Ministry of Finance proposes to increase family deduction level

(Chinhphu.vn) - The Ministry of Finance has just presented a plan to increase the family deduction for taxpayers and dependents. Many middle-income workers will no longer have to pay personal income tax, or have their personal income tax significantly reduced.

Ministry of Finance proposes to increase family deduction for employees

The Ministry of Finance has just sent the Ministry of Justice a draft Resolution on adjusting the family deduction level of personal income tax for appraisal, in which it proposes to increase the deduction level for taxpayers from 11 million VND/month to 15.5 million VND/month and the deduction level for each dependent from 4.4 million VND to 6.2 million VND/month.

According to the Ministry of Finance, this deduction level is based on the growth rate of average income per capita and GDP per capita from 2020 to present, both increasing by about 40-42%.

If the proposed family deduction is applied, most taxpayers in tier 1 will no longer have to pay tax, accounting for 95% of those currently in this tier. At the same time, a portion of taxpayers in tier 2 will also be transferred to tier 1 or not have to pay. Thus, all tax levels will significantly reduce tax obligations for employees.

For example, if there is one dependent, an individual with an income of 25 million VND/month will only have to pay 33,750 VND, and if the income is 35 million, the contribution will be 265,000 VND. Meanwhile, if the employee participates in voluntary pension insurance or has valid allowances and subsidies, the tax payable can be reduced further, even to 0.

According to the Ministry of Finance's calculations, the budget revenue from personal income tax will be about 84,477 billion VND/year, a decrease of about 21,000 billion compared to the current level. The number of taxpayers will also decrease to 2.21 million, or 2.18 million fewer people, equivalent to 49.66%.

Notably, the current family deduction level (VND 11 million for taxpayers and VND 4.4 million for dependents) has been maintained since July 2020 until now. Many opinions say that this level is outdated and no longer suitable. According to regulations, when the cumulative consumer price index (CPI) over the years increases by more than 20%, the family deduction level needs to be adjusted.

Under option 1, the highest tax rate of 35% applies to taxable income from 80 million VND/month or more. Under option 2, the highest tax rate of 35% only applies to income from 100 million VND/month.

The Ministry of Finance calculates that with option 1, individuals with taxable income of 10 million VND/month will receive a reduction of 250,000 VND, those with income of 30 million will receive a reduction of 850,000 VND and those with income of 80 million will receive a reduction of 650,000 VND per month.

With option 2, people with taxable income of 50 million VND/month or less will still receive a similar reduction as option 1, but the group with income over 50 million will receive a larger reduction.

During the consultation process, some localities proposed a higher family deduction adjustment level than the Ministry of Finance's plan.

It is expected that the Personal Income Tax Law will be submitted to the National Assembly for consideration at the October session and will take effect from July 1, 2026. The family deduction level will be implemented first according to the Resolution of the National Assembly Standing Committee, applicable until the Government issues new regulations to replace it. If approved, the new family deduction level will apply from the 2026 tax period.

Mr. Minh

Source: https://baochinhphu.vn/bo-tai-chinh-de-xuat-tang-muc-giam-tru-gia-canh-102250910121156898.htm