Calculating personal income tax: Need to increase family deduction to 18 million/month

The proposed increase in family deduction for taxpayers to 15.5 million VND/month is considered outdated, especially when we have to wait until the 2026 tax period, that is, until 2027, to finalize taxes.

The proposed level of 15.5 million VND/month is still low.

The draft Resolution of the National Assembly Standing Committee on adjusting the family deduction level of personal income tax is being appraised by the Ministry of Justice . The Ministry of Finance proposed to choose option 2 on the family deduction level.

Accordingly, it is proposed to increase the family deduction for taxpayers from 11 million VND/month to 15.5 million VND/month; for dependents from 4.4 million VND/month to 6.2 million VND/month.

According to the Ministry of Finance , when the family deduction level is increased, most taxpayers at level 1 will no longer have to pay tax. A portion of individuals paying tax at level 2 will be transferred to non-tax status or transferred to level 1. Similarly, individuals at the remaining tax levels will have their personal income tax payable reduced.

However, sharing with VietNamNet reporter, Mr. Nguyen Ngoc Tinh, Vice President of the Ho Chi Minh City Tax Consultants and Agents Association, assessed that the proposed plan to increase the family deduction level proposed by the Ministry of Finance is still too low, not meeting the minimum needs of taxpayers.

According to Mr. Tinh, the family deduction level must be at least equal to the average GDP per capita income or higher to meet the essential needs of the people. Otherwise, the policy will have difficulty ensuring that after paying taxes, people will still be able to accumulate income.

"The need to save to prevent incidents and accidents in life is the expectation of taxpayers. If paying taxes becomes a burden, not enough to save, or even difficult to cover daily essential needs such as food, travel, education , health care... then the policy is not really reasonable," Mr. Tinh analyzed.

Experts suggest that the Government should soon apply a new family deduction level in 2025. Photo: Nam Khanh

He said that the proposed increase in family deduction for taxpayers to 15.5 million VND/month is outdated, especially when we have to wait until the 2026 tax period (ie, until 2027 to finalize taxes).

“Meanwhile, the cost of living and inflation can fluctuate dramatically, making this deduction quickly obsolete. Therefore, when building a policy, it is necessary to have a vision, so that when it comes into practice, it both encourages individuals to pay taxes enthusiastically and ensures that after tax there are still conditions to accumulate,” Mr. Tinh emphasized.

The expert proposed raising the family deduction for taxpayers to 18 million VND/month.

For dependents, after the Personal Income Tax Law is amended and allows deductions for education and medical expenses, the family deduction level should also be increased. In the immediate future, he proposed to raise it to 50% of the taxpayer, equivalent to 9 million VND/month/person; then, progress to equalizing the taxpayer's deduction level.

Meanwhile, Associate Professor Dr. Pham Manh Hung, Deputy Director of the Institute of Banking Science Research, Banking Academy, assessed that at this time, the proposed increase in family deductions to 15.5 million VND for taxpayers and 6.2 million VND for dependents would significantly increase the tax threshold, especially for young households in urban areas.

People with income of 15-20 million VND/month almost do not have to pay tax, or pay very low tax after deducting insurance and deductions.

However, Vietnam often applies “threshold” adjustments, which are only considered when the cumulative CPI exceeds 20%. This carries the risk of being late, if housing, education, health care costs or inflation in the next few years increase rapidly, the “protection” of the proposed family deduction will gradually decrease before the next adjustment.

Therefore, technically, there should be a periodic review mechanism (every 2-3 years) instead of waiting for the CPI to exceed a large threshold before considering adjustments.

Proposal for new family deduction to be applied immediately in 2025

Notably, the Vice President of the Ho Chi Minh City Tax Consultants and Agents Association recommended that the resolution should take effect this year instead of waiting until 2026.

“The draft currently stipulates that it will be applied to the 2026 tax period, meaning taxpayers must wait until March 2027 to finalize their tax payment, which is too long. While the deadline for tax finalization for 2025 is March-April 2026, there is every basis for early application to meet taxpayers' expectations,” he noted.

According to Mr. Tinh, taxes from salaried employees account for a high proportion of personal income tax revenue and have been continuously increasing over the years. Therefore, the Government needs to soon apply a new family deduction to encourage and motivate employees in enterprises and organizations.

Sharing the same view, Dr. Nguyen Ngoc Tu, lecturer at Hanoi University of Business and Technology, also proposed that the new family deduction should be applied immediately for the 2025 tax period, instead of waiting until the 2026 tax period. If we wait another year to apply it, the regulation will become more outdated, increasing the burden on taxpayers.

He said that if the National Assembly passes the resolution at the October session, the time for finalizing personal income tax for 2025 will not be until March-April 2026. Thus, technically, immediate application is completely feasible and does not cause any obstacles.

Vietnam.vn

Source: https://vietnamnet.vn/tinh-thue-thu-nhap-ca-nhan-can-nang-muc-giam-tru-gia-canh-len-18-trieu-thang-2441829.html