10.02.2023, 10:01

Viet Nam to amend law on personal income tax

 

The Ministry of Justice included the Law on PIT in the Government’s proposal on the programme of law and ordinance development in 2025.

Accordingly, the draft would be submitted to the National Assembly for comments at the 10th meeting which is scheduled for October 2025. The bill is expected to be passed at the 11th meeting, scheduled for May 2026.

The ministry said that a number of provisions of the PIT law were outdated and no longer suitable in the current domestic and international economic situations, such as issues related to taxable income, tax-exempt income, tax calculation basis, method of determining taxable amount and progressive tariffs.

The law also had some gaps in dealing with new tax issues arising from the process of international economic integration and the emergence of new business models. “Incomes of individuals are increasingly diversified and complicated. New business models were constantly appearing, creating many sources of income for individuals,” the ministry wrote in the proposal.

A notable proposal was that Viet Nam could consider reducing the number of levels of tax rates in the partially progressive tariff from 7 to 5 together with widening the gaps of taxable income for each bracket to ensure that more tax was collected on people with taxable income at higher grades. This would also contribute to facilitating tax declaration and payment through reducing the number of tax levels, the ministry said.

Currently, Viet Nam applied seven tax rates at 5 per cent to 35 per cent for monthly taxable income from up to VND5 million to over VND80 million.

Adjusting the gaps between taxable incomes in each bracket would be put under consideration to ensure appropriateness to recent changes in the living standards and improving the competitiveness of the economy in attracting foreign experts and skilled workers to work in Viet Nam. This is necessary in the context of fierce competition for human resources, especially among developing countries, the ministry pointed out.

The World Bank in a recent study said that reducing the number of tax brackets from 7 to 5 was in line with the global trend to improve tax management and compliance, which, however, might impact budget revenue.

The ministry said that deductions would be put into consideration for increases to ensure compatibility with price fluctuations and improvements in living standards.

Lawyer Pham Ngoc Hung, Deputy President of HCM City Association of Enterprises, said that reducing the number of tax brackets was reasonable to facilitate tax compliance.

Hung said that the PIT law should be amended as soon as possible so that people would have reasonable net income which would contribute to promoting purchasing power, the market, production and business.

According to lawyer Do Trong Hien, director of CTB Do Gia Limited Company, the personal deduction other deductions were no longer appropriate.

Although the personal deduction increased from VND9 million to VND11 million per month from July 1, 2020, it failed to keep pace with the increasing prices of goods and services, he said. The family allowance at VND4.4 million per month for each dependent was also outdated.

He pointed out that there were other sums which should be accounted for as deductions such as expenses for medical examination and treatment and bank loans. “The expenses which are reasonable, valid and fully documented should be deducted,” he said.

The tax brackets should also be adjusted to encourage experts and skilled workers to make efforts to work at higher positions.

Nguyen Van Duoc from the HCM City Tax Consultants and Agents Association said that unreasonable tax brackets would cause labourers to tend to work and declare tax in places with lower tax rates.

Lowering tax rates should be put into consideration to attract foreign experts and skilled workers to work and declare tax in Viet Nam, Duoc said.

Under the proposal, the ministry said that the amendment also studied home sellers’ personal income tax rates based on ownership duration, so higher tax rates would be imposed on real estate owners with short ownership periods to prevent speculation and a real estate bubble.

It also proposed other incomes to be considered taxable, including incomes from the transfer of domains, mobile phone numbers and vehicle registration plates, and studying separate tax regulations for derivatives transfer due to the differences between derivatives and stocks.

“The amendments to the PIT law would be studied and considered carefully to ensure consistency with the tax system reform strategy to 2030, appropriateness to the socio-economic context, income and living standards of the people and with international practices while ensuring the rights of workers, encouraging the developing of the labour market in the context of international integration while ensuring revenue for the State budget,” the ministry wrote.

The Law on PIT was passed on November 20, 2007 and took effect from the beginning of 2009. The law was amended two times in 2012 and 2014. 

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