Personal income tax problem: Mother receives more than 1 million/month in pension, child cannot deduct family circumstances

The current regulation that income for dependents should not exceed 1 million VND/month has been applied for nearly 20 years without change. This is too outdated and needs to be revised.

Regulations that have existed for nearly 20 years have not changed

Ms. Vu Thu ( Hanoi ) shared that her mother has been receiving a monthly pension according to regulations of 50% of the basic salary since her father passed away.

If in 2023, the basic salary is 1.8 million VND/month, the pension support is less than 1 million VND, Ms. Thu can still declare her mother as a dependent. However, from July 1, 2024, the basic salary will increase to 2.34 million VND/month, the pension is over 1.1 million VND, making her mother no longer eligible.

According to Ms. Thu, her mother is getting older and weaker, and health care costs are increasing, so the amount of more than 1.1 million VND is nothing, while she is not entitled to family deductions and has to pay more taxes.

“If the regulations on income levels to determine dependents are not changed, even if the family deduction level for taxpayers is increased, it will not be fair,” said Ms. Thu.

In fact, many families have elderly parents but are not considered dependents when their income is over 1 million VND/month. This causes many salaried workers to suffer disadvantages when calculating personal income tax.

Experts say that the regulation that the average monthly income in a year from all sources of income does not exceed 1 million VND to be considered a dependent is too outdated.

The Draft Law on Personal Income Tax (replacement) has been proposed by the Ministry of Finance with many amendments compared to current regulations such as: Family deduction level for taxpayers, progressive tax schedule, regulations on exemption and reduction of personal income tax...

However, there is no specific information on the income level for individuals identified as dependents in the above cases.

According to the draft, dependents are people that taxpayers are responsible for supporting, including: minor children, disabled children, and children who are unable to work. Individuals who have no income or whose income does not exceed the level prescribed by the Ministry of Finance, including adult children studying at university, college, vocational high school or vocational training; spouses who are unable to work; parents who are past working age or are unable to work; other people without support that taxpayers must directly support.

Circular No. 111/2013/TT-BTC of the Ministry of Finance guiding the implementation of the Law on Personal Income Tax, stipulates family deductions for biological father, biological mother; father-in-law, mother-in-law (or father-in-law, mother-in-law); stepfather, stepmother; legal adoptive father, adoptive mother of taxpayers who meet the conditions.

For people outside of working age, there must be no income or average monthly income in the year from all sources does not exceed 1 million VND.

Need to raise income threshold to determine dependents

Sharing with VietNamNet reporter, Dr. Nguyen Ngoc Tu, lecturer at Hanoi University of Business and Technology, said that the regulation that average monthly income in a year from all sources of income does not exceed 1 million VND to be considered a dependent was introduced when the Personal Income Tax Law took effect, nearly 20 years ago, so it is too outdated and out of date.

According to Mr. Tu, the consumer price index (CPI) has increased more than 2 times in the past 18 years, GDP and per capita income have also increased 2.5-3 times. If calculated mechanically, the income to determine dependents must increase to 3.5 million VND/month. However, even this level is not realistic, it is difficult to cover the cost of raising children.

“The current family deduction for dependents is 4.4 million VND/month, and is expected to increase to about 6.2 million VND/month. Therefore, only those with incomes above 6.2 million VND/month should be excluded, while those below this level should still be considered dependents,” Mr. Tu proposed.

The expert said that, in reality, dependents are children studying, especially elderly parents with underlying diseases, so the children's expenses for their parents are often higher than their own expenses.

Therefore, when amending the Personal Income Tax Law, the regulations on income for dependents need to be calculated and adjusted to at least equal the family deduction level, while the current regulation of not exceeding 1 million VND is too low.

Sharing the same view, Ms. Le Thi Thuy, CEO of Bach Khoa Consulting Services Co., Ltd., recommended that this income level should be changed to match the current expenses of people outside of working age.

According to Ms. Thuy, it is necessary to calculate the minimum living and medical expenses and should be calculated by region, urban or rural areas. "The income level to calculate dependents should be adjusted to a minimum of about 5 million VND in cities and 3 million VND in rural areas," Ms. Thuy proposed.

Experts all agree that when amending tax policies, the State needs to ensure sharing with taxpayers, harmonizing income and actual spending, thereby motivating and encouraging people to fulfill their tax obligations.

Source: https://vietnamnet.vn/thue-tncn-me-nhan-tien-tuat-hon-1-trieu-thang-con-khong-duoc-giam-tru-gia-canh-2434558.html