Is there an official adjustment to increase pension in Vietnam from July 1, 2025? Does increasing the pension affect the personal income tax in Vietnam?

Is there an official adjustment to increase pension in Vietnam from July 1, 2025?

Law on Social Insurance 2024 will come into effect from July 1, 2025, and will adjust the pension levels for many subjects.

Based on Clause 2, Article 99 of the Law on Social Insurance 2024, it is stipulated:

Monthly Pension Level

1. The monthly pension level for eligible subjects specified in Article 98 of this Law is calculated as follows:

a) For female workers, 45% of the average income used as a basis for social insurance contributions as stipulated in Article 104 of this Law corresponds to 15 years of social insurance contributions, thereafter adding 2% for each additional year of contribution, with a maximum rate of 75%;

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2. Pension adjustments are implemented according to the provisions of Article 67 of this Law.

Based on Article 67 of the Law on Social Insurance 2024, the regulation on pension adjustment is as follows:

Pension Adjustment

1. Pensions are adjusted based on the increase in the consumer price index in line with the capacity of the state budget and the social insurance fund.

2. Adjusting the pension increase appropriately for subjects with low pensions and those who retired before 1995, ensuring to narrow the pension disparity between retirees from different periods.

3. The Government of Vietnam stipulates the timing, subjects, and levels of pension adjustment specified in this Article.

Thus, starting July 1, 2025, according to the Law on Social Insurance 2024, subjects who retired before 1995 with low pensions will have an appropriate increase in pension to ensure the narrowing of pension disparities among retirees from different periods.

Is there an official adjustment to increase pension in Vietnam from July 1, 2025? (Image from the Internet)

Does increasing the pension affect the personal income tax in Vietnam?

According to Article 4 of the Law on Personal Income Tax 2007 (amended and supplemented by Clause 2, Article 1 of the Amended Law on Personal Income Tax 2012 and Clause 3, Article 2 of the Amended Law on Tax 2014), it is stipulated as follows:

Income Exempt from Tax

1. Income from real estate transfers between spouses; between biological parents and biological children; between adoptive parents and adopted children; between parents-in-law and daughters-in-law; between parents-in-law and sons-in-law; between grandparents and grandchildren; between siblings.

2. Income from transferring housing, residential land use rights, and assets attached to residential land of individuals in cases where individuals have only one house, residential land.

3. Income from the value of land use rights of individuals granted land by the State.

4. Income from inheritance, gifts as real estate between spouses; between biological parents and biological children; between adoptive parents and adopted children; between parents-in-law and daughters-in-law; between parents-in-law and sons-in-law; between grandparents and grandchildren; between siblings.

5. Income of households and individuals directly engaged in agricultural, forestry, salt production, aquaculture, and fishing not yet processed into other products or only through simple processing.

6. Income from the conversion of agricultural land by households and individuals granted by the State for production.

7. Income from interest on deposits at credit institutions, interest from life insurance contracts.

8. Income from remittances.

9. Additional night work, overtime payments higher than the wages for day work or work during working hours according to the law.

10. Pensions paid by the Social Insurance Fund; monthly pensions paid by the voluntary pension fund.

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Thus, pensions are subject to personal income tax exemption, so increasing pensions does not affect the personal income tax contribution.

Do persons retiring but continuing to work require paying personal income tax in Vietnam?

Based on Clause 2, Article 3 of the Law on Personal Income Tax 2007 (amended by Clause 1, Article 1 of the Amended Law on Personal Income Tax 2012), it provides for taxable income from wages and salaries, including:

Taxable Income

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2. Income from wages and salaries, including:

a) Wages, salaries, and amounts of a nature similar to wages and salaries;

b) Allowances and subsidies, except for allowances and subsidies according to the law on preference for people with meritorious services; national defense and security allowances; hazardous and dangerous allowances for professions or jobs at workplaces with hazardous and dangerous elements; attractive allowances, regional allowances according to the law; sudden difficulty allowances, accident, occupational disease allowances, one-time childbirth or adoption allowances, allowances due to loss of working capacity, one-time pension allowances, monthly survivorship allowances and other allowances as prescribed by the law on social insurance; severance allowances, job loss allowances as provided by the Labor Code; social protection allowances and other non-wage, non-salary allowances, and subsidies as prescribed by the Government of Vietnam.”

c) Remuneration in various forms;

d) Income received from participation in business associations, boards of directors, supervisory boards, management boards, and other organizations;

đ) Other benefits that taxpayers receive in cash or in kind;

e) Bonuses, except for bonuses accompanied by titles awarded by the State, bonuses accompanied by national or international awards, bonuses for technical innovations, inventions, and discoveries recognized by competent State agencies, bonuses for detecting and reporting illegal activities to competent State agencies.

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Therefore, if one reaches retirement age and continues to work, the income earned is subject to taxation as wages and salaries. Therefore, personal income tax must still be applied in accordance with the law.