Personal income tax: Proposal to reduce rates, highest rate 35%

The Ministry of Finance has just submitted a draft of the Law on Personal Income Tax (amended), proposing to shorten the progressive tax rate from 7 levels to 5 levels, but the highest rate is still 35%.

In the latest draft of the Law on Personal Income Tax (amended), the Ministry of Finance submitted to the Government a minimum tax rate of 5% corresponding to taxable income in a month of 10 million VND (after deducting family circumstances and other taxable expenses). The maximum tax rate is 35%, for taxable income over 100 million VND. In addition, the progressive tax schedule is shortened to 5 levels.

The Ministry of Finance said that through reviewing the current tax structure, studying the trend of improving people's living standards in the coming time as well as international experience, it is possible to study to reduce the number of tax brackets from the current 7 brackets to an appropriate level; consider widening the income gap in tax brackets. Simplifying and reducing tax brackets is to facilitate taxpayers' tax declaration and payment.

Accordingly, the Ministry of Finance has developed two options to amend the tax schedule in the direction of streamlining the number of levels and widening the income gap between levels.

In the latest draft of the Law on Personal Income Tax (amended) just sent to the Ministry of Justice for appraisal, the Ministry of Finance said it has submitted option 2 to the Government.

Analyzing the two options above, the Ministry of Finance said that with option 1, individuals with taxable income at level 1 will not be affected (however, with the adjustment of the family deduction level, individuals with income at level 1 will receive a tax reduction); individuals paying taxes at level 2 or higher will also receive a tax reduction compared to the present.

For example, an individual with a taxable income of VND10 million/month will receive a reduction of VND250,000/month; an individual with a taxable income of VND30 million/month will receive a reduction of VND850,000/month; an individual with a taxable income of VND40 million/month will receive a reduction of VND750,000/month; an individual with a taxable income of VND80 million/month will receive a reduction of VND650,000/month...

For option 2, basically every individual with taxable income from 50 million VND/month or less will receive a tax reduction equivalent to option 1. For individuals with taxable income over 50 million VND/month, the reduction will be greater than option 1.

Previously, the majority of opinions also leaned towards this option 2, but there was also a proposal to continue to spread out the income levels in each tax bracket, while lowering the tax rates at each bracket, such as reducing the highest tax bracket from 35% to 30% or 25%.

Responding to the above opinion, the Ministry of Finance said that many countries in the region still apply the highest tax rate of 35% such as Thailand, Indonesia, Philippines; even at 45% such as China, Korea, Japan, India.

Therefore, the adjustment according to the two proposed options, combining the increase in family deductions and adding other deductions (health, education , etc.) has contributed to reducing the tax burden for taxpayers. Accordingly, the middle and low income groups will be exempted from personal income tax, while the higher income groups will also receive a reduction compared to the current level.

Ngoc Vy

Source: https://vtcnews.vn/thue-thu-nhap-ca-nhan-de-xuat-rut-bac-muc-nop-cao-nhat-35-ar963767.html