Increase family deductions, reduce tax rates, and sharply raise the threshold for non-taxable revenue

Based on comments at the 10th session of the 15th National Assembly, the Ministry of Finance is finalizing the draft Law on Personal Income Tax (amended) with many important adjustments, including increasing family deductions, adjusting the progressive tax schedule and raising the threshold of non-taxable revenue for business households.

Activities at the Hanoi Tax Department. Photo - illustration: VNA

According to the Ministry of Finance , the draft Law has been submitted by the Government to the National Assembly and the drafting agency is receiving the review opinions of the Economic and Financial Committee and the views of delegates at the discussion sessions on November 5 and November 19. It is expected to report to the Government a plan to complete the draft Law with outstanding contents.

One of the highlights is the adjustment of the family deduction level. The National Assembly Standing Committee has approved raising the deduction level for the taxpayer himself to 15.5 million VND/month and for each dependent to 6.2 million VND/month. With the new calculation, employees with incomes of 17 million VND, 24 million VND or 31 million VND/month (respectively, no, 1 or 2 dependents) will not have to pay tax.

Along with that, the progressive tax schedule is also proposed to be adjusted in the direction of reducing the number of levels from 7 to 5 and widening the gap between levels. Based on the opinions of National Assembly delegates, the drafting agency is studying the option of reducing the tax rate from 15% to 10% and from 25% to 20% to create more reasonableness and uniformity between tax rates.

With this new tax schedule, all individuals currently paying taxes at all levels will have their tax obligations reduced compared to the current tax schedule.

In addition, the new tax schedule has also overcome the sudden increase at some levels (level 2, level 3) as proposed in the previous draft Law, ensuring more reasonableness of the tax schedule.

The Draft Law supplements a number of provisions on tax exemption and reduction of personal income tax to institutionalize the Party's policies and guidelines and the State's laws in Resolutions and a number of recently issued Laws.

At the same time, amend and complete regulations on some tax-exempt incomes, such as: Income paid by supplementary pension insurance funds, voluntary pension funds, wages for night work, overtime, wages paid for days without leave, severance pay, unemployment benefits paid by enterprises, interest on local government bonds, etc.

The draft Law also adds provisions that taxpayers are allowed to deduct certain expenses during the year at appropriate levels, such as medical and educational expenses, before calculating taxes, and assigns the Government to provide detailed regulations to ensure flexibility and suitability with the socio-economic situation.

According to the current Personal Income Tax Law, the revenue level not subject to personal income tax is 100 million VND/year or less. This level is being applied uniformly with the value added tax of households and individuals doing business, which is also 100 million VND/year or less, is not subject to value added tax.

On November 26, 2024, the National Assembly passed the Law on Value Added Tax No. 48/2024/QH15, accordingly, adjusting this level, raising it from VND 100 million/year to VND 200 million/year and applying from January 1, 2026. To ensure consistency and uniformity in the legal system, the Government submitted to the National Assembly to raise the annual tax-free revenue of business individuals to VND 200 million/year.

Based on listening to the opinions of the reviewers and delegates, the Ministry of Finance said that it will continue to study and adjust this level to be appropriate, ensuring relative fairness for individuals with income from salaries and wages, and is also expected to amend the Law on Value Added Tax to increase the level of revenue not subject to value added tax to ensure consistency.

Currently, the Ministry of Finance plans to report to the Government a plan to adjust the non-taxable revenue of individual businesses to ensure it is consistent with the actual situation, demonstrating the State's sharing with households and individual businesses with revenue of 3 billion or less, towards the goal of social security.

In addition, the Ministry of Finance will continue to research tax calculation methods for households and individuals with revenue of 3 billion or less.

To ensure compliance and reflect the true nature of income tax, the Ministry of Finance plans to report to the Government a plan to collect tax on income (revenue - expenses) for all individuals with revenue above the non-taxable threshold. Accordingly, it is expected to add a provision: Individuals doing business with annual revenue above the non-taxable threshold up to 3 billion VND shall pay tax at the tax rate corresponding to the corporate income tax applicable to enterprises with revenue below 3 billion VND.

In case an individual business has a revenue of less than 3 billion VND and cannot determine the cost, they will continue to pay tax at the current rate on revenue (with tax rates of 0.5%, 1%, 2% depending on the industry) and these households and individuals will be deducted according to the non-taxable threshold before calculating tax, not calculating tax from the first revenue as current regulations.

Source: https://baotintuc.vn/kinh-te/tang-giam-tru-gia-canh-giam-bac-thue-nang-manh-nguong-doanh-thu-khong-chiu-thue-20251125230037470.htm