses incurred at educational institutions in Vietnam, up to VND 24 million per year, including tuition fees for preschool, general education, vocational education, higher education, and other professional skills training.
Note:
To qualify for these deductions, the expenses must satisfy all of the following conditions:
- Be supported by valid invoices and supporting documents in accordance with the law. For medical expenses, a detailed medical expense statement issued in accordance with the regulations of the Minister of Health is also required.
- The invoices and supporting documents must bear the name of the taxpayer or the taxpayer's dependant.
- The expenses must not have been reimbursed or paid by any other source, including sponsorships, financial assistance, third-party payments, the State budget, social insurance, health insurance, or any other insurance schemes.
Effective date
Decree No. 253/2026/ND-CP takes effect from 1 July 2026, except for the provisions relating to business income and employment income of resident individuals, which apply from the 2026 tax year.
