Latest level of reduction based on family circumstances in Vietnam

Latest level of reduction based on family circumstances in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is reduction based on family circumstances?

According to the Law on Personal Income Tax, reduction based on family circumstances means a sum of money deductible from pre-tax income from business, salary or wage of a resident taxpayer. 

The level of reduction based on family circumstances applicable to dependants is determined on the principle that each dependant may be counted only once for tax reduction for a taxpayer.

2. Latest level of reduction based on family circumstances in Vietnam

Pursuant to the provisions of Article 1 of Resolution 954/2020/UBTVQH14, levels of reduction based on family circumstances include:

- Personal exemption: 11 million VND/month (132 million VND/year);

- Dependent exemption: 4,4 million VND/dependent/month.

Thus, the personal exemption is 11 million VND/month (132 million VND/year); and the deduction for each dependent is 4.4 million VND/month.

3. How many dependents can a person have when calculating reduction based on family circumstances in Vietnam?

Point c, Clause 1, Article 9, Circular 111/2013/TT-BTC stipulates deduction for dependants in Vietnam as follows

- The taxpayer may make deductions for his or her dependants if the taxpayer has applied for tax registration and been issued with the tax code.

- When registering deductions for dependants, the taxpayer shall be issued with tax codes for dependants and make preliminary deductions in the year from the registration date. The dependants that are registered before October 1, 2013 takes effect are still eligible for deductions until being issued with tax codes.

- If the taxpayer has not made deductions for dependants in the tax year, the deductions for dependants shall be made from the month in which the custody is given when the taxpayer settles tax and registers deductions for dependants. Deductions for other dependants, who are defined in Point d.4 Clause of Article 9, Circular 111/2013/TT-BTC, must be registered by December 31 of the tax year, otherwise the deduction for the whole tax year shall not be made.

- The deduction for a dependant shall apply to only one taxpayer in the tax year. Where multiple taxpayers have the same dependant to provide for, they shall reach an agreement on the person that makes the deduction for such dependant.

Thus, the law only stipulates that each dependent can only be counted as a deduction once for a taxpayer in a tax year. There is no regulation limiting the maximum number of dependents a person can have when considering family deductions in personal income tax.

4. Who are dependents?

According to the provisions of Point d, Clause 1, Article 9, Circular 111/2013/TT-BTC stipulates that dependents include the following subjects:

* Children, legitimate adopted children, illegitimate children, stepchildren. 

- Children under 18 years of age.

- Children from 18 years of age and over that are disabled and incapable of work.

- Children studying in Vietnam or overseas in universities, college, vocational schools, including children from 18 years of age and over in high schools (including the period awaiting university enrolment result from June to September in 12th grade) that have no income or have the average monthly income of  ≤ 1.000.000 VND in the year from all sources.

* The taxpayer's spouse

- The person of working age must meet all conditions below:

+ The person is disabled and incapable of work.

+ The person has no income or his average monthly income from all sources does not exceed 1,000,000 VND.

- The people outside working age shall have no income or their average monthly income from all sources shall not exceed 1,000,000 VND.

* The taxpayer’s parents, parents-in-law, stepparents, legitimate adoptive parents

- The person of working age must meet all conditions below:

+ The person is disabled and incapable of work.

+ The person has no income or his average monthly income from all sources does not exceed 1,000,000 VND.

- The people outside working age shall have no income or their average monthly income from all sources shall not exceed 1,000,000 VND.

* Other dependants

- The taxpayer’s brothers and sisters.

- The taxpayer’s grandparents, aunts, uncles.

- The taxpayer’s nieces and nephews.

- Other people to provide for as prescribed by law.

These other individuals must be homeless and directly raised by taxpayers, meeting the conditions in Point dd, Clause 1, Article 9 of Circular 111/2013/TT-BTC.

Nguyen Ngoc Que Anh

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