When will the new family circumstance deduction rate be applied to Personal Income Tax? This is a question that Legal Secretary has recently received quite frequently from our Valued Customers and Members. The Editorial Board of Legal Secretary would like to address this issue in the following article.
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When to apply the new family deduction level for personal income tax? - Illustrative image
As previously informed by THU KY LUAT to our esteemed clients and members, on June 2, 2020, the 14th Standing Committee of the National Assembly officially passed Resolution 954/2020/UBTVQH14 on adjusting the family deduction level of personal income tax.
This resolution adjusts the family deduction level specified in Clause 1, Article 19 of the Law on Personal Income Tax No. 04/2007/QH12, which has been amended and supplemented by certain articles according to Law No. 26/2012/QH13 as follows:
1. The deduction level for taxpayers is 11 million VND/month (132 million VND/year);
2. The deduction level for each dependent is 4.4 million VND/month.
Currently, according to Clause 1, Article 19 of the Law on Personal Income Tax (amended and supplemented in Clause 4, Article 1 of the amended Law on Personal Income Tax 2012), the family deduction level is 9 million VND/month (108 million VND/year) for taxpayers and 3.6 million VND/month for each dependent.
Thus, from July 1, 2020, the family deduction level for taxpayers is 11 million VND/month (increased by 2 million VND/month) and the deduction level for each dependent is 4.4 million VND/month (increased by 0.8 million VND/month).
Notably, this resolution will take effect from July 1, 2020, and be applied from the tax period of 2020.
For cases where tax has been temporarily paid according to the family deduction level specified in Clause 1, Article 19 of the Law on Personal Income Tax No. 04/2007/QH12 as amended and supplemented by some articles in Law No. 26/2012/QH13 (9 million VND/month for taxpayers and 3.6 million VND/month for each dependent), the personal income tax payable will be re-determined according to the family deduction level specified in this resolution when finalizing the personal income tax for 2020.
To be specific, for the months of January, February, March, April, and May of 2020, where taxpayers have temporarily paid personal income tax according to the old deduction level (9 million VND/month for taxpayers and 3.6 million VND/month for each dependent), when performing the tax finalization procedure at the beginning of 2021, the tax authority will re-determine the correct tax payable according to the new deduction level under Resolution 954 (11 million VND/month for taxpayers and 4.4 million VND/month for each dependent) and refund in whole or in part to the taxpayer.
Nguyen Trinh
