Employment Tax

Vietnam | New Personal Income Tax (PIT) Law

Summary

On 10 December 2025, the National Assembly approved a new PIT Law. This new law marked a significant change in the PIT regime with the trend of lower the burden to the employees who earn employment income. Some changes are also added to achieve consistency with changes in other regulations.

The new law is in effect from 1 July 2026. However, certain provisions related to employment income and business income will be applied for 2026 tax declaration period, which means will take effect from January 2026 onwards.

The detail

We summarize below some of the key changes:

1. Employment income tax brackets for tax residents reduced from 7 to 5 tiers, with a broader base affecting middle-income earners. The highest marginal rate remains at 35% but the highest taxable income level has now been increased to VND100 million/month (approx. USD3,802) from the previous VND 80million/month (approx. USD3,042). Overall, taxpayers will see an increase net take home income resulting from lower tax brackets. Employment income of tax non-residents will continue to be taxed at a flat rate of 20%.
2. Increased relief thresholds:

• Personal relief: Raised from VND11 million/month (approx. USD5,019 annually) to 5 million/month (approx. USD7,072 annually).
• Dependent relief: Increased from VND4.4 million/dependent/month (approx. USD 2,008 annually) to 2 million/dependent/month (approx. USD2,829 annually).

3. A new deduction for healthcare and education/training expenses for the taxpayers and their dependents (parent, spouse, and/or children).
   
4. Compensation paid for overtime, including night shift is tax exempt. Previously, only the portion of salary or wages paid for night work or overtime that exceeds the salary or wages calculated based on normal working hours shall be exempt from PIT. Further implementation guidance on this change is expected.
5. Payment in lieu of annual leave is now tax exempt.
6. In addition to Article 49.3 of the Law on Digital Technology Industry 2025, effective from 1 January 2026, further expands the scope of PIT exemptions for certain employment-related income. Specifically, high-quality digital technology industry professionals are entitled to a PIT exemption for 5 years from the date of their first employment contract in Vietnam. This exemption applies to income derived from projects in concentrated digital technology zones, key digital technology R&D and manufacturing projects (such as semiconductors and artificial intelligence), and training activities supporting the digital technology industry.
7. Rental income is subject to PIT at a flat rate of 5% on annual gross rental amount if the annual income exceeds VND500million (VND100 million under the previous PIT law).
8. Tax on share transfers—no change of the current 0.1% tax on sales proceeds for both tax residents and tax non-residents.
9. Tax on capital transfer—for tax non-residents, the tax on capital transfers will shift from a 0.1% tax on sales proceeds to a 20% tax on net gains. For tax residents, the current 20% tax on net gains remains unchanged. If cost basis cannot be determined, then the tax shall be calculated at 2% of the sales proceeds, applicable to both tax and tax non-residents.
10. The new law increases the PIT exemption threshold for prize winnings, copyrights, commercial franchising, inheritance, and gifts from VND 10 million to VND 20 million.
11. Transfer of gold bar is subject to tax at 0.1% on gross proceed.

Item 1 to 7 will take effect from January 2026 onwards, whereas item 8 to 11 will take effect from July 2026 onwards.

What this means

The PIT Law is designed to increase net take-home income for many taxpayers, particularly in the low to middle-income earners, without adding extra cost burdens on employers. The new law also signals a clear policy push to encourage investment in science and technology. By expanding PIT incentives for high quality digital technology talent, Vietnam aims to attract skilled professionals, strengthen innovation capacity, and accelerate the development of strategic technology sectors. This move highlights the government’s use of tax incentives as a key instrument to enhance long-term competitiveness and support business growth.

It is expected that the Circular guiding detailed implementation of the PIT Law will be issued soon.

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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