Officially deduct medical and educational expenses before paying personal income tax

Individual income taxpayers will be allowed to deduct medical and educational expenses.

The government regulates the deduction level for medical and educational expenses.

The draft law on Personal Income Tax (replacement) for which the Ministry of Finance is seeking comments has proposed expenses that can be deducted from income before calculating tax on income from salaries and wages of taxpayers.

Clause 2, Article 12 stipulates: Taxpayers are entitled to deduct from their income before calculating tax the expenses for healthcare , education and training of the taxpayer and his/her parents, spouse, and dependent children at the level prescribed by the Government. These expenses must meet the conditions on invoices and documents as prescribed and cannot be paid from other sources. The draft clearly states that the Government will specify this in detail.

Thus, when the Personal Income Tax Law (replacement) is promulgated and takes effect, taxpayers will be able to deduct medical, educational and training expenses for themselves and their dependents.

Medical and educational expenses will be deducted before calculating personal income tax.

PHOTO: NGOC THANG

Lawyer Nguyen Duc Nghia, Deputy Director of the Legal Consulting Center of the Ho Chi Minh City Business Association, said that the draft law's addition of this provision is very good because the cost of education and self-training for both taxpayers and dependents is an essential expense for every family. Taxpayers themselves must also continuously train themselves to develop their careers, increase their income, and at the same time cover their children's training costs. It is possible to set a maximum level according to the tuition fees of public schools from elementary to university. Taxpayers themselves also need to have continuous training costs to update their knowledge and improve their qualifications, such as learning foreign languages, learning about new technologies such as AI, or short-term courses directly related to their jobs. The government can set a maximum deduction level for each year that taxpayers can deduct.

In addition, taxpayers themselves have health insurance, but if they need more support to take care of their elderly parents, they should be allowed to deduct this expense. Consider allowing personal income taxpayers to deduct the remaining medical expenses after insurance payment, especially for serious illnesses and long-term illnesses. "This amendment to the Personal Income Tax Law needs to consider calculating correctly and sufficiently to deduct reasonable expenses of employees to ensure the lives of families. At that time, taxpayers themselves will feel more fair and secure in declaring their income and paying taxes. Personal income tax revenue from salaried employees will not decrease but will always increase over time, so it is necessary to encourage and nurture the source of income," said lawyer Nghia.

How do countries deduct medical and educational expenses?

According to Dr. Do Thien Anh Tuan, Fulbright University, many countries have allowed deductions for consumption expenses for "recommended" items such as tuition fees, voluntary insurance or "family" expenses such as pregnant women, childbirth, caring for sick elderly people... For example, next to Vietnam, Thailand has applied a progressive personal income tax system with tax rates from 5% to 35% and has a relatively rich deduction system, to support people with low and middle incomes, while promoting consumption and social investment. Taxpayers are entitled to a basic personal deduction of 60,000 baht/year; a deduction for spouses with no income of 60,000 baht/year; a deduction for dependents (children) of 30,000 baht/child/year, plus 2,000 baht/child for the second child onwards; health insurance costs up to 25,000 baht/year (nearly 20 million VND/year); private education costs for children up to 100,000 baht/year (about 79.7 million VND/year); costs of taking care of parents (over 60 years old up to 30,000 baht/person)... In particular, Thailand regularly issues special seasonal deduction programs, for example "Shop Dee Mee Khuen" (tax-refund shopping) allows deductions of up to 40,000 baht for certain consumer expenses such as books, learning equipment, domestic products...

Similarly, China is one of the emerging economies that has adopted a clearly family-oriented tax deduction system since 2019, with the addition of a series of "special deductions" for workers with young children, elderly dependents, those studying for higher education, renting a house or repaying a first-time home loan. In 2023, China raised the deduction for education and childcare to 2,000 yuan (CNY)/month/child (about 7 million VND/month). In addition, major medical expenses are also deductible if they exceed the threshold of 15,000 yuan; interest on a first-time home loan is 1,000 yuan/month for up to 240 months; rental costs are from 800 to 1,500 yuan/month depending on the city; care for the elderly over 60 years old is up to 3,000 yuan/month...

"Allowing deductions for essential or encouraged expenses such as education and insurance accurately reflects people's actual financial capacity after covering their living expenses. For example, a person with an income of VND20 million/month but having to spend VND8 million on preschool tuition and hospital fees for their elderly mother, the remaining amount for actual spending is only equivalent to someone with an income of VND12 million. If such expenses are not deducted, the tax system will inadvertently "tax" the cost of living, which is both unreasonable and inhumane. Or the Government can set a ceiling, such as a maximum of 30% of taxable income, for people to deduct essential expenses, while ensuring the risk of budget loss is managed," Dr. Do Thien Anh Tuan shared.

Source: https://thanhnien.vn/chinh-thuc-khau-tru-chi-phi-y-tegiao-duc-truoc-khi-nop-thue-thu-nhap-ca-nhan-185250724152133141.htm