Vietnam: What is the current level of family exemptions for dependents? Proposing to increase or decrease the amount of family exemptions in the near future?
What is the current level of family exemptions for dependents in Vietnam?
Pursuant to the provisions of Article 1 of Resolution 954/2020/UBTVQH14 stipulating the family exemptions in Vietnam, which will be adjusted from July 1, 2021 as follows:
Exemptions
The exemptions specified in Clause 1 Article 19 of the Law on Personal Income Tax No. 04/2007/QH12, amended by Law No. 26/2012/QH13, are changed as follows:
1. Personal exemption: 11 million VND/month (132 million VND/year);
2. Dependent exemption: 4,4 million VND/dependent/month.
Thus, the exemption for taxpayers is 11 million VND/month (132 million VND/year) and the exemption for each dependent is 4.4 million VND/month.
Vietnam: What is the current level of family exemptions for dependents? Proposing to increase or decrease the amount of family exemptions in the near future?
Evaluation of the current situation of applying family exemptions in Vietnam?
In Section 2.1, Subsection 2, Section II, Appendix 2, Draft Government's Proposal on the Law and Ordinance Development Program in 2024; to adjust the Program for making laws and ordinances in 2023, as follows:
According to the provisions of the current Law on Personal Income Tax, individuals are entitled to deduct social insurance, health insurance, unemployment insurance, professional liability insurance for a number of professions that must participate in compulsory insurance, minus the family exemptions, charitable and humanitarian contributions, allowances and allowances as prescribed, etc., the remaining amount is the income used as a basis for calculating personal income tax.
The 2007 Law on Personal Income Tax in Vietnam (applicable from January 1, 2009) stipulates that the exemption for taxpayers is VND 4 million/month (VND 48 million/year); The exemption for each dependent is 1.6 million VND/month.
The 2012 Law amending and supplementing a number of articles of the Law on Personal Income Tax in Vietnam (applicable from July 1, 2013) stipulates that the exemption for taxpayers is VND 9 million/month (108 million VND/year); The deduction for each dependent is 3.6 million VND/month.
At the same time, the following regulations are added: In case the consumer price index (CPI) fluctuates by more than 20% compared to the time when the Law comes into force or the most recent time of adjustment of the family exemption, the Government shall submit it to the Standing Committee of the National Assembly for adjustment of the family exemption specified in this Clause in line with price fluctuations to apply for the next tax period.
On June 2, 2020, the National Assembly Standing Committee issued Resolution 954/2020/UBTVQH14 on adjusting the personal income tax exemption (applicable from the tax period of 2020).
Thus, the exemption for taxpayers is increased to 11 million VND/month (132 million VND/year); The exemption for each dependent is 4.4 million VND/month.
The adjustment to raise the exemption for personal income tax has contributed to reducing the obligation for taxpayers, the amount of tax payable will be reduced for all subjects who are paying PIT.
In the past time, it has been suggested that it is necessary to stipulate the level of family exemption according to the regional minimum wage, the family exemption level in big cities and urban areas should be higher than in rural and mountainous areas due to more expensive fees; There are also opinions that there should be a higher regulatory tax policy for individuals in urban areas and big cities to limit immigration and migration to big cities...
With the current exemption for the taxpayer himself is 11 million VND/month and for each dependent is 4.4 million VND/month, the person earning income from salary and wages is at 17 million VND/month (if there is 1 dependent) or 22 million VND/month (if there are 2 dependents) after deducting social insurance, health insurance, unemployment insurance, etc., it has not been paid personal income tax yet.
- Individuals with income below 120 million VND/month, according to current PIT payable compared to income is less than 20%, specifically:
+ Individuals with an income of 40 million VND/month, the payable PIT amount is 6.56%/income;
+ If the income is 60 million VND/month, the payable PIT amount is 11.74%/income;
+ If the income is 80 million VND/month, the payable PIT amount is 15.55%/income;
+ Income of 100 million VND/month, the payable PIT amount is 18.44%/income.
- For individuals with high incomes of over VND 120 million, the new PIT payable at a higher rate of 20%/income, specifically:
+ Individuals with an income of 120 million VND/month, the payable PIT amount is 21.2%/income;
+ Individuals with an income of 150 million VND/month, the payable PIT amount is 23.96%/income...
(This calculation assumes that the individual has 1 dependent, in case an individual has more than 1 dependent, the tax payable is also correspondingly lower).
According to the Population Living Standard Survey 2021 report released by the General Statistics Office (Ministry of Planning and Investment), the per capita income per month of Vietnam in 2021 (at current prices) is 4 2 million dong and the highest income group (group consisting of the richest 20% of the population - group 5) has an average income of 9,184 million dong/month/person.
Thus, the current deduction for taxpayers (11 million VND/month) is more than 2.6 times higher than the per capita income (much higher than the common rate that other countries are applying). );
At the same time, it is also higher than the average income of the top 20% of the population. The deduction for dependents (4.4 million VND/month) is also equivalent to the current per capita income.
What is the family exemption in Vietnam in the near future?
This content is recorded in Section 2.1, Subsection 2, Section II, Appendix 2, Draft Government's Proposal on Law and Ordinance Development Program in 2024; to adjust the Program for making laws and ordinances in 2023, as follows:
The draft report clearly states that the implementation of the PIT policy plays a very important role in implementing the redistributive policy and ensuring social justice.
Along with other sources of revenue, the income from PIT has been used to meet a lot of spending needs for development investment, security and defense, ensuring social security, hunger eradication and poverty alleviation.
The application of PIT needs to ensure that it is suitable to the living situation of the taxpayer in the general socio-economic context (considered horizontal fairness) and accordingly, the regulation on family exemption is an important element in the personal income tax policy of most countries.
In essence, the regulation on deduction before tax calculation ensures the principle that individuals need to have a certain level of income in order to meet the essential needs of life such as: food, accommodation, travel, study. , medical examination and treatment ..., therefore, income above this threshold must pay tax.
The application of deductions is also aimed at excluding low-income subjects from paying PIT.
The family exemption for taxpayers and taxpayers' dependents in accordance with the law on personal income tax is a specific level according to the general level of society, regardless of people with high or low incomes, with different consumer needs.
Accordingly, the specific family exemption level needs to be studied and calculated carefully, ensuring that it is higher than GDP per capita, regional minimum wages, per capita expenditure in a given period.
According to the Prime Minister's Decision 2114/QD-TTg in 2021, promulgating the implementation plan of the Politburo's Conclusion No. 19-KL/TW and the project on orientation of the law-making program for the 15th National Assembly term The Law on Personal Income Tax (amended) is expected to be considered and included in the National Assembly's legislative document development program for the period 2023-2025.
If it is expected that by 2026, the revised Law on Personal Income Tax will come into effect, it is also possible to study and amend the reduction to increase the family exemption level to suit the fluctuation of prices as well as the increase in people's living standards in the next stage.
View the full Draft Proposal: here.
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