The Standing Committee of the National Assembly has allowed the increase of the monthly tax-free threshold from July 1 in a move to make the cost of living match inflation.
|Vietnam’s new taxable personal income threshold to take effect from July.|
Accordingly, the threshold will be raised from VND9 million (US$389) per month to VND11 million (US$475).
Additionally, the family circumstance-based deduction for each dependent of a taxpayer will also be increased from VND3.6 million (US$155.42) per month to VND4.4 million (US$189.96).
Under the existing legislation, a reduction based on family circumstances means a sum of money deductible from pre-tax income.
With the new threshold in place, incomes of more than 1 million people will no longer be taxable.
Those having paid income tax based on the previous standard deduction would be refunded by the end of this year.
With this adjustment, an individual with income of less than VND20 million (US$863.44) and one dependent would have to pay tax of VND230,000 (US$9.93), 48% less than the amount paid currently, while those with higher income would be subjected to a 7% reduction in tax amount.
In 2019, over 6.88 million people paid personal income tax of a combined VND79.2 trillion (US$3.41 billion). The figure would be reduced to VND68.92 trillion (US$2.97 billion), down 13% year-on-year, the Ministry of Finance has estimated.
The ministry expected a higher disposable income as a result of the adjustment would encourage household consumption and spur economic growth.