Update: 30.03.2026
The Law on Personal Income Tax, Law No. 109/2025/QH15 dated 10 December 2025, was officially adopted by the National Assembly and shall take effect from 1 July 2026. However, the provisions directly applicable to income derived from business activities and from salaries and wages of resident individuals are applicable to the tax assessment period commencing from 1 January 2026.
Accordingly, as from 01 January 2026, the personal income tax (“PIT”) policy introduces a number of significant adjustments that have a direct impact on the rights and obligations of taxpayers, in particular individuals deriving income from salaries and wages. Notably, these adjustments primarily relate to the revision of the progressive tax schedule and the increase in the family (dependent) deduction. These changes are expected to generate positive impacts on the current socio-economic context, thereby contributing to a reduction in the tax burden and an improvement in taxpayers’ actual disposable income.
I. Key adjustments to the PIT policy applicable from 01 January 2026
1. Reduction of the progressive tax schedule from seven (7) brackets to five (5) brackets
Previously, taxable income derived from business activities and from salaries and wages of resident individuals was subject to a progressive tax schedule consisting of seven (7) tax brackets, with tax rates ranging from 5% to 35%. This tax schedule has served as the legal basis for determining PIT liabilities over the preceding period.
In the context of significant fluctuations in living standards and income levels, the maintenance of multiple tax brackets with relatively narrow income thresholds has become less appropriate and has given rise to certain limitations, particularly for middle-income earners, whose tax liabilities tend to increase rapidly as income moves from one bracket to the next.
Commencing from the tax assessment period starting on 01 January 2026, the progressive tax schedule applicable to taxable income derived from salaries and wages of resident individuals has been revised to five (5) tax brackets, replacing the seven (7) bracket structure previously in force.
Accordingly, the progressive tax schedule has been revised into five (5) tax brackets as follows:
| Tax bracket | Taxable income per year (VND million) | Taxable income per month (VND million) | Tax rate (%) |
| 1 | Up to 120 | Up to 10 | 5 |
| 2 | Over 120 to 360 | Over 10 to 30 | 10 |
| 3 | Over 360 to 720 | Over 30 to 60 | 20 |
| 4 | Over 720 to 1,200 | Over 60 to 100 | 30 |
| 5 | Over 1,200 | Over 100 | 35 |
The revised tax schedule streamlines the number of tax brackets while simultaneously expanding the taxable income ranges applicable to each tax rate. This adjustment addresses the limitations of the previous seven (7) bracket tax schedule, under which taxable income thresholds were fragmented, thereby simplifying the determination of taxable income in practice.
- Increase in the family (dependent) deduction
Another notable adjustment, in addition to the revision of the progressive tax schedule, is the increase in the family (dependent) deduction. With effect from 1 January 2026, the new family (dependent) deduction is officially applicable pursuant to Resolution No. 110/2025/UBTVQH15. Accordingly, the family (dependent) deduction applicable to the tax assessment period commencing from 1 January 2026 is prescribed as follows:
i. Deduction for the taxpayer: VND 15.5 million per month (VND 186 million per year);
ii. Deduction for each dependent: VND 6.2 million per month (VND 74.4 million per year).
Accordingly, compared to 2025, the deduction for the taxpayer has increased by VND 4.5 million per month, while the family (dependent) deduction has increased by VND 1.8 million per month. As a result, resident individual taxpayers will incur a lower PIT liability, or may not be subject to PIT where their income does not exceed the new deduction thresholds.
II. The impact of changes to the PIT policy on taxpayers and enterprises
1. Impact on Taxpayers
The adjustment to the progressive tax schedule and the family (dependent) deduction applicable to the tax assessment period commencing from 1 January 2026 has a direct impact on the tax obligations of individuals deriving income from salaries and wages. As the family (dependent) deduction is increased, the corresponding taxable income of individuals is reduced, thereby lowering the PIT payable for the majority of low- and middle-income earners.
In addition, the revised tax schedule, with a reduced number of tax brackets, contributes to a more reasonable calibration of the progressive nature of the tax burden. The expansion of income ranges within each tax bracket helps mitigate situations in which a marginal increase in income results in a disproportionate increase in tax liability. As a result, the tax pressure on low- to middle-income groups is alleviated, while the redistributive function of PIT in respect of high-income earners is still maintained.
However, from a practical implementation perspective, the tax rates across the revised tax brackets continue to present certain potential risks. In particular, the uneven increases in tax rates between brackets—most notably the 10% jumps from the second to the third bracket and from the third to the fourth bracket—are relatively significant when compared to the 5% increases applicable between the first (1) and second (2) brackets and between the fourth (4) and fifth (5) brackets. This disparity may cause certain taxpayers, especially those within the middle- and upper-middle-income segments, to be subject to a substantially higher tax rate despite only a marginal increase in income, thereby reducing disposable income and adversely affecting their capacity for savings.
2. Impact on Enterprises
In their capacity as income payers and withholding agents for PIT purposes, the implementation of the revised tax policy from 2026 imposes additional requirements on enterprises to adjust their payroll systems, tax calculation and withholding procedures, and to update the applicable family (dependent) deductions in accordance with the new regulations. During the initial implementation phase, enterprises may incur additional administrative costs, including the upgrading of payroll and accounting software, the review of employees’ tax records, and the organisation of internal guidance and communications to ensure that tax withholding is carried out accurately and consistently.
Furthermore, changes to the tax schedule and family (dependent) deductions may have a direct impact on employees’ net income, thereby influencing expectations in relation to salaries, remuneration policies, and labour relations within enterprises. In practice, if such tax changes are not communicated in a timely and transparent manner, they may give rise to misunderstandings regarding compensation policies, placing additional pressure on human resources and labour management functions.
III. Recommendations and practical solutions for enterprises to ensure compliance with the revised PIT policy
First, timely monitoring and updating of guidance issued by competent state authorities
Timely monitoring and updating of guidance issued by competent state authorities (such as the Ministry of Finance, the Tax Authority and regional Tax Departments,…) plays a fundamental role in the implementation of the revised PIT policy. On this basis, enterprises are able to accurately determine the applicable effective dates, applicable rates and applicable subjects of the relevant regulations, thereby ensuring legal compliance and mitigating the risk of administrative penalties for tax violations.
In parallel with policy updates, enterprises should proactively develop internal communication plans to clearly disseminate and explain to employees the changes relating to the family (dependent) deduction, the tax schedule and the revised tax brackets. In particular, for employees whose income levels fall within the thresholds for transitioning from the second (2) to the third (3) bracket and from the third (3) to the fourth (4) bracket, timely and comprehensive communication will help promote transparency, consensus and stability in labour relations.
Second, timely review and updating of payroll and human resources policies
Based on the newly promulgated legal regulations, enterprises should conduct a comprehensive review of their existing payroll systems and human resources policies. In particular, enterprises should reassess their salary scales and payroll structures, the classification of taxable and non-taxable income components, as well as the allowances and benefits currently provided to employees, in order to ensure alignment with the revised PIT policy framework.
At the same time, enterprises are required to update and adjust their PIT calculation formulas in accordance with the revised progressive tax schedule, including the application of the new family (dependent) deduction levels for taxpayers and their dependents. This serves to ensure that tax withholding is carried out accurately, consistently and in full compliance with applicable tax regulations.
Third, adjustment of PIT withholding and finalisation procedures
Enterprises should upgrade or adjust their accounting and payroll software to (i) accurately calculate taxable income in accordance with the revised progressive tax schedule and (ii) correctly apply the family (dependent) deductions for taxpayers and their dependents.
In addition, enterprises should establish and implement internal control procedures in relation to PIT withholding and finalisation. Such procedures enable the early identification and timely rectification of errors, thereby mitigating legal risks and minimising additional costs that may arise in the course of tax inspections and audits.
Fourth, supporting employees in the registration of dependents
Given that the family (dependent) deduction has a direct impact on employees’ tax obligations and net income, the supporting role of enterprises is of particular importance. Accordingly, enterprises should guide employees in reviewing the conditions for dependent registration, while also providing assistance in the preparation and submission of documentation for new registrations, amendments or termination of dependent registrations within the statutory deadlines prescribed by tax regulations.
In addition, enterprises should conduct periodic reviews of registered dependent records, verify the completeness and validity of supporting documentation, and properly maintain dependent files in accordance with applicable regulations for the purposes of tax administration and finalisation.
These measures not only ensure that employees fully enjoy their lawful entitlement to family (dependent) deductions, but also help enterprises mitigate the risk of errors in the year-end PIT finalisation process, particularly in cases where dependent documentation is incomplete or updated late.
Fifth, proactive assessment of the impact on labour costs and remuneration and benefits policies
Adjustments to the family (dependent) deduction and the progressive tax schedule may result in changes to employees’ net income, thereby indirectly affecting the salary structures, remuneration policies and benefits schemes currently applied by enterprises. In certain cases, employees may develop expectations for adjustments to their income levels or benefits to reflect changes in their actual disposable income.
Against this backdrop, enterprises should proactively conduct a comprehensive assessment of the impact on overall labour costs, including salaries, benefits and related statutory contributions, in order to formulate appropriate adjustments to their human resources policies. Such an approach helps ensure a balanced alignment of interests between enterprises and employees, enhances the effectiveness of human resources management, and mitigates potential financial and legal risks, thereby providing a stable foundation for the enterprise’s long-term development.
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