Editor's note:

The current personal income tax system has revealed many shortcomings. These include family allowance deductions that are no longer appropriate for the constantly fluctuating general price levels, too many tax brackets, and an inaccurate and incomplete calculation of taxes for business households (especially online sellers)...

However, the Personal Income Tax Law can only be amended in 2026. This amendment will require even more significant improvements to create greater fairness for taxpayers.

The series of articles on the shortcomings of personal income tax, produced by VietNamNet, adds another perspective to this issue that is always of public interest.

What income level is subject to tax?

Essentially, the regulations on deductions before tax calculation ensure that individuals need to have a certain level of income to meet their essential needs such as food, housing, transportation, education, medical care, etc. Therefore, only income above this threshold is subject to tax.

According to the Ministry of Finance , with the current tax deductions of VND 11 million per month for the taxpayer themselves and VND 4.4 million per month for each dependent, individuals with income from salaries and wages of VND 17 million per month (if they have one dependent) or VND 22 million per month (if they have two dependents), after deducting social insurance, health insurance, unemployment insurance, etc., are not yet required to pay personal income tax.

pork - photo by nguyenhue.jpg
The cost of living is always a heavy burden on the people. Photo: Nguyen Hue

For individuals with an income of less than 120 million VND per month, under current regulations, the amount of personal income tax payable compared to their income is less than 20%.

Specifically, an individual with an income of 40 million VND/month will have to pay 6.56% of their income as personal income tax.

If you earn 60 million VND per month, the personal income tax payable is 11.74% of your income.

If you earn 80 million VND per month, the personal income tax payable is 15.55% of your income.

If you earn 100 million VND per month, the personal income tax payable is 18.44% of that income.

For individuals with high incomes exceeding 120 million VND, the personal income tax payable is at a rate higher than 20% of their income.

Specifically: an individual with an income of 120 million VND/month will have to pay 21.2% of their income in personal income tax; an individual with an income of 150 million VND/month will have to pay 23.96% of their income... This calculation assumes the individual has one dependent; if the individual has more than one dependent, the amount of tax payable will be correspondingly lower.

The Ministry of Finance has made such calculations, but recently, many opinions have commented that the personal allowance deduction is still too low. In addition, some argue that the personal allowance deduction should be based on the regional minimum wage, and that the deduction in urban areas and large cities should be higher than in rural and mountainous areas due to higher living costs...

In reality, many families are struggling to make ends meet while still having to pay personal income tax, especially in large cities.

Like the family of Ms. Nguyen Thi Huong in Hanoi , these days, she and her husband are beginning their personal income tax settlement period. Their combined monthly income is approximately 36 million VND. Even after deducting family allowances for their two children, Ms. Huong and her husband still have to pay personal income tax. Although the amount of tax payable isn't large, it still makes her feel resentful.

"Our family's monthly expenses are always tight, as we have to pay 11 million VND per month for the apartment installments; 3 million VND per month to support our elderly parents; and cover electricity, water, and living expenses for my wife, myself, and our two children."

"The family allowance for the children is only enough to cover their monthly school expenses. Meanwhile, the parents don't get any deductions because they receive a pension of over 2 million VND per month. The income isn't enough to cover expenses, yet we still have to pay taxes. I find this really unfair," Ms. Huong said.

Medical and educational expenses should be deductible.

Citing the experiences of other countries, the Ministry of Finance stated that most personal income tax laws in other countries stipulate the amount of family allowance deductions in various forms and methods.

In terms of classification, personal income tax deductions applied in various countries are divided into three groups.

One approach is to offer general deductions for individual taxpayers. In many countries, the application of general deductions aims to exclude low-income earners from paying personal income tax. This reduces the burden on tax authorities in managing and settling taxes, especially since the amount of tax collected from those below the income threshold is often small, while the cost of managing tax collection from these individuals is usually substantial. Because the living needs of individual taxpayers vary greatly (different consumption needs, different consumption patterns in different regions, etc.), experience from other countries shows that determining the appropriate level of deductions is always a matter of differing opinions.

Secondly, there are deductions for dependents, such as deductions for children, spouses, parents, etc. These deductions apply to individuals whom the taxpayer is responsible for supporting (dependents). However, the scope of dependents varies from country to country, and different countries have different criteria. The deduction amount for dependents is usually lower than the deduction amount for the individual taxpayer.

Some countries have limits on the number of dependents eligible for tax deductions (e.g., Thailand, Indonesia, Malaysia...), while many others do not (e.g., the US, the UK). Some countries do not specify separate deductions for dependents and for individual taxpayers, but instead stipulate a general amount (e.g., China...).

Vietnam currently applies two types of tax deductions. In addition, some countries have established specific deductions (for example, deductions for medical expenses, education, etc.). These are deductions that taxpayers are entitled to when they meet certain criteria, such as spending on items that the government encourages (e.g., healthcare, education, etc.).

Accordingly, the scope of these deductions is also very diverse. Some countries allow deductions for social insurance and health insurance contributions to encourage people to participate in these services. Some countries allow deductions for children's education expenses, while others allow deductions for interest on mortgage payments (to encourage home ownership) or charitable contributions.

Viewing this aspect, lawyer Truong Thanh Duc, Director of ANVI Law Firm, assessed: The Personal Income Tax Law needs to be amended to adhere to the correct principles, because the nature of tax is revenue minus expenses, and any income must be taxed. Therefore, expenses of the taxpayer and their family members, such as children's tuition, medical expenses, house purchase, construction, or rental costs, must be specifically regulated in the law to determine how they can be deducted before calculating personal income tax.

Allowing expenses to be deducted when calculating personal income tax if invoices are available is also something that a tax expert has been proposing for many years. Mr. Chung Thanh Tien, Chairman of the "Understanding Right - Doing Right" Accounting Association, once analyzed: The tax authorities can maintain the current deduction amount but allow a percentage deduction of actual expenses if there is documentation for the taxpayer. In that case, both the taxpayer and the tax authorities will know which party is evading taxes.

This also motivates people to request invoices – an issue the tax authorities are advocating through various means, including "invoice lottery." Businesses will no longer be able to hide their revenue. According to this source, allowing buyers to deduct taxes to a certain extent with supporting documents will contribute to budget revenue and "reduce the negotiation and splitting of lump-sum taxes that has been a problem in the past."

Next article: Shortcomings in personal income tax, citizens still have to wait for the Law to be amended.

Selling sticky rice in luxury cars and paying personal income tax : In reality, salaried employees earning just over 11 million VND/month have to pay personal income tax if they have no dependents, while self-employed individuals earning high incomes are almost exempt from this tax.