In the latest draft of the revised Law on Personal Income Tax, the Ministry of Finance presented a plan to the government to reduce the number of progressive personal income tax brackets from 7 to 5. The minimum tax rate of 5% will apply to a monthly taxable income of 10 million VND (after deducting family allowances and other deductible expenses). The maximum rate remains at 35% for taxable income exceeding 100 million VND.
The Ministry of Finance's proposed tax bracket adjustments are as follows:
| Tax Bracket | Current | Proposed | ||
| Taxable Income (million VND/month) | Tax Rate (%) | Taxable Income (million VND/month) | Tax Rate (%) | |
| 1 | up to 5 | 5 | up to 10 | 5 |
| 2 | > 5-10 | 10 | > 10-30 | 15 |
| 3 | > 10-18 | 15 | > 30-60 | 25 |
| 4 | > 18-32 | 20 | > 60-100 | 30 |
| 5 | > 32-52 | 25 | above 100 | 35 |
| 6 | > 52-80 | 30 | ||
| 7 | above 80 | 35 | ||
Previously, some experts suggested a maximum personal income tax rate of 20-25% would be more suitable for Vietnam, given the country's moderate average income and the need for economic accumulation and investment.
However, the Ministry of Finance cited international examples where several countries maintain a top tax rate of 35% (Thailand, Indonesia, Philippines), or even 45% (China, South Korea, Japan, India).
The ministry also argued that adjusting the tax rates as proposed, along with increasing family deductions and adding other deductions (healthcare, education), will lower the effective tax rate – the ratio of tax paid to total income. This will benefit taxpayers, especially those with low and middle incomes, who may no longer be required to pay personal income tax. Meanwhile, the effective tax rate for higher earners will also decrease compared to the current system.
For example, an individual with one dependent earning 20 million VND per month from salary currently pays 125,000 VND in monthly taxes. Under the proposed plan, with deductions, they would no longer be liable for income tax.
For those earning 25 million VND a month, the monthly tax payment will decrease from 448,000 VND to 34,000 VND, a 92% reduction. Similarly, those earning 30 million VND a month will see a 73% reduction in their monthly tax payment.
According to the 2024 survey on living standards by the General Statistics Office, Vietnam's per capita income is 5.4 million VND per month. The highest income group – the top 20% – has an average income of 11.8 million VND per person per month.
According to the Ministry of Finance, the tax adjustments also target the upper-middle-income group. Specifically, the 5% rate in the first bracket applies to taxable income from 0 to 10 million VND, equivalent to a salary income of 20-35 million VND for an individual with one dependent. The 15% rate in the second bracket applies to taxable income from 10 to 30 million VND, equivalent to a salary of 35-56 million VND.
The Ministry of Finance estimates that the proposed plan will result in a revenue decrease of 8,740 billion VND.
The draft revised Law on Personal Income Tax is expected to be submitted to the National Assembly for review and approval in the October session.
Phuong Dung
