Employment Tax

Vietnam | Decree No. 253/2026/ND-CP and Circular No. 87/2026/TT-BTC guiding the new Personal Income Tax (“PIT”) law

Summary

On 30 June 2026, the Government of Vietnam issued Decree No. 253/2026/ND-CP, and the Ministry of Finance issued Circular No. 87/2026/TT-BTC, providing guidance on the new PIT Law, dependent eligibility and share transfer income.

Both instruments take effect from 1 July 2026, with certain employment and business income provisions applying retrospectively from the 2026 tax period.

This alert summarizes the key changes and their implications for taxpayers, including employers.​

The detail

The key changes are outlined below:

1. Tax residency determination

Decree 253 treats arrival and departure dates as separate days for tax residency purposes, which may affect individuals close to the statutory threshold.

2. Taxable and non-taxable employment income

• Meal allowances are PIT-exempt up to VND1.2 million per month from 1 July 2026, with any excess treated as taxable income.
• PIT exemptions now extend to the following payments and benefits:
• Overtime pay, night-shift allowances and unused annual leave payments are PIT-exempt where paid under the Labour Code.
• Payments for employee transfers, rotations and business trips are PIT-exempt where supported by appropriate documentation.
• Employment income for qualifying employees in digital and high-tech sectors is eligible for a five-year PIT exemption.
• Severance, redundancy and unemployment payments above statutory levels are PIT-exempt if provided under employment contracts, internal labour regulations or company policies.
• School fee exemptions for expatriate employees’ children studying in Vietnam now cover both direct employer payments to schools and reimbursements to employees.
• Cash and non-cash prizes from employer-organised games or competitions are taxable employment income.

3. Taxation of non-employment income

• PIT applies at 0.1% of gross sale proceeds for share transfers in both public and non-public joint-stock companies. The proposed 20% tax on gains from non-public or unlisted shares was not adopted.
• Taxable income categories now include carbon credits, auctioned vehicle licence plates and digital asset transactions.

4. Deductions

• Healthcare and education/training expenses are deductible up to VND23 million and VND24 million per year, respectively.
• Contributions made by employers and employees to local non-mandatory retirement insurance, life insurance premiums and pension funds are deductible up to VND3 million per month, with any excess employer contributions treated as taxable income.
• Circular 87 increases the monthly income threshold for dependant eligibility from VND1 million to VND3 million.

5. Tax filing and administration

• The withholding threshold for individuals without employment contracts, or with contracts under three months, increases from VND2 million to VND5 million per payment; withholding rates remain 10% for tax residents and 20% for tax non-residents.
• Individuals with other sources of income may authorise the income payer to finalise their annual PIT if the average monthly income from such income does not exceed VND15 million and 10% PIT has been withheld, up from the previous VND10million threshold.
• For share awards or employee share option plans, upon the transfer of shares, the securities company or commercial bank holding the individual’s depository account must withhold 10% PIT on the taxable employment income component.
• Dependent registration must be completed by 31 December of the relevant tax year.
• Taxpayers must file an individual annual tax return when claiming healthcare or education/training deductions, or when reporting taxable share income.
• No amended salary and wage tax declarations are required for 1 January to 30 June 2026 where changes arise from the transitional provisions; relevant adjustments can be included in the 2026 tax finalization dossiers.

What this means

Decree 253 expands PIT exemptions and deductions, clarifies key rules and increases compliance obligations. Employers should review compensation, payroll processes and internal policies, while further implementation guidance is expected under the Circular.

How we can help

Vialto Partners will continue to monitor developments and provide timely updates. Please contact us if you would like support assessing the impact of these changes and prepare for compliance.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Brittany Chong
Partner

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