What are guidelines for calculating personal income tax using the abridged method for 2025 on income from salaries and wages in Vietnam?

What are guidelines for calculating personal income tax (PIT) using the abridged method for 2025 on income from salaries and wages in Vietnam?

Based on Clause 3, Article 7 of Circular 111/2013/TT-BTC which stipulates that taxable personal income tax on income from salaries, wages is determined by the following formula:

PIT payable = Taxable Income x Tax Rate

In which:

- Taxable Income (TNTT) = Taxable Income - Deductions.

- The tax rates on salaries, wages are progressive according to parts as stipulated in Article 22 of the Personal Income Tax Law 2008. Specifically:

However, based on Appendix No. 01/PL-TNCN issued with Circular 111/2013/TT-BTC, there is a provision for the abridged method of calculating PIT on wages as follows:

The taxpayer only needs to determine the taxable income per month and the corresponding tax bracket, then apply the simplified tax calculation formula to determine the personal income tax payable.

This abridged method offers a convenient and easy approach when calculating personal income tax on income from salaries and wages. Below is an example to help you visualize this simplified calculation method:

Example: Mrs. C has income from salary and wages in the month totaling 40 million VND and contributes to insurance according to the rate of: 8% social insurance, 1.5% health insurance on salary, 1% unemployment insurance. Mrs. C supports 2 children under 18 years old, and during the month Mrs. C does not make charitable, humanitarian, or educational contributions.

Tax payable calculated by the abridged method

- Mrs. C’s taxable income is 40 million VND.

- Mrs. C is entitled to the following deductions:

+ Personal deduction: 11 million VND

+ Dependent deduction for 02 dependents (2 children):

4.4 million VND x 2 = 8.8 million VND

+ Social insurance, health insurance, unemployment insurance:

(The maximum salary for paying social and health insurance is not more than 20 times the statutory pay rate, i.e., not exceeding 2,340,000 x 20 = 46,800,000 VND)

40 million VND x (8% + 1.5% + 1%) = 4.2 million VND

Total deductions:

11 million VND + 8.8 million VND + 4.2 million VND = 24 million VND

- Mrs. C’s taxable income is:

40 million VND - 24 million VND = 16 million VND

=> A monthly taxable income of 16 million VND falls under tax bracket 3. Therefore, the personal income tax payable is calculated as follows:

16 million VND x 15% - 75 million VND = 1,650,000 VND

What are guidelines for calculating personal income tax using the abridged method for 2025 on income from salaries and wages in Vietnam? (Image from the Internet)

What types of income are subject to PIT in Vietnam?

Based on Article 3 of the Personal Income Tax Law 2007 (amended by Clause 1, Article 1 of the Amended Personal Income Tax Law 2012 and Article 2 of the Law Amending Tax Laws 2014), the following types of income are subject to PIT:

(1) Income from business:

- Income from the production and business activities of goods and services;

- Income from independent professional activities of individuals with a practice license or certificate as required by law.

Income from business regulations above does not include income from individual business with revenue of 100 million VND/year or less.

(2) Income from salaries and wages:

- Salaries and wages and amounts of a salary or wage nature;

- Allowances and subsidies, except for allowances and subsidies according to laws on incentives for people with meritorious services, defense and security allowances, hazardous and dangerous allowances for occupations or jobs in toxic, dangerous workplaces, attraction allowances, regional allowances as regulated by law, sudden difficulty allowances, labor accident, occupational disease allowances, one-time maternity allowance, adoption allowance, one-time retirement allowance, monthly survivor's benefit, severance allowance, job loss allowance according to the Labor Code, other allowances paid by the Social Insurance, social evils settlement allowances;

- Remuneration in various forms;

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

- Other benefits received in cash or in kind;

- Bonuses, except for bonuses accompanied by state-awarded titles, national prizes, international prizes, bonuses for technological innovation, patents recognized by competent state agencies, bonuses for detecting and reporting legal violations to competent state agencies.

(3) Income from capital investment:

- Interest from lending;

- Dividend income;

- Income from other forms of capital investment, except for income from government bond interest.

(4) Income from capital transfer:

- Income from the transfer of capital in economic organizations;

- Income from securities transfer;

- Income from other forms of capital transfer.

(5) Income from real estate transfer:

- Income from the transfer of land use rights and assets attached to land;

- Income from the transfer of ownership or use of housing;

- Income from the transfer of lease rights of land, water surface;

- Other income received from real estate transfer.

(6) Income from winning prizes:

- Lottery winnings;

- Winnings from promotional activities;

- Winnings from betting activities;

- Prizes from games, contests with prizes, and other forms of winnings.

(7) Income from copyright:

- Income from the transfer, transfer of use rights to intellectual property objects;

- Income from technology transfer.

(8) Income from franchising

(9) Income from inheritance:

Referring to securities, capital contributions in economic organizations, business establishments, real estate, and other assets required to register for ownership or use.

(10) Income from receiving gifts:

Referring to securities, capital contributions in economic organizations, business establishments, real estate, and other assets required to register for ownership or use.

What are regulations on period for personal income tax in Vietnam?

According to Article 7 of the Personal Income Tax Law 2007 (amended and supplemented by clause 3, Article 1 of the Amended Personal Income Tax Law 2012), the tax period for determining personal income tax is as follows:

(1) For resident individuals

- The annual tax period applies to income from business, income from salaries and wages;

- The tax period on each income generation applies to income from capital investment; income from capital transfer, excluding income from securities transfer; income from real estate transfer; prize income; income from copyright; income from franchising; income from inheritance; income from gifts;

- The tax period according to each transfer or annually for income from securities transfer.

In addition, the annual tax period applies to income from business and income from salaries and wages as guided in Article 6 of Circular 111/2013/TT-BTC for resident individuals as follows:

+ Annual tax period: applies to income from business and income from salaries and wages.

If during the calendar year, the individual is present in Vietnam for 183 days or more, the tax period is calculated based on the calendar year.

If during the calendar year, the individual is present in Vietnam for less than 183 days but remains for 183 days or more within 12 consecutive months from the date of first arrival in Vietnam, the initial tax period is the 12 consecutive months from the first date of arrival in Vietnam. From the second year, the tax period is based on the calendar year.

+ Tax period for each income generation: applies to income from capital investment, income from capital transfer, income from real estate transfer, prize income, income from copyright, income from franchising, income from inheritance, income from gifts.

+ Tax period for each income generation or annually applies to income from securities transfer.

(2) For non-resident individuals

The tax period for non-resident individuals is calculated per each income generation.

If a non-resident business individual has a fixed business location such as a store or booth, the tax period applies as for resident individuals with business income.