The current progressive personal income tax system for salaried employees consists of 7 brackets, with rates ranging from 5% to 35%. However, experts have repeatedly advised authorities to revise this complex system, particularly its concentration on lower income levels.
In the latest draft of the Personal Income Tax Law, the Ministry of Finance proposes two revised options, both aiming to reduce the number of brackets and widen income ranges.
In both options, the minimum tax rate of 5% applies to a monthly taxable income of 10 million VND (after deductions for dependents and other allowable expenses). The maximum rate remains at 35%, applying to taxable income above 80 million VND (option 1) and 100 million VND (option 2).
According to the Ministry of Finance, reducing the number of tax brackets simplifies tax administration and filing, aligning with global tax reform trends. Both options achieve this goal while adjusting the taxable income within each bracket.
Proposed adjustments to tax brackets by the Ministry of Finance:
| Tax Bracket | Current | Option 1 | Option 2 | |||
| Taxable Income (million VND/month) | Tax Rate (%) | Taxable Income (million VND/month) | Tax Rate (%) | Taxable Income (million VND/month) | Tax Rate (%) | |
| 1 | up to 5 | 5 | up to 10 | 5 | up to 10 | 5 |
| 2 | above 5-10 | 10 | above 10-20 | 15 | above 10-30 | 15 |
| 3 | above 10-18 | 15 | above 20-50 | 25 | above 30-60 | 25 |
| 4 | above 18-32 | 20 | above 50-80 | 30 | above 60-100 | 30 |
| 5 | above 32-52 | 25 | above 80 | 35 | above 100 | 35 |
| 6 | above 52-80 | 30 | ||||
| 7 | above 80 | 35 | ||||
The Ministry of Finance notes that the two options will have varying impacts. Option 1 reduces taxes for incomes above 10 million VND, while option 2 offers greater reductions for incomes above 50 million VND.
For example, under option 1, an individual with a taxable income of 10 million VND per month would save 250,000 VND. Similarly, those earning 30 million VND would save 850,000 VND, those earning 40 million VND would save 750,000 VND, and those earning over 80 million VND would save approximately 650,000 VND.
The Ministry of Finance stated that progressive personal income tax systems are common globally. While many countries employ multi-tiered systems, their design varies. The current trend is toward simplification by reducing the number of brackets.
Globally, the highest tax rates are increasing in some countries. For example, last year, Finland raised its top rate from 57% to 57.3%, and Lithuania from 20% to 32%. Some Asian countries have top rates of 45% (Japan, South Korea, China), 30% (Malaysia), or 35% (Philippines, Indonesia).
The number of tax brackets also differs internationally. Singapore has 13, while most European, North American, and Australian countries have 5-6. The US has 7, and Albania has the fewest, with 2.
Phuong Dung
