What is the current reduction based on family circumstances in Vietnam?

What is the current reduction based on family circumstances in Vietnam? (Internet image)

1. What is reduction based on family circumstances?

Reduction based on family circumstances means a sum of money deductible from pre-tax income from business, salary or wage of a resident taxpayer. 

(Clause 1, Article 19 of the Law on Personal Income Tax 2007, as amended in 2012)

2. What is the current reduction based on family circumstances? 

The current family circumstance deduction level is specified in Resolution 954/2020/UBTVQH14, specifically as follows:

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

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

3. Principles for Calculating deduction in Vietnam

3.1. Personal deduction for the taxpayer in Vietnam

- The taxpayer that has multiple sources of income from wages and business shall calculate the personal deduction for himself in a place at a time (considered a full month).

- The foreigner being a resident in Vietnam shall make personal deduction from January (or the month of arrival if the person comes to Vietnam for the first time) until the month in which the labor contract expires and that person leaves Vietnam in the tax year (considered a full month).

Example 8: Mr. E is a foreigner that comes to work in Vietnam continuously from March 01, 2014. On November 15, 2014, the labor contract expires and Mr. E goes home. Mr. E is present in Vietnam for 183 days from March 01, 2014 until the date of departure. Thus in 2014, Mr. E is a resident and may make a personal deduction from January until the end of November 2014.

Example 9: Mrs. G is a foreigner who comes to Vietnam for the first time on September 21, 2013. On June 15, 2014, the labor contract expires and Mrs. G leaves Vietnam. Mrs. G is present in Vietnam for 187 days during the period from September 21, 2013 to June 15, 2013. Thus in the first tax year (from September 21, 2013 to September 20, 2014), Mrs. G is considered a resident in Vietnam and may make a personal deduction from September 2013 until the end of June 2014.

- If the person has not made personal deduction or the deduction does not cover 12 months in the tax year, the person may make deduction for 12 months before settling tax.

3.2. Deduction for dependants in Vietnam 

- 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 this Circular 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 of 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.

(Point c, Clause 1, Article 9 of Circular 111/2013/TT-BTC, as amended by Circular 92/2015/TT-BTC)

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