Ministry of Finance proposes to increase family deduction level, applicable from 2026

The Ministry of Finance has developed two options for adjusting the family deduction level, each option will be based on a different calculation basis for the Government to consider. (Photo: Vietnam+)

The Ministry of Finance is soliciting comments on the draft Resolution on adjusting the family deduction level and requests that it be sent to the Ministry of Finance before August 1 for synthesis and reporting to the Government .

Specifically, the draft proposes to sharply increase the deduction for taxpayers themselves, up to VND15.5 million/month. If approved, this policy is expected to take effect from the 2026 tax period.

This move comes as the consumer price index (CPI) has been rising in recent years, putting great pressure on people's living costs. The adjustment is not only to enforce legal regulations but also an important solution to support life, stimulate consumption and promote economic growth.

In the submission, the Ministry of Finance has developed two options for adjusting the family deduction level, each option will be based on a different calculation basis for the Government to consider.

Option 1 will closely follow the provisions of the Personal Income Tax Law and adjust when the CPI fluctuates by more than 20%. Based on the calculation of the General Statistics Office, the cumulative CPI from 2020 to the end of 2025 is expected to increase by about 21.24%. The Ministry of Finance proposes a new family deduction for taxpayers to increase from VND 11 million/month to VND 13.3 million/month (equivalent to VND 159.6 million/year). Each dependent also increases from VND 4.4 million/month to VND 5.3 million/month.

In addition, option 2 adjusts according to income and GDP growth. This option is considered more innovative and reflects the sharing of economic growth achievements with the people. Based on the forecast of income growth rate and GDP per capita in the period 2020-2025 (about 40-42%), the proposed family deduction is significantly higher. Specifically, the taxpayer will increase from 11 million VND/month to 15.5 million VND/month (equivalent to 186 million VND/year). Each dependent will increase from 4.4 million VND/month to 6.2 million VND/month.

In particular, the Ministry of Finance believes that option 2 will help reduce tax obligations more significantly, increase disposable income for people, thereby strongly stimulating spending and creating momentum for long-term economic growth.

According to the Ministry of Finance, the legal basis for this adjustment is Clause 4, Article 1 of the 2012 amended Law on Personal Income Tax. The law clearly stipulates that when the CPI fluctuates by more than 20% compared to the time of the most recent adjustment, the Government must submit to the National Assembly Standing Committee an appropriate adjustment of the family deduction level.

Previously, the most recent adjustment took place in 2020. Meanwhile, data from the General Statistics Office shows that the cumulative CPI from 2020 to 2024 was 16.02%. With the forecast of CPI in 2025 increasing by about 4.5-5%, the total cumulative increase will certainly exceed the 20% mark. Therefore, considering adjusting the family deduction level at this time is a mandatory and necessary requirement for the policy to keep up with real life.

However, raising the family deduction level will reduce personal income tax revenue. The Ministry of Finance estimates that option 1 will reduce budget revenue by about VND12,000 billion/year; option 2 will reduce budget revenue by about VND21,000 billion/year.

To make up for this revenue shortfall, the Government plans to direct ministries and sectors to synchronously implement many solutions. One is to focus on removing difficulties for production and business, striving to achieve the GDP growth target of at least 8% in 2025 to create sustainable revenue sources. Two is to strengthen tax management, resolutely combat revenue loss, especially in new areas such as e-commerce and digital platform business. Three is to manage state budget expenditures closely, economically and effectively.

Regarding the roadmap for approval and application, according to the working program, the National Assembly Standing Committee is expected to consider and approve this draft Resolution at the 50th Session, taking place in October. If approved, the new family deduction level will officially take effect from January 1, 2026 and will be applied immediately for the 2026 tax period.

(Vietnam+)

Source: https://baoninhbinh.org.vn/bo-tai-chinh-de-xuat-tang-muc-giam-tru-gia-canh-ap-dung-tu-nam-2026-250722084615383.html