Employment Tax

Vietnam | Draft Decree on New Personal Income Tax (“PIT”) Law

Summary

The Ministry of Finance (“MoF”) issued a draft Decree on 27 March 2026 seeking public feedback on the implementation of the new PIT Law No. 109/2025/QH15.

The new PIT Law was approved by the National Assembly on 10 December 2025 and will take effect from 1 July 2026, but certain provisions relating to business income and employment income of tax resident have already been effective since January 2026.

The detail

We outline below some key proposed changes in relation to employment income.

1. Tax residency determination

Under the current regulations, the date of arrival and the date of departure are counted as one day of physical presence in Vietnam.  Under the draft Decree, it is proposed that the date of arrival and the date of departure be counted as two days of physical presence in Vietnam.

2. Taxable and non-taxable income

• Meal allowance paid before 2025 is non-taxable up to VND730,000 (approximately USD28) per month. Amount exceeding the cap is taxable. However, pursuant to Official Letter No. 5106/CT-CS issued by the Department of Taxation on 12 November 2025, meal allowance paid in 2025 is not taxable if the amount paid is in accordance with the company’s policy.

Under the draft Decree, it is proposed that taxation of meal allowance be reverted to a threshold basis, where meal allowance is non-taxable up to VND1.2 million (approximately USD46) per month. Amount exceeding this cap is taxable.

• Cash and non-cash rewards paid by an employer in relation to employer-led games or competitions are proposed to be treated as taxable employment income.
• Taxable benefit-in-kinds are proposed to include employer-paid consulting fees to service providers where the beneficiary of such services can be identified.
• Overtime and night shift payments, as well as payments in lieu of annual leave (i.e., annual leave encashment), are proposed to be treated as non-taxable income, provided that such payments are made in accordance with the Labour Law.
• Employment income derived from individuals working in the following industry sectors is exempt from PIT for a period of 5 years.
  • High-quality digital technology industry professionals: Eligibility and qualifying activities are set out in Chapters II and III of Decree No. 353/2025/ND-CP (“Decree 353”) and Article 13 of Law No. 71/2025/QH15 on Digital Technology (“Law 71”), effective from 1 January 2026.
  • High technology industry professionals: Eligibility and qualifying activities are set out in Article 11, 12 and 13 of Law No. 133/2025/QH15 on High Technology, issued on 10 December 2025 and effective from 1 July 2026.

3. Deductions

• Pursuant to the new PIT Law, healthcare and education/training expenses incurred by taxpayers and their dependents (parent, spouse, and/or children) are deductible. The draft Decree proposes the following thresholds:
  • Healthcare expenses capped at VND20million (approximately USD769) per year and education/training expenses capped at VND21million (approximately USD807) per year; or
  • Healthcare expenses capped at VND23million (approximately USD884) per year and education/training expenses capped at VND24million (approximately USD923) per year.
• Under the draft Decree, employer and employee contributions to supplementary retirement insurance in accordance with the Vietnam Social Insurance Law, (ii) life insurance premiums and (iii) voluntary pension funds are proposed to be deductible up to VND3million (approximately USD115) per month. Any excess contributions made by employer would be taxable.
• Personal relief is increased from VND11 million per month (approximately USD5,077 annually) to VND15.5 million per month (approximately USD7,154 annually). Whereas dependent relief is increased from VND4.4million per month (approximately USD 2,031 annually) to VND6.2million per month (approximately USD2,862 annually). Personal and dependent relief has already been taken effect since 1 January 2026.

Under the draft Decree, the current income threshold of VND1million per month for dependent relief eligibility is proposed to be increased to a level to be prescribed by the Ministry of Finance.

4. Tax filing and administration

• Currently where an organization pays income to an individual without an employment contract or with a contract of less than 3 months, the income payer is required to withhold tax if the payment exceeds VND2million (approximately USD77) per payment: tax rate is 10% for tax residents and 20% for non-residents. Under the draft Decree, it is proposed to increase this threshold to VND3million (approximately USD115) per payment.
• Currently, employees may authorize their employer to finalize PIT on their behalf if they meet the following conditions:
  1. (a) Have a labor contract of at least 3 months with the employer; and (b) have only one source of income from that employer during the tax year and are still employed by that employer at the time of tax finalization; and/or
  2. If they receive income from another payer, such income must not exceed an average of VND10 million (approximately USD385) per month, and 10% PIT must have been withheld by that payer.

Under the draft Decree, it is proposed to remove condition (i)(a); and increase the average monthly income threshold under condition (ii) from VND10 million to VND15 million (approximately USD576) per month. This change aims to simplify employee eligibility for authorizing the employer to finalize their annual PIT.

What this means

After collecting feedback from relevant authorities and business associations, the MoF will submit a revised draft Decree to the Government for approval. We will continue to monitor developments and provide updates.

How we can support

Vialto Partners can support you in meeting your tax compliance requirements in Vietnam and would welcome the opportunity to meet or arrange a call to discuss how we can best assist you and your employees in remaining compliant.

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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