Contributing to the draft Law on Personal Income Tax (amended), Vietnam Television proposed that the drafting agency add party fees and trade union fees to the deductions when calculating personal income tax.

The reason is that these are the amounts that employees are required to pay monthly according to regulations. Adding these amounts to the deduction will help reflect more accurately the actual taxable income, contributing to ensuring fairness with the mandatory expenses of employees.

The Ministry of Finance acknowledges the opinions of Vietnam Television for consideration in the process of drafting documents guiding the implementation of the law.

Some organizations and individuals have commented and expressed their desire to increase the deduction level for retirement insurance contributions before calculating personal income tax.

The American Chamber of Commerce in Vietnam proposed to maintain the deduction for contributions to pension funds; and expand the deduction to be applied to funds established outside of Vietnam, meeting the requirements of the host country.

The association also proposed to increase the deduction from VND1 million/month to VND3 million/month for contributions to voluntary pension funds, voluntary supplementary pension funds or purchases of voluntary pension insurance and life insurance to accurately reflect current living standards and encourage workers to actively participate in these funds.

W-personal income tax.jpg
Some opinions propose to reduce party and union fees when calculating personal income tax. Photo: NK

According to the association, this proposed level is also consistent with current regulations related to voluntary pension fund and life insurance contributions deductible when calculating corporate income tax as prescribed in Article 2 of Decree 146/2017/ND-CP.

Sharing the above proposal, Deloitte Vietnam Tax Consulting Co., Ltd. agrees with adding deductions related to contributions to supplementary pension insurance under the Law on Social Insurance, voluntary pension insurance purchases, and life insurance.

However, the company found that this deduction mechanism still has some shortcomings, notably the elimination of voluntary pension fund contributions. In essence, voluntary pension funds also aim to ensure social security like supplementary pension insurance, voluntary pension insurance. Therefore, the deduction mechanism should also be applied similarly.

The current deduction mechanism for additional voluntary pension funds, voluntary pension insurance, and life insurance is still only applied to funds established under the guidance of the Ministry of Finance.

For foreign experts transferred to work in Vietnam, individuals and parent companies abroad usually maintain contributions to voluntary pension funds and life insurance established abroad.

Current regulations only limit funds established in Vietnam, which invisibly reduces the benefits of foreign experts, while in essence, the above forms of insurance are to ensure the welfare of workers.

“The current contribution deduction (VND1 million/month) is no longer suitable for the current socio -economic situation, making this policy no longer attractive enough to encourage employees and businesses to participate,” Deloitte Vietnam assessed.

Many other individuals suggested raising the deduction from personal income tax for pension insurance contributions to the same level as the family deduction for dependents. The proposal aims to encourage employees to contribute more than the amount paid by the enterprise, thereby encouraging people to participate themselves and reducing pressure on the welfare system from the budget.

In response to the above comments, the Ministry of Finance said that the draft law has replaced the term “voluntary pension fund” with the phrase “voluntary pension insurance purchase” without changing the nature, because this product is provided by an insurance company. The law’s guiding document will provide details. The draft law has been assigned to the Government to regulate this level.

During the process of drafting the decree, research will be conducted and reports will be submitted to competent authorities for consideration to prescribe appropriate levels, consistent with the levels prescribed on corporate income tax.

The highest personal income tax rate should be only 25% . The draft Law on Personal Income Tax (amended) shortens the tax schedule to 5 levels, keeping the highest rate of 35% for income over 100 million VND/month. However, many opinions propose lowering the ceiling and loosening the tax threshold to ensure fairness.

Source: https://vietnamnet.vn/tinh-thue-thu-nhap-ca-nhan-de-xuat-giam-tru-them-nhieu-chi-phi-2444949.html